Diverse FMX: Managing a Defective Building Work Claim

By March 1, 2019Insurance

Aria Property Group: Valencia Residences

Building defects are not always a sign of “shonky” building work. The reality is, building defects are a fact of life and even Tier 1 Builders leave defects behind – despite their best internal quality control and compliance management efforts. According to Australian University1 research studies, 100% of new buildings inspected by qualified building inspectors have defects.

Pro-active Bodies Corporate and Developers/Builders are ensuring a thorough professional building inspection is done as early as possible into the life of the newly registered scheme. The earlier defects are picked up, the better – for both the Lot Owners and whomever holds the obligation to rectify under the statutory builder’s warranty.

Defect Liability Period

Non-structural defects (previously referred to as “Category 2 Defects”), such as delaminating tiles, missing grout, fraying carpet, fouling doors/drawers/windows, paint scratches, minor cracks, efflorescence, etc. have a 12 month defect liability period. These defects typically present inside apartments and offices, or in recreational facilities within the common property. These defects need to be picked up and reported to the Builder within 10-11 months past the Certificate of Classification in order for these to be rectified prior to the expiration of the Non-structural Defect Liability Period.

Structural defects (previously referred to as “Category 1 Defects”), such as water leaks, significant cracks, delaminating waterproof membranes, defects in the fire protection system, safety issues, etc. have a six years + six months defect liability period. These defects typically present on the common property of the scheme, in the riser cupboards and service areas, plant rooms and basement car park areas. These defects need to be picked up and reported to the Builder as soon as possible – within six years of when the certificate of classification was issued in order for these to be rectified prior to the expiration of the Structural Defect Liability Period.

Duty to Report

The Body Corporate has a duty to report defects in a timely manner to the Builder. If the Builder can prove that the Body Corporate knew about a defect (e.g. a water leak) and left it for an extended period of time before reporting it, the Queensland Building & Construction Commission (“QBCC”) may fail to issue a Direction to Rectify upon the Builder and leave the defect up to the Body Corporate to rectify at their cost.

Ideal Process

As soon as practical after the first AGM of the scheme: –

  1. Engage a professional building inspection company to undertake a full inspection of common property
  2. Issue the Register of Defects upon the Builder, with a request for rectification within a reasonable time period
  3. Failing rectification, lodge a defective building work complaint with the QBCC

Note: As soon as structural defects are noticed – especially water leaks, significant cracks or defects in fire safety installations, it is vital that the Body Corporate acts promptly and reports to the Builder for rectification.

Value of “As Constructed” Documentation and the Building Contract

In order to lodge a defective building work claim the QBCC will ask for a copy of the Building Contract, which should have been handed over [by the Developer] to the Body Corporate at the first AGM of the newly registered scheme. Along with the Building Contract, should be the full suite of “As Constructed” plans, warranty certificates, Form 15’s and Form 16’s and Operations Manuals for all plant and equipment installed on site.

From this suite of documentation the Body Corporate is fully armed to make successful warranty claims against the original builder – or, in scenarios when the Builder is bankrupt – against the individual signatories of Form 16’s and sub-contractor warranties.

When it comes to successfully managing a defective building work claim, three things really go in the Body Corporate’s favour: –

  1. Early identification of issues/defects
  2. Full suite of “As Cons” and Building Contract
  3. Tenacity

Insured or Not Insured

Buildings up to 3-stories in height may be covered by the QBCC Home Warranty Insurance, however this does not mean that the QBCC can’t help you with your building over 3 stories high. The QBCC is there to support all consumers of construction products – including bodies corporate of high-rise and commercial schemes.

Builder Bankrupt?

There is further recourse for bodies corporate determined to make a successful warranty claim in circumstances where the Builder is a deregistered entity, bankrupt or has deactivated his/her QBCC License. For further information on managing a defective building work claim under such circumstances please contact Diverse FMX (p) 1300 348 369

Author: Lynda Kypriadakis – Managing Director


QBCC License: – 1305015 (DPX Projects Pty Ltd)
1300 348 369
0400 900 469