A builder under a residential building contract in Queensland is subject to the express warranties under the residential building contract, as well as warranties implied by the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act). One of those implied warranties is that the builder must carry out the contract works with “reasonable diligence”.
What amounts to “reasonable diligence” is often the subject of dispute when the relationship between the owner and builder deteriorates, commonly as a result of time and cost blow-outs.
The uncertainty around valid termination of a residential contract, and subsequent cover under the QBCC’s Home Warranty Insurance Scheme (Scheme), was brought to light in the recent case of Richards and Anor v Queensland Building and Construction Commission and Anor  QCAT 189 (Richards).
In Richards, practical completion of the homeowners’ home renovations was due under the contract by no later than 29 December 2016. The owners gave the builder a Notice to Remedy Breach (NTRB) on 27 April 2017 for failing to progress the works in a diligent manner, with the builder last appearing on site on 12 March 2017.
The builder did not return to site within the time stated in the NTRB and the owners terminated the contract on 16 May 2019 because of the builder’s failure to remedy the breach.
The owners subsequently made a claim on the QBCC’s Scheme for non-completion of works. That claim was initially rejected by the QBCC because, it was argued, the owners were themselves in breach of the contract and the owner’s termination was therefore not in accordance with the contract – a pre-condition to a claim under the Scheme.
The Tribunal rejected the QBCC’s arguments, finding instead that the owner was not in breach of the contract, was entitled to issue the NTRB to the builder, and was entitled to terminate the contract due to the builder’s failure to remedy the breach. Given those findings, the owners were entitled to cover under the Scheme.
Each building contract and situation is different. A homeowner must be very careful when considering termination, as a wrongful termination will exclude the owner from claiming under the Scheme.
A builder will not have failed to proceed with the works diligently simply because the works are delayed in completion. There are many circumstances in which delay will be outside of the builder’s control, and those circumstances must be considered by the owner before issuing a NTRB, and by the builder in responding to a breach notice.
What can you do to protect your interests?
As a homeowner, you should always keep records of any directions issued to the builder, particularly those that may cause the builder to be delayed in completing the works by the practical completion date.
There are several warning signs to be alert to that all may not be well with the builder, and a sign that you should seek legal advice. Those warning signs include:
- the builder requesting payment in advance of work it has not carried out (a breach of the QBCC Act but a reasonably common complaint by owners);
- the builder “going slow” on site, or trade contractors not attending site;
- trade contractors contacting you requesting payment because they have not been paid by the builder.
Start the conversation
Because of the serious consequences attaching to termination, whether a builder or homeowner, you should contact a solicitor as soon as you are concerned about the direction the contract is heading. Solicitors are often able to act as a circuit breaker and negotiate outcomes that benefit both parties, getting the relationship back on track.
Enforcing your contractual rights under a building contract requires strategic, pragmatic and commercially-driven advice, as each dispute is unique in its pressure points, factual disputes and desired outcomes.
Redchip’s dispute resolution team is well-versed in residential and commercial building disputes, acting for both builders and homeowners. We understand the common triggers and our early intervention can often resolve little issues before they morph into much bigger disputes.
If you have any questions about your contract, or are concerned about the direction it is heading, please contact us on 07 3223 6100 or send us a message and we will get in contact with you to discuss any questions you may have.