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Building defect disputes

By Frank Higginson26 Mar 2008

We have recently seen a variety of building defect disputes involving matters such as:

  • faulty waterproofing membranes;
  • cracking in balconies, walls and other concrete areas;
  • faulty air conditioning systems;
  • cracking and lifting of tiles on stairs and around swimming pools;
  • incomplete building work; and
  • failure to comply with rectification directions of the Building Services Authority.

Disputes in relation to building defects in strata schemes are generally very complicated as they commonly involve a confusing interplay of contract and negligence law together with building and body corporate legislation. Due to the highly technical nature of these disputes, it is often extremely difficult for the parties involved to reach a satisfactory outcome without expert advice.

The Building Services Authority has the power to make directions for the rectification of defective building work, within six years and three months of the completion of the building work. Other remedies, such as compensation for damages, may be pursued by an application to the Commercial and Consumer Tribunal or by court proceedings.

One issue that bodies corporate commonly face is the failure of the builder to comply with a direction issued by the Building Services Authority. This issue has a significant impact on larger schemes.

Small schemes

  • If a builder fails to comply with a direction of the Building Services Authority to rectify building defects in a residential building that is less than three stories, the Building Services Authority may engage a licensed contractor from its panel to complete the rectification works, without cost to the body corporate.

Larger schemes

  • The Building Services Authority does not have the power to have rectification work carried out at buildings that comprise of two or more residential units and exceed three stories in height, as these buildings are not covered by the statutory insurance scheme.

The fines that can be levied by the Building Services Authority are sometimes not sufficient to cause the builder to rectify the defects. Therefore, for larger schemes, the only practical way to resolve the building defect dispute is by commencing legal proceedings.

Obtain legal advice promptly

Building defects can have serious detrimental effects on the use, enjoyment and value of lots within a scheme. Other common effects of building defects are loss of rent and property damage. Without expert legal advice, it is possible that the costs of the defect will be unfairly borne by the

The complications in these types of disputes arise due to the large number of parties involved in the construction, management and maintenance of strata schemes as well as the various legal relationships that exist between them. Identifying the parties responsible for rectifying the defect and/or paying compensation for any consequential losses can be more challenging than in other types of disputes.

Latent building defects take some time to become apparent which further complicates these disputes. If there is a long period of time between the completion of the defective building work and the discovery of the defect, the right to take action may be lost due to legislation. Additionally, some of the parties involved in the building work may no longer exist.

It is essential to seek legal advice as soon as a defect is identified. This might prevent some of the timing issues raised above. The other purpose of obtaining advice early is to take the appropriate action to minimise the losses caused by the defect. Given that dispute resolution processes can be time consuming and costly, prevention (or minimisation) is better than cure.