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Builders and Developers beware when selling

Watkins Tapsell Buliding & Construction Law

I have dealt with numerous builders and developers over the years who have had their building company renovate  a residential property for their development company.  The development company has then entered into a contract for sale of the renovated property with a buyer. The buyer later contacts the building company and the development company in relation to defects in the property and asks them to fix them.
The builder and developer (before they come to see me) initially refuse to go back to the property to fix anything and say to the buyer “the property was sold to you in the state that it was in. Under the contract of sale the rule “buyer beware” applies, that is, you  as the buyer were required to make your own inquiries in relation to the property and the state of the building works. I also had a special condition put into the contract that you rely on your own inquiries in relation to the condition of the premises and the building works on it.”

Unfortunately, this argument cannot work for the building company as the building company (regardless of what the contract between the development company and the buyer says) is still bound by the statutory warranties under the Home Building Act. Statutory warranties are promises which include that:

  • the work was performed in a proper and workmanlike manner.
  • all materials supplied are good and suitable for the purpose for which they are used and that, unless otherwise stated, the materials were new when used.
  • the work was done in accordance with and complied with the law in place at the time of building.
  • the work has resulted in a dwelling that is reasonably fit for occupation.
  • the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes the purpose or result known to the contractor, so as to show that the owner relies on the contractors skill and judgment.

The builder/developer came to see me once they received an application against them from the NSW Civil and Administrative Tribunal seeking orders that they pay the buyer a sum of $110,000 for the cost of having another builder rectify the works.

I acted for the builder and negotiated a settlement of the matter which involved a small payment to the owner. With the assistance of some building and engineering experts I was able to argue that while some of the defects with the property were as a result of the renovation works carried out by the builder some of the other problems had nothing to do with the work carried out by the builder.

If you are a Builder and Developer and a buyer contacts you in relation to some problems with a property please contact me for some early advice, don’t wait until you receive the application from the Tribunal.

This represents the law as at 30 January 2015.

Sonja Daly

Sonja Daly joined Watkins Tapsell as a Solicitor in 1994. She became a Partner of the firm in 1998 and brings her expertise to the commercial litigation practice advising on contract and building disputes as well as interpretation and breach of agreements