Defects in off-the-plan developments

Buying off the plan can be an exciting prospect – a brand new property, with brand new fixtures and fittings. All of this sounds great in theory, but what happens when you move in and discover chipped benchtops, paint on the carpet or loose tiles?

Defects Clause

Within off the plan Contracts, there is generally a clause addressing defects which may become apparent after settlement. Whilst the specifics of the clause will vary from Contract to Contract, in most cases, it acts to enable purchasers to notify the vendor of defects within an agreed timeframe (usually 3 months) and have them repair these defects at their own cost within a reasonable period. This allows vendors to address minor defects such as repairing chipped benchtops, replacing marked carpet and rectifying loose tiles.

In practice, purchasers are usually only permitted to serve one defects notice. Therefore, it may be prudent to save that notice until towards the end of the agreed timeframe, to allow as much time as possible to discover and note all defects. It may also be worthwhile to hire a professional building inspector to undertake an inspection and compile a list of defects to be submitted to the vendor.

Statutory Warranties

Where residential off the plan developments have taken place, it is likely that the statutory warranties for home building work in NSW pursuant to the Home Building Act 1989 will apply. Where there are defects, this can amount to a breach of warranty. Owners can make a claim for breach of warranty within six years for major defects and two years for other defects, starting from the date of completion of the works.

Generally, an owner must mitigate their loss by making reasonable efforts to make the claim within six months of the defect becoming apparent and not unreasonably refusing access to enable inspection and rectification works.

What Can You Do?

Attempt to negotiate for a longer defects period e.g. six months, to allow further time for you to uncover defects.
Attempt to negotiate to be able to serve more than one notice of defects in case you serve your only notice then later discover you have missed something.
Attempt to negotiate a fixed timeframe in which the defects must be repaired, rather than a ‘reasonable time’ which is ambiguous.
Do your research. Look into the builder/developer; see examples of their previous works, whether there are any forum discussions regarding their workmanship, and whether they have any completed developments you can see in person.

Above all this, it is critical to seek the assistance of an experienced property lawyer who can guide you through the process and negotiate to protect your interests, such as one of the members of the Baker Love team.