Domestic Building disputes occur frequently in Victoria, as well as the rest of Australia, for many reasons whether it be due to alleged defective works or unnecessary delay. When settling such disputes, it is vital to ensure that your Terms of Settlement or Deed of Settlement does not inadvertently breach the Domestic Building Contract Act 1995 (Vic) (“the Act”) and the implied warranties contained therein. The releases in such Terms or Deeds may otherwise be void under the Act.
I don’t act, I build?
A number of types of building works fall under the operation of the Act. According to Section 5 of the Act, the types of work to which the Act applies includes:
- Any erection or construction of a home;
- Any associated work including, but not limited to, landscaping, paving and the erection or construction of any building or fixture associated with the home;
- The provision of lighting, heating, ventilation, air conditioning, water supply, sewerage or drainage to the home or the property on which the home is, or is to be;
- The renovation, alteration, extension, improvement or repair of a home;
- Any work such as landscaping, paving or the erection or construction of retaining structures, driveways, fencing, garages, workshops, swimming pools or spas that is to be carried out in conjunction with the renovation, alteration, extension, improvement or repair of a home;
- Any renovation, alteration, extension, improvement or repair of a home;
- Any work associated with the construction or erection of a building on land that is zoned for residential purposes;
- The demolition or removal of a home;
- Any site work relating to the above;
- The preparation of plans or specifications for the carrying out of the above work.
According to Section 6, the Act does not apply to any work relating to:
- A farm building or proposed farm building (other than a home);
- Buildings intended to be used only for business purposes;
- Building intended to accommodate animals;
- Design works carried out by architect or registered building practitioner under the Building Act 1993 as an engineer or draftsperson;
- Work involved in obtaining foundations data in relation to a building site;
- Transporting of a building from one site to another; or
- Work carried out under a contract for one type of work only (including attaching external figures, electrical work, glazing, installing floor coverings, insulating, painting, plastering, plumbing work, tiling, erecting a chain wire fence to enclose a tennis court and erecting a most, pole or antenna).
It’s implied so you can’t deny
If your building works fall under any of the categories in Section 5 of the Act, then the following implied warranties apply to your work according to Section 8:
- That the work will be carried out in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract;
- That all material to be supplied by the builder for use in the work will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new;
- That the work will be carried out in accordance with, and will comply with, all laws and legal requirements;
- That the work will be carried out with reasonable care and skill and will be completed by the date (or within the period) specified by the contract;
- If the work consists of the erection of a home, or is work intended to renovate, alter, extend, improve or repair a home to a stage suitable for occupation, the home will be suitable for occupation at the time the work is completed; and
- if the contract states the particular purpose for which the work is required, or the result which the building owner wishes the work to achieve, so as to show that the building owner relies on the builder's skill and judgement, the builder warrants that the work and any material used in carrying out the work will be reasonably fit for that purpose or will be of such a nature and quality that they might reasonably be expected to achieve that result.
These warranties are deemed to be terms of the building contract regardless of whether or not they are actually set out in the contract.
You may be thinking that “Ok, but builders can just contract out of these warranties in my Deed or Terms of Settlement”. However, this is not the case; you cannot do so according to Section 10 of the Act which states that:
A provision of an agreement or instrument that purports to restrict or remove the right of a person to take proceedings for a breach of any of the warranties listed in section 8 is void to the extent that it applies to a breach other than a breach that was known, or ought reasonably to have been known, to the person to exist at the time the agreement or instrument was executed.
Therefore, the implied warranties cannot be restricted or removed in any agreement or instrument, including any Terms or Deed of Settlement with a customer.
Alphonso to the rescue
A potential solution for builders and subcontractors in this scenario where you are trying to finalise any Terms or Deed of Settlement with a customer may be found in the case of Alphonso v P and JM De Leo Pty Ltd  VCAT 1459 (“the Alphonso case”).
The terms of settlement in that case were challenged as being in breach of Section 10 of the Act. However, the builder succeeded in this case whereby the release clause in the terms (which released each party from all claims, actions, demands and suits) specifically acknowledged that the release did not affect the implied warranties under the Act as well as Part 9 of the Building Act 1993 (Vic). Accordingly, the balance of the releases contained in the terms of settlement remained enforceable and were not deemed to be in breach of Section 10.
Whether you are a builder, subcontractor, landscaper, residential pool builder or similar, it is important to be aware of the implied warranties and whether they apply to your type of works. You cannot contract out of the implied warranties. It is therefore important to carefully structure and draft any Terms or Deed of Settlement with a customer when settling a domestic building dispute so that the release clause does not become void and unenforceable. It is also important that your Terms or Deed of Settlement does not inadvertently breach or seek a release from a builders obligations under, inter alia, the Building Regulations 2018 (Vic) and the Building Code of Australia.
If you have a Domestic Building dispute that you need assistance with, please do not hesitate to contact our experienced professionals.