Mythbusting: Builder's Warranties
Many builders are under the incorrect impression that there are different structural and non-structural warranty periods, or they can set their own defect period policies.
One common misunderstanding is that builders only need to take responsibility for their work for the 6 year period covered by the statutory warranty insurance. This is incorrect.
Another is that Owner-Builders are not responsible for their building work once they have their statutory warranty insurance. This too is incorrect.
Here are our answers to some common questions about your builder and warranties.
Myth 1: Builders can give a fixed warranty period for a period they choose.
No! There is no way of reducing the limitation period set by the Building Act. If a building defect is discovered, a builder cannot limit his liability by putting a term in your contract, his website or advertising material. In fact, any contract clause or advertising that seeks to reduce the warranty or limitation period will be void and of no effect.
Myth 2: There is a 10 year warranty so the builder is liable for defects for 10 years.
Not quite! There is a 10 year limitation period for building actions. This means legal action in VCAT can be started against a builder anytime up to 10 years of completion of a contract or from a date the certificate of occupancy is issued.
The 10 year limitation period does not necessarily mean that you provide a 10 year warranty for your work. What it means is that if a defect is identified in the building, the owner has up to 10 years from the date of the certificate of occupancy (or the completion date) to sue the builder.
Myth 3: There is a 2 year non-structural and 6 year structural warranty for building works.
Incorrect. These warranties only apply to Home Owner Warranty Insurance [HOW] claims. These time limits do not otherwise apply to claims against builders. HOW is obtained by the builder for your benefit. In short, a HOW policy protects you in circumstances where your builder has died, disappeared or become insolvent.
Myth 4: You are not covered by builders warranty if you purchase someone else’s new home [under 7 years old].
Incorrect. The implied warranties provided by the builder of a property run with the property – not the owner. This means that a new owner of a property can make a claim against a builder, providing they are within the warranty and limitation periods.
FURTHER READING: We discuss the outcome of a recent legal case which establishes a clear Builders Warranty Period. READ>
This article provides information that is general in nature and is not a substitute for legal advice.