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  • 18
    Sep

    When your builder disappears – what are your options?

    When your builder disappears – what are your options?

    NCAT Proceedings

    Earlier this year we appeared before the NSW Civil and Administrative Tribunal (“NCAT”) representing a home owner seeking more than $50,000 from a builder he had engaged to construct a granny flat.

    Our client alleged that the builder failed to complete the project and that the work was not completed in accordance with the building contract The builder subsequently disappeared.

    Builder to pay damages

    The Senior Member, in ordering the builder to pay almost $55,000 in damages to our client found that based on the evidence before him the incomplete works were in breach of the builder’s statutory warranty as they “were not in accordance with the plans and specifications set out in the contract…. or not completed with due care and skill, or both.

    The builder’s failure to complete the works within the time specified in the contract resulted in our client’s inability to rent out the granny flat for which loss of rent was claimed. The Senior Member, after considering our client’s evidence and the remoteness of the damage as set out in the leading contract law case of Hadley v Baxendale [1984] 9 Ex 341, was satisfied that “the loss of rent flowed naturally from this breach in this case.

    Builder to pay legal costs

    Further, the Senior Member ordered the builder to pay our client’s legal costs and the costs of having an expert report prepared. He found that expert’s costs were “reasonably incurred to prove [our client’s] case on breach of statutory warranty and to establish the reasonable costs of rectification.”

    Home owners beware

    We have observed an alarming increase in disputes between builders and home owners, often resulting in costly litigation.

    Basic precautions

    Some basic precautions home owners should take include:

    • Have your building contract prepared or reviewed by a building and construction lawyer prior to signing it. The expenditure of a few hundred dollars at this stage may well save you thousands in the future.
    • Home owners should always conduct a Fair Trading home building licence check to ensure their builder has a licence, and that the licence allows the builder to undertake the contractual works.
    • Ensure any changes to the contract, referred to as “variations”, are agreed to and signed prior to the variation work commencing.
    • Apart from the initial deposit, do not make further payments to the builder unless the relevant stage of work is completed.
    • If a dispute arises with the builder, promptly obtain competent legal advice.
    • Understand what building works the contract price covers. Importantly, know what work is not covered.
    • If the contract value is more than $20,000 it is fundamental that home owners receive a Home Owners Warranty Certificate of Insurance from the builder prior to any work commencing or deposit being paid.

    Insurance can be crucial

    We are aware of a number of cases where there was no insurance and the builder was a company with no assets, leaving the home-owner without any redress.

    In our client’s matter, although the builder disappeared, there was insurance in place providing an avenue for the sums ordered by the Tribunal to be recovered through the insurer.

    The importance of insurance cannot be underestimated, particularly so in situations where a builder disappears, becomes insolvent or a dispute arises between the parties to the contract causing work to stop.

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