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Statutory Warranties

Builders need to be aware that warranties apply for all residential building work carried out in New South Wales, writes the MBA New South Wales Legal Department (NSW).

The Home Building Act 1989 implies a number of warranties into contracts for all residential building work carried out in NSW. They apply irrespective of whether they are included in a written contract.

Contrary to what some builders think there is no monetary threshold after which the warranties apply. They apply to all residential building work. This is separate from the insurance provisions of the Act. Although the Act requires Home Warranty Insurance where the contract price exceeds $12,000, the warranties apply regardless of the contract price or whether the builder has a valid insurance policy.

Statutory Warranties - Section 18B

The substance of the warranties is contained in s18B of the Act and includes:

(a) A Warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract.

The first part this warranty, the "proper and workmanlike manner" test, is generally interpreted on a case-by-case basis. It usually incorporates an assessment of the work done and the work as it should be have been done. It may also include an assessment of the circumstances under which the scope of works was established. That is, where the work is done to a budget, the workmanlike manner may be limited to the degree provided for by the budget.

The second part of this warranty is a comparison between the work actually performed and the requirements of the plans. If the plans conflict with the Building Code of Australia (BCA), the builder should seek instruction in writing from the owner (or, if applicable, the architect) regarding how to proceed. A failure to comply with the BCA is a failure to satisfy the warranty that the work will comply with applicable laws. Construction certificates are issued subject to the requirement that the work done complies with the BCA. As discussed below, any alternation to the work necessary for compliance with the BCA is a deemed variation.
(b) A warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new.
The builder should take into consideration any representations made by the owner as to the planned (or even possible) use of the work. This may include other work to be performed by the owner which may affect or be affected by your scope of work. For example, will the owner be installing a saltwater pool? Will the owner be rendering the walls? Where there is no disclosure of this intention it is not the builder's responsibility to make enquiries; however, where the prospect is raised it should be addressed and the selection of materials should be approved in writing by the owner.

A warranty that the work will be done in accordance with, and will comply with, this or any other law.

The MBA residential contracts contain clauses which provide for compliance with the requirements of local and other authorities and inspections. The relevant clause is cl 12 in both the BCA and Cost Plus contracts. This clause provides that any change to the scope of works which is required to comply with this warranty is a variation.
(d) A warranty that the work will be done with due diligence and within the time stipulated in the contractor, if no time is stipulated, within a reasonable time.

This warranty is subject to contractual provisions. Clause 11 of the MBA residential contracts provides for extensions of time.
(e) A warranty that, if the work consists of the construction of a dwelling, the making of alternations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling.

Obtaining an occupation certificate should satisfy this warranty. However where an occupation certificate is not issued or not required, the application of this warranty would need to be considered on a case-by-case basis. It should be noted that, unless the obtaining of the occupation certificate is included within the scope of works, this responsibility rests with the owners.
(f) A warranty that the work and any materials used in doing the work will be reasonably fit the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor license or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment.

This warranty is similar to warranty (b) above but applies to work as well as to materials.

Please note that our provision of any telephone advice to you is only a general discussion to assist as to whether you wish to instruct us. Telephone discussions should not be construed as legal advice and are not to be relied upon. Legal advice which you can rely on can only be properly provided by us to you at or following an initial conference. We are not responsible for any action you may take or fail to take based upon the provision of our telephone advice to you. If you wish to arrange a conference, please contact us.

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1/12/2010

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