Off-the-Plan Purchase: Who Is Liable for New Home Defects?
Purchasing a property off the plan is an enticing prospect, but it also comes with potential risks — especially when it comes to construction defects. Whether it's minor issues like faulty finishes or major structural problems, knowing who is liable for these defects is vital toward protecting your interests. We take you through the steps you can take to mitigate risks when buying off the plan and outline your options if defects arise after the property is completed.
Mitigating risks of buying off the plan
Committing to buy a property off the plan comes with the risk that the property may not be up to the standard you were expecting when it’s delivered. For this reason, it is essential to conduct some thorough research before buying property off the plan. Following are some things to watch out for:
Ensure you’ve found a reputable builder or developer
Research the developer or builders’ history of completed projects, including quality, timelines, and whether they delivered on promises. Online reviews can be very helpful in gauging the experiences of their past clients.
Checking the builder has a licence registered with Queensland Building and Construction Commission (QBCC) is essential. This helps to ensure they are a financially viable business with the appropriate insurances in place.
Pay close attention to contract details
Review what’s included in the contract (e.g., fixtures, finishes, appliances) and what is excluded to avoid any unwelcome surprises.
Ensure you’re aware of how the sunset clause works so you understand the conditions under which the developer can cancel the contract and return your deposit. Be aware of any variation clauses allowing the developer to make changes to the design or materials.
Understand current and future market conditions
Off the plan properties don’t pop up overnight, so it’s important you’re aware of the current and predicted market conditions for the area you’re purchasing in. A good place to start is understanding the current prices and future growth projections aligning with the predicted development timeline of your project.
Ensure your finances are appropriately organised
Confirm that your lender is willing to finance an off-the-plan purchase and that you meet their requirements. It’s important to understand that the property’s value at completion may differ from the purchase price, so it’s a good idea to work with finance professionals to prepare for the possibility of a shortfall in the valuation — this ties in with keeping an eye on predicted market conditions.
Understand the completion date and any possible delays
Get a clear timeline for completion and assess the likelihood of delays. It’s a good idea to come up with a contingency plan for any delays, including potential financial impacts like renting in the interim.
Who is liable for building defects?
The answer to this may depend on the timing of the defect and your agreed contractual terms.
Off the plan contracts should include clauses around building defects, detailing the time period in which you are required to notify the developer or builder of any defects relating to poor workmanship or defective materials. It’s a good idea to seek legal advice regarding off the plan contracts to ensure the time period associated with clauses such as this are of a reasonable length. For example, if your contract only gives you 14 days to notify the developer of a defect, chances are you’re likely to miss something.
It’s important to note that quite often building defects are not obvious until months or even years later. This highlights the need for a defect liability period clause which makes the builder liable for repairing building defects within a specified liability period. If a defect presents itself after this period, there are also warranties that builders must follow.
What are common building defects?
Building defects can generally be broken up into two main categories; structural and non-structural. Structural includes things such as significant plumbing issues, roof leaks, and major structural compromises. Non-structural are things like faulty taps, defective windows, and issues with floor coverings.
What do I do if I find building defects?
If you come across a defect, the first thing you should do is raise it with your builder or developer.
If the builder does not rectify the issue, you may be eligible to lodge a complaint with the Queensland Building and Construction Commission (QBCC). It's important to lodge the complaint promptly — within 12 months for non-structural defects and within 6 years and 6 months for structural defects from the practical completion date. The QBCC can help mediate the process of building rectification.
If your complaint cannot be resolved through the QBCC’s dispute resolution process, you may be eligible for assistance under the Queensland Home Warranty Scheme.
Time limits for claims:
● For structural defects, you must lodge your complaint within 3 months of noticing the defect.
● For non-structural defects, within 7 months of the completion date.
If you’re unsure of your rights when it comes to remedying a building defect, we’re more than happy to point you in the right direction, or if you’re thinking about buying property off the plan, we’d love to chat with you to ensure you are as legally protected as possible throughout the process. Please feel free to get in touch with us.
Disclaimer: This article is general in nature and does not constitute legal advice. If you require legal advice in relation to your personal circumstances, you must formally engage our firm, or another firm to provide legal advice in relation to your matter. Bradley & Bray lawyers take no responsibility for any use of the information provided in this article.
You might also be interested in
