1. What are we talking about?
Historically when a WA Strata Company or Lot owner wanted to make a complaint against a WA Builder for construction defects, after submitting their Complaint form, they would often be required by Building and Energy (previously known as the “WA Building Commission”) to obtain an Independent Expert Report to support their complaint and demonstrate why a construction defect exists. The key issue being it was the Strata Company or Lot owner’s obligation to prove that a construction defect exists.
Builders were often also required to obtain an Independent Expert Report in response to the Complaint to justify their position and demonstrate why the alleged construction defects were in fact, not defects.
The above position was in part supported by the fact that the adjudicator in these matters, Building and Energy, would generally not visit the construction site, so all of the evidence required to support or defend these positions had to be obtained and reported by Independent Building Inspectors.
The required processes, designed by Building and Energy, were expensive and took a substantial amount of time to progress.
The Independent Expert Reports produced by independent building inspectors often had to cover a multitude of construction items and in essence, these reports had to provide very detailed evidence supporting or defending the position. The report format was determined by the Building and Energy. Given that the actual cost to remediate each individual construction defect item could be extensive, the reports and or supporting evidence, was often subjected to rigorous challenge, debate and dispute by opposing parties. Often matters were escalated to the State Administrative Tribunal where Lawyers are permitted to represent each party, resulting in further interrogation of the Independent Expert Reports. Within this background, it is not surprising that the costs of producing these reports were expensive and out of reach for many home owners and or builders.
The cost of obtaining Independent Expert Reports was potentially recoverable from the opposing party, however the lack of clarity and guidance at the outset made this position unreliable and risky for all parties. Building and Energy’s assessment of the costs were also considered inequitable by many parties.
2. What Has Changed?
Back to the future!
From 1 July 2020, Building and Energy will no longer require Strata Companies (on Strata structures up to three levels) or Lot owners to obtain Independent Building Inspection reports. Issues identified in the formal Complaint will be inspected by Building and Energy’s own building inspectors, who will provide the parties with an independent report.
On the face of it this represents a potentially positive step for both Strata Companies/Lot Owners and builders. Appointing an independent party early in the complaint process may potentially result in clarity and direction in disputes earlier than is currently experienced.
For Strata Companies and or Lot Owners, they will be able to provide builders with a notice of Complaint (see here) and then once the required period has elapsed they can lodge the actual Complaint Form (see here) and pay a nominal fee ($120). Both of these documents need to be sent to the Builder involved. Presumably Building and Energy will then appoint their own inspector to review, investigate and report to all parties.
So on the face of it, this new process is an absolute win for Strata Companies/ Lot Owners on properties up to three levels. Their cost in progressing building defects against a builder potentially just got substantially easier and cheaper. The news for quality builders is also potentially very positive. The revised processes may prevent invalid and vexatious claims being made against the builder which can on occasions take considerable time and effort to resolve.
3. What are Construction Defects?
In WA, the Legislation provides that builders have a lifelong liability for significant construction defects. However, Building and Energy can only assist Strata Companies progress their complaints against builders during the 6 years statutory defect liability period. This statutory defect period runs from the date of practical completion. Under the WA Legislation, this date is drop dead! That is, unless a Complaint (not the Notice of Complaint) against a builder has been formally lodged with Building and Energy prior to the end of the 6 years, Building and Energy cannot provide any support to the home owner.
Beyond 6 years, Strata Companies may be able to progress a Complaint against a builder but are likely to need to engage lawyers. Hence, residual defects will need to be substantive to justify the investment.
What is a construction defect? Essentially we are looking for construction items which are not consistent with the approved construction plans, the Building Code of Australia, relevant Australian Standards and standards of professional workmanship. Sadly, some of these key documents are only available via an expensive subscription service, however the WA Guide to Standards and Tolerances (see here) provides home owners with a starting point. Unlike the suggestion from many builders, construction defects are not restricted to structural defects.
The challenge for many Strata Companies/Lot Owners is in actually identifying the defects. Some defects are obvious while others require experience, skills and qualifications to identify. A range of construction inspections reports from reputable building inspection firms should be able to support the property owner in gathering the evidence required to support the Notice of Complaint and or actual Complaint. These reports tend to be much cheaper than the cost of Independent Expert Reports. The construction reports should feed directly into the Notice of Complaint and the Complaint Form.
4. Who lodges the Complaint
We have written on the issue of Strata common property versus owner Lot property on numerous occasions in the past. The same issue applies to lodging complaints for construction defects on Strata.
Lot Owners are the only ones who can lodge complaints against a Builder for construction defects on Lot property. Similarly, only Strata Companies can lodge complaints against Builders for construction defects on strata common property. It is critical that the Strata Company and Lot owner are 100% clear on exactly where the Lot boundaries are and hence where the construction defect lies. If the wrong parties commence a Complaint on property they do not own the Complaint is unlikely to be successful.
Let’s look at an example. If an upper level strata Lot on a two storey strata complex, where the Lot boundaries are the internal perimeter walls, floors and ceilings, suffers water ingress it is likely that this will be a strata company common property issue as the moisture is likely to have travelled through common property to get into to the Lot. Hence the strata Company should progress the issue with the builder in this instance. Conversely, if we have a single level multi Lot strata structure consisting of standalone individual dwellings where the Lot boundaries are to the external surfaces of each Lot building, then moisture ingress is likely to be a Lot owner responsibility to progress with the builder.
5. Why so many Defects and Complaints?
In WA, builders especially on strata construction up to three levels, essentially self-assess all construction work as satisfactory and compliant. While there are requirements for the Builder to engage a Building Surveyor to confirm compliance, the number of defects identified in strata buildings indicates that the current compliance model is less than optimal. This is in an environment where the vast majority of trades associated with the construction of strata properties are not Licenced, registered or in many cases required to have any formal qualifications with ongoing professional development obligations.
Now to be clear there are a huge number of quality builders in WA who build excellent and compliant strata buildings to an exceptionally high quality. Sadly, on occasions, the other end of the spectrum is also over represented.
While the current compliance regime for residential construction remains, there is likely to be a number of complaints which will need to be progressed through Building and Energy.
6. Do the changes cover all Complaints?
The announcement from Building and Energy notes that “Some exclusions will apply to the services that Building and Energy’s in-house inspectors can provide, including inspections of high-rise buildings (indications being that these are strata buildings over 3 levels) and detailed expert reports on subjects such as engineering, chemical analysis and corrosion”.
7. Do you have to use a Building and Energy Inspector?
Current indications are that Strata Companies and or builders are not obliged to use the Building and Energy inspectors and can continue to utilise their own building inspectors to produce an Independent Expert report. The cost alone may negate this position, but it remains an option noting that both parties retain the right to appeal decisions from Building and Energy to the State Administrative Tribunal.
8. What are the potential Challenges
1.1 Number of Complaints
Over the past 6 years we have seen a number of home owners and Strata Companies concerned about aspects of the construction work, however the costs of progressing a complaint against a builder via Building and Energy were considered prohibitive. The gates have now been opened! Hence, any residential property, Strata Company or strata Lot owner who owns a building constructed within the last 6 years can potentially lodge a complaint with Building and Energy and have this issue investigated for a nominal cost.
Important note – The builder’s statutory defect liability obligations transfer to each subsequent owner of a property. It does not matter if the current home owner or Lot owner did not engage the builder to construct the home or Lot. Any subsequent owner of a home or Lot can lodge a complaint with Building and Energy during the six year statutory defect liability period.
Given the relatively small number of inspectors currently employed by Building and Energy, they may quickly become very busy and a queue of Complaints may form.
1.2 Supporting Regional Property Owners
Currently all of Building and Energy inspectors are located within Perth. How Building and Energy propose to efficiently and effectively support regional property owners is unknown.
1.3 Escalation to State Administrative Tribunal
For a variety of reasons, Building Complaints will be transferred from Building and Energy to the State Administrative Tribunal (“SAT”). What status Building and Energy produced Inspector Reports will have in SAT and whether or not property owners and or Builders will be able to draw on these Inspectors and or their reports is unknown. The question remains will the entire process need to start again, with entirely new Independent Building Inspectors.
1.4 New processes
Like any new processes there will need to be a settlement period. How the proposed new processes establish themselves within Building and Energy is yet to be seen. However, the potential benefits for home owners and quality builders are clear.
9. Act Now
Strata Companies related to strata properties level and less constructed over the past 6 years who have not progressed valid complaints against builders, due to the costs involved should review their position. Potentially the costs associated with progressing complaints just became substantially cheaper. All Strata companies, where the construction was completed in the last 6 years should review the status of construction defects within the strata common property and reconsider progressing a complaint against the builder in light of these changes.
The new arrangements announced by Building and Energy are a step in the right direction.
Any Strata Companies and Lot owners with a property less than 6 years of age and constructed with 3 levels or less can now reassess lodging a complaint with Building and Energy where costs were previously a prohibitive barrier.
Quality Builders who focus on producing a quality product will benefit from the process. Unsubstantiated complaints should now be able to progressed and resolved with minimal costs.
Sub-standard builders, the world has now changed. For $120, Strata Companies and Lot Owners can now have their complaint investigated against a builder by a Building and Energy building inspector.
11. The Advertisement
Houspect undertakes practical completion and defect liability inspections to specifically identify construction defects. These reports can feed directly into Building and Energy Notice of Complaint and actual Complaint Forms.
When required, Houspect will continue to provide Independent Expert Repots for WA Building Commission, SAT and Magistrate matters.
Ideally, Strata Companies and Lot owners should aim to avoid any dispute with their builder. Houspect offers staged construction inspections where we inspect the progress of the construction at every key stage of the build, hence avoiding many of the common dispute areas.
12. The Disclaimer
Houspect inspects buildings and constructions. Houspect are not Lawyers. This document is not intended as legal advice. If you need legal advice you should seek independent legal advice through a WA Legal Practitioner.
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