The Defect Liability Period explained

It’s not uncommon for minor building defects or faults to arise during a project. These need to be rectified by the contractor during the Defect Liability Period.

Every builder sets out to complete a project seamlessly and with no defectsbeing found. But the reality is that problems frequently arise with the materials used during the build or with the work carried out.

Once a construction contract has been signed, the builder is required to carry out and complete the works to the standard specified in the contract. A ‘defect’, when it happens, relates to work not performed in accordance with the standards and requirements of the contract.

A standard construction contract will stipulate a Defects Liability Period (DLP) relating to the work being undertaken. It sets a fixed period of time during which the contractor is required to remedy any issues that have arisen since the start of construction. The Defect Liability Period typically starts when the construction work is practically or substantially completed.

Its purpose is to formalise an understanding between the homeowner and builder that a process will be followed to correct any building defects without the need to resort to dispute resolution.

Who is responsible for fixing building defects?

The builder named in the contract is responsible for repairing or rectifying any defects that appear in the building works. These defects can be minor in nature and may include work such as fixing loose fittings or rectifying doors and windows that don’t close properly.

Note that damage incurred during the homeowner’s occupation of the building isn’t covered in the Defect Liability Period, nor is there an obligation that the builder repair defects resulting from fair wear and tear to the property.

What is the Defect Liability Period?

Residential building contracts typically contain a Defect Liability Period clause. This clause places a requirement on the builder to rectify minor defects that might arise during the initial occupation of the home. The length of time that the Defect Liability Clause imposes does differ across Australia, but for residential construction, it is typically a period of 3 – 6 months. The HIA New Home Building Contracts usually have a 13-week Defect Liability Period, however, this period is longer in some regions.

Aside from variations state to state, the duration of the Defect Liability Period can depend on the nature of the build, the type of work a particular contractor carries out and whether any building defects in the work may take time to become apparent.

The Defect Liability Period versus Warranty

The Defect Liability Period remains in place for a fixed period beyond practical completion of the building work, but that doesn’t mean the builder’s liability for building defects ends once the Defect Liability Period ends. A builder’s liability may extend several years beyond the completion of the Defect Liability Period and will be determined by the statutory warranty legislation in place.

Statutory warranties are usually in effect for six years for major structural defects and two years for all other defects. Each state and territory has its own statutory warranty legislation in place, which you can find out more about by visiting our Building Statutory Warranty page.

It’s worth noting that only the homeowner who is party to the building contract can bring a claim relating to the Defect Liability Period, not any subsequent owner of the property. That makes claims during the Defect Liability Period different to those during the statutory warranty period, which can be made by the homeowner who contracted with the builder and any subsequent owner of the building title.

The Defect Liability Period provides a safeguard to homeowners for a fixed duration during and after the construction work. Beyond that period, homeowners (and subsequent homeowners) are protected against building defects and non-completion of a project by statutory home warranty legislation.

If you’re a builder about to undertake a project that is required by law to be warranted in your state or territory (for example, if the work is of a particular type and is valued at over a certain threshold), you must take out Home Warranty Insurance before you begin.

You can find out more by visiting our Home Warranty Insurance page.

HIA Insurance Services understands the risks and challenges facing the building sector and can assist trades people and workers with essential insurance cover. For advice about the Defect Liability Period or to enquire about Home Warranty Insurance, contact us for a quote.