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Owners’ Corporation Law - March 2018

26 Feb 2018

We need to talk about building defects …

By Tom Bacon

Inevitably, there are going to be mistakes made in constructing and finishing a 20-storey tower.

There are some fairly tricky building elements that contractors need to be very careful about in their methodology, otherwise some quite serious problems are going to manifest.

For instance, in order to prevent water ingress through a sliding door frame from a balcony into the interior of a unit, the waterproofing membrane and the screed that is applied to the slab must form a complete interlocking seal with the aluminum door frame. Any mistakes here, and water can travel through and under the door and into the unit.

Similarly, the sealing of penetrations such as PVC and copper pipes from sinks and taps need to be appropriately fire-sealed and fitted with a fire collar to prevent a fire from travelling between residential units on different floors of the building and if the fire collar is not fitted properly or at all then it’s a huge safety risk and a breach of the Building Code of Australia.

In Sydney, over two thirds of apartment buildings built since 1997 have reported serious building defects (defined as defects quantified in excess of $500,000 to fix) according to a survey of 2000 buildings in research conducted by the University of New South Wales.

Here in Melbourne though, we have no such data and nobody seems willing to talk much about building defects in residential buildings.

In Sydney, it’s quite the opposite. Legal proceedings are commonplace and the developer or builder are enforced to return to site to complete the job properly or pay for the works to be completed by other licensed tradespeople.

Now, the quality of contractors in Sydney is not too different to Melbourne. The same shortcuts are taken in both cities. On a construction site, time is money and, if some builders or developers can get away with cutting corners in order to save time, then that translates to a much cheaper build and much higher profits for the developer at the expense of the interests of subsequent owners who may eventually have to pay special levies to fix the building if and when problems manifest.

The problem is so widespread in Sydney that builders and developers convinced the NSW State Government to stop owners’ corporations (OCs) from filing legal claims against them. The resulting legislation now means that the developer puts up a 2 per cent bond and if any problems manifest within 15 months of the completion of the building then the bond can be called upon to fund repairs. Legal commentators have decried this reform, noting that defects within a building can sometimes take several years to become evident.

Here in Victoria, we have excellent legislation in this regard. A residential owners’ corporation has six years from completion of the work to bring a claim against a builder for shoddy or defective building works.

In fact, the Victorian Government recently overhauled the Domestic Building Contracts Act to set up a new dispute resolution body to conciliate on these matters and to make orders in certain circumstances.

The issue here is about educating owners and committees about these powers. The developers and OC managers mislead owners and committees by talking about the defect limitation period (DLP) of between 6 and 12 months.

However, this is not the case at all. What they are talking about is completely separate from the six-year warranty period owed by the builder to residential owners’ corporation under legislation. The DLP refers to the building contract between the developer and the builder only, and has nothing to do with the OC.

Yes, the developer can request the builder to return and fix defective work within the DLP, but the point is that at any time in the first six years following completion, the OC can also request the same.

It is also worth pointing out that some specialised trades such as plumbing are required to carry an insurance policy, so if you are in a building with serious plumbing issues, the OC might be able to make a claim against the plumber and their insurer.

A committee should always take independent legal advice in relation to building defects and it is prudent to start these investigations almost at once after the developer steps down from the committee in year two of the building.

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