Guide

Defects: statutory warranties and who can rely on them

For residential building work in New South Wales the law puts warranties into the contract whether or not anyone wrote them in. This is what they promise, how long they last and who is protected by them.

General information, not legal advice. This page sets out how the law generally applies. It does not take account of your circumstances, and you should get advice about your own situation before acting on it. The official sources this page is written from are listed on it; where they differ from anything here, they are the authority.

In short

Section 18B of the Home Building Act 1989 (NSW) implies warranties into every contract to do residential building work. They cannot be excluded by the contract, and a term that tries to exclude or restrict them is void.

For contracts signed on or after 1 February 2012, proceedings for a breach must be started within six years for a major defect and within two years for any other defect, measured from completion of the work. Which category a defect falls into therefore decides how long there is to bring a statutory warranty claim; other remedies can run to different limits.

Do this first: find out the completion date and write it down. Everything on this page is counted from it.

What the warranties actually promise

The warranties are set out in section 18B of the Home Building Act 1989. They are implied into every contract to do residential building work, and also into a contract under which a principal contractor engages a subcontractor to do the work.

They are practical promises rather than general assurances of quality. Each one is a separate warranty, and a claim usually identifies which of them a particular defect breaches.

That the work will be done with due care and skill, and in accordance with the plans and specifications set out in the contract.
That all materials supplied will be good and suitable for the purpose for which they are used and, unless otherwise stated, will be new.
That the work will be done in accordance with, and will comply with, the Act and any other law.
That the work will be done with due diligence and within the time stated in the contract, or otherwise within a reasonable time.
That, where the work consists of the construction of a dwelling, the result will be a dwelling that is reasonably fit to live in.
That the work and any materials used will be reasonably fit for any purpose, result or condition the owner made known to the contractor and relied on the contractor's skill and judgement about.

A contract term that purports to exclude or restrict these warranties does not work. If one is in front of you, that is a reason to take advice before signing.

Six years, or two

The warranties do not last forever. For contracts signed on or after 1 February 2012, proceedings to enforce them have to be started within six years for a major defect and within two years for any other defect, measured from completion of the work. Where loss becomes apparent in the last six months of a period, NSW Government guidance describes a further six months to enforce the warranty.

This is why the first question in a defect matter is usually not whether the work is bad. It is which side of that line a defect falls on, and whether the relevant period has already run. A serious problem found in year three is a live claim if it is major and a very difficult one if it is not.

There is one piece of relief. The NSW Government’s guidance is that where a defect first becomes apparent in the last six months of a warranty period, a further six months is available to begin the dispute process. Treat that as a safety net rather than a plan: the moment you notice something, raise it in writing and note the date.

Completion is a defined idea, not simply the day the builder drove away. If the date is unclear in your case, that is itself a question worth advice, because everything else depends on it.

What makes a defect major

A major defect is about a major element of the building — broadly, the parts that hold it up or keep the weather out, such as footings, floors, walls, roofs, columns and beams — and about the consequence of the defect.

The idea is that the defect causes, or is likely to cause, the building or a part of it to be unable to be lived in or used for its purpose, or the destruction of the building or part of it, or a threat of collapse. Defects related to fire safety and to waterproofing are dealt with specifically.

This is not a question that can be answered from a website. It is answered by expert evidence about your building: what the defect is, what caused it, which element of the building is affected and what the consequence is. That is why a defect claim usually needs a report, and why the report has to address cause and consequence rather than only appearance.

Sort your defects list into probable major items and probable minor ones early. The two are on different clocks, and the minor ones are the ones that quietly run out of time.

Who can rely on them

The obvious answer is the person who signed the contract with the builder. But the warranties reach further than that, and this is the part most people do not know.

A subsequent owner of the land generally has the benefit of the statutory warranties for the remainder of the warranty period. Buying a house does not reset the clock, and it does not strip the protection away either. What you inherit is what is left of the original period.

The warranties are also implied into a contract between a principal contractor and a subcontractor, which matters when the argument about a defect moves down the chain.

Separately, the Design and Building Practitioners Act 2020 (NSW) imposes a duty on a person who carries out construction work to exercise reasonable care to avoid economic loss caused by defects. That duty is owed to each owner of the land and to each subsequent owner, whether or not they were party to any contract, and it cannot be delegated. For an owners corporation dealing with common property defects it is often the more useful route.

If you bought the property rather than built it, get the original contract and the completion date from the vendor, the developer or the certifier if you can. Without the date you cannot work out what remains.

What a claim looks like in practice

A statutory warranty claim is a contract claim. You are saying that the work breached one or more of the warranties, that you have suffered loss as a result, and that the loss should be made good — usually by the cost of rectification.

In practice that means three things have to be established: that the work is defective in a way that breaches a warranty, what it will cost to put right, and that you are within the period. Expert evidence normally does the first two.

Before NCAT will accept most home building applications, the dispute has to have been referred to NSW Fair Trading and Building Commission NSW first, and evidence of that investigation has to be attached unless the matter is exempt. The exemptions include a matter where the time for lodging a claim is due to expire within three months. An inspector may attend and may issue a rectification order, and a defect dispute can end at that stage.

Raise each defect in writing, with the date you first noticed it.
Give the contractor a fair and documented opportunity to fix it.
Lodge a complaint with Building Commission NSW if it is not fixed.
Commission an expert report addressed to cause, breach and cost of rectification.
Apply to NCAT, or to a court where the matter belongs there, before any period expires.

Giving the builder a chance to return is fair and sensible. Do not let that chance run down a warranty period — the period keeps running whatever is being promised.

What usually happens

Fix the completion date

From the contract, the occupation certificate or the final invoice. Write it down. Every period on this page is measured from it.

List the defects and date each one

What is wrong, where, and when you first noticed it. Photographs with dates are worth more than descriptions written later.

Sort them into major and other

For contracts signed on or after 1 February 2012, major goes on the six year clock and everything else on the two year clock. Where an item is arguable, treat it as the shorter one until you have advice.

Raise it in writing, then use the free route

Tell the contractor, in writing, with a date for a response. If that fails, complain to Building Commission NSW — for most home building disputes that referral is needed before NCAT will take the application.

Common questions

My builder says the defects period in the contract has ended, so that is the end of it.

Those are two different things. A defects liability period in the contract is a contractual arrangement for fixing items after practical completion, and it is usually short. For contracts signed on or after 1 February 2012, the statutory warranties under section 18B run for six years for a major defect and two years for other defects from completion, and they are not cut down by the contract’s own defects period.

I am the second owner. Do the warranties still apply to me?

Generally yes, for whatever remains of the original period. The statutory warranties are not confined to the person who signed the contract, and the duty of care under the Design and Building Practitioners Act is owed to subsequent owners as well. What you need is the completion date and, if you can get it, the original contract.

The builder's company has been wound up. Is there anything left?

Possibly. Home building compensation cover responds as a last resort where the contractor has become insolvent, has died, has disappeared or has had their licence suspended, and there may be claims against others involved in the work, including under the statutory duty of care. Raise it early, because that scheme has its own requirements.

Does the six month extension give me a whole extra six months?

It is narrower than it sounds. The NSW Government’s guidance is that where a defect becomes apparent in the last six months of a warranty period, a further six months is available to start the dispute process. It depends on when the defect became apparent, which is a matter of evidence. Do not build a plan around it.

Is cosmetic cracking a major defect?

Usually not, which means it is on the shorter clock. Cracking that indicates a problem in a load-bearing element is a different matter entirely. The distinction is about the element affected and the consequence, and it is settled by expert evidence rather than by how bad it looks.

If a period may be close

The date that matters is completion, not the date you noticed. If that date is more than a couple of years ago, say so when you get in touch and bring the completion date with you.