Building defects, big consequences - lessons from NCAT

Bartier Perry recently acted for homeowners in two separate cases in the NSW Civil and Administrative Tribunal (Tribunal). In both matters the homeowners were successful, demonstrating that builders who perform residential building works and fail to comply with the statutory warranties pursuant to section 18B of the Home Building Act 1989 (NSW) (the HBA) could face significant financial liability.

Although the factual circumstances differed, both cases involved major building defects, failures to comply with statutory warranties, and decisions where the Tribunal ordered the builder pay substantial monetary compensation to the homeowners.

Together these decisions provide important guidance for homeowners and anyone undertaking residential construction work in NSW.

Case 1: Builder ordered to pay $500,000.00

In this case, Bartier Perry acted for the homeowner who entered into a contract with the builder to construct a new dwelling for $500,500.

The homeowner commenced proceedings in the Tribunal against the builder seeking compensation for defective and incomplete work and for breaches of the statutory warranties in section 18B of the HBA.

The homeowner’s expert evidence confirmed extensive defects, including serious structural issues with the slab and footing system and approximately 72 missing concrete piers. The Tribunal accepted the evidence filed by the homeowner. Consequently, the Tribunal further found that the builder had failed to comply with the statutory warranties under section 18B of the HBA, including failing to perform the works in accordance with the plans and specifications.

The Tribunal concluded that the defects were so significant that demolition, rather than in-situ rectification, was ultimately required.

In deciding whether to make a work order or money order, the Tribunal considered circumstances of the matter including that:

• The builder had left the work incomplete;

• The builder had failed to comply with a Rectification Order issued by the NSW Building Commissioner;

• The builder’s licence had been cancelled; and

• The builder failed to obtain independent expert evidence to respond to the homeowner’s detailed engineering and building reports. 

The Tribunal determined that a money order of the maximum jurisdictional limit was appropriate and ordered the builder to pay the homeowner $500,000 plus the homeowner’s costs.

Case 2: Homeowner-builder ordered to pay $148,133.97

In this case, Bartier Perry acted for a homeowner who purchased a recently renovated property. The previous owner of the property had carried out renovation and extension work under an owner‑builder permit before selling the property to our client.

After moving into the property, the homeowner discovered serious structural and waterproofing defects. Expert investigations revealed failed waterproofing, non‑compliant footing depths, subfloor moisture issues and widespread subsidence arising from the renovations. Over time, these defects caused cracking, floor movement and structural damage throughout the home, including areas that were part of the original dwelling.

The Tribunal confirmed that:

• An owner-builder is not required to hold a contractor licence by reason of the owner-builder permit; and

• Pursuant to s 18C of the HBA, an owner-builder is liable to a subsequent owner of the property for any breach of the statutory warranties as if the owner-builder had done the work under a contract with the subsequent owner. That is, there is a deemed contract in respect of the work performed.

The Tribunal found the builder was fully liable for defective work, including work carried out by trades he had engaged.

The Tribunal accepted the expert evidence filed by the homeowner as to the defects, consequential damage and cost of rectification, holding that the builder failed to perform the works in accordance with the statutory warranties under the HBA, including that the work had not been performed with due care and skill.

The builder argued that he should be permitted to return to rectify the defects, however the homeowner submitted a money order was appropriate. In making its decision, the Tribunal noted:

• It held doubts that the builder would comply with any work order made; 

• The builder did not accept the extent and seriousness of the defects, nor the necessary scope of rectification;

• The builder lacked relevant qualifications. The builder insisted that he should supervise the rectification works himself, despite having no licence or formal building credentials; and 

• The evidence showed a breakdown in the relationship between the homeowner and builder as well as mutual disrespect and distrust.

The Tribunal concluded that, on any terms, a work order was unlikely to achieve a timely and cost-effective resolution of the dispute and would instead likely result in further conflict and delay, including a possible renewal application.

The Tribunal ordered the builder to pay $148,133.97. This comprised the entire cost to rectify the works as set out in the homeowner’s evidence as well as compensation for the homeowner’s alternative accommodation while extensive demolition and rebuilding works were carried out.

Why these decisions matter

These decisions demonstrate that a builder will not always be allowed to return to rectify in circumstances where they have breached the statutory warranties.

It is well known that the preferred outcome of the Tribunal is to give the builder an opportunity to rectify, as set out in section 48MA of the HBA. The rationale behind this preference is straightforward: rectification by the builder can, in many cases, be quicker, cheaper and more efficient than monetary compensation which would allow the homeowner to engage a remedial builder.

However, where there is strong evidence that a work order is not appropriate, the Tribunal can, and will, make a money order against the builder. This allows the homeowner to engage qualified third-party contractors to carry out the rectification works independently.

As set out in the cases above, in deciding whether a work order is appropriate, the Tribunal may consider a number of factors, including:

The seriousness and extent of the defects; 

• Whether the responsible party accepts the defects and the required scope of rectification; 

• The parties’ relationship and level of trust and confidence between them; 

• The builder’s willingness and ability to comply with an order;

• Licensing and insurance issues; and 

• Whether a work order would be a timely and cost‑effective resolution of the dispute. 

Lessons for homeowners and builders

Ultimately, both decisions demonstrate the very real financial risks faced by builders (including owner‑builders) who fail to comply with their statutory obligations under the HBA. In appropriate circumstances, the Tribunal will not hesitate to order substantial monetary compensation. In this event, the builder loses the opportunity to rectify, and instead faces a potentially substantial money order, often requiring payment of the full cost of rectification by a remedial builder which is usually far more costly than the builder returning.

In addition to the financial risk for builders, money orders can also have significant impacts on licensing and historical compliance records.

For homeowners, these cases provide reassurance that the law recognises the practical realities of building disputes. While the preferred outcome is to allow the builder to return to rectify, where appropriate, the Tribunal will award monetary compensation, allowing homeowners to move forward without further delay.

These cases highlight the importance of understanding and meeting statutory obligations under the HBA. Careful documentation, tailored legal advice and a proactive approach to dispute resolution can help builders and homeowners alike to protect their interests and reduce risk exposure.

How we can assist you

If you are a builder or homeowner with concerns about alleged defective or incomplete work, or about building or renovation works generally, we can provide advice about your rights, liabilities and entitlements.

To get in touch with our team feel free to reach out to Sharon Levy or Breitil Sulaiman.

Authors: Sharon Levy, Breitil Sulaiman & Elizabeth Morakis

This publication is intended as a source of information only. No reader should act on any matter without first obtaining professional advice.