Implied warranties and consumer guarantees
The law requires a Builder Practitioner to meet certain obligations, when they commence building work.
These are called 'warranties' in the Domestic Building Contracts Act 1995, and ‘consumer guarantees’ in the Australian Consumer Law. You have rights under both laws.
Warranties under building law
Builders and tradespeople must honour the implied warranties in the Domestic Building Contracts Act, which require that they:
carry out the work in a proper and workmanlike manner, in accordance with the plans and specifications set out in the contract
ensure all materials supplied are good and suitable for the purpose and are new, unless otherwise stated in the contract
carry out the work in accordance with all laws and legal requirements
carry out the work with reasonable care and skill and complete works by the date (or within the period) specified by the contract
ensure new homes, extensions, renovations, repairs and kit homes (or similar) are suitable for occupation when completed
ensure other types of work and the material used are reasonably fit for the intended purpose.
Implied warranties automatically apply to all domestic building work, regardless of the cost or whether or not there is a written contract.
These warranties transfer to a new owner for up to 10 years from completion of the work.
This right transfers to a new owner if the property is sold within this time. Seek legal advice for more information, including if the building work is older than 10 years.
Domestic building insurance
By law, builders or tradespeople must take out domestic building insurance for their clients when the cost of the works exceeds $16,000.
This insurance only gives you limited cover.
Domestic building insurance, previously known as ‘builders warranty insurance’, protects consumers in the event their builder or tradesperson cannot finish the building project or fix defects because they have:
become insolvent, or
If your policy was issued on or after 1 July 2015, it also provides cover if the builder fails to comply with a final order made by the Victorian Civil and Administrative Tribunal (VCAT) or a court.
Your builder or tradesperson must provide you with a copy of the policy and a certificate of insurance covering your property before you pay a deposit or any other money.
Domestic building insurance covers costs up to $300,000 to fix structural defects for six years, and non-structural defects for two years. Claims on the policy for work that was not completed may be limited to only 20 per cent of the contract price.
In all other cases, your builder or tradesperson is required to fix or complete works in accordance with the contract.