Notice of defects before handover on Australian residential builds

What it is

A notice of defects is a written list of building defects given by the homeowner (or their representative) to the builder. The typical timing is at practical completion, where the owner identifies items that prevent acceptance of the work and asks for them to be rectified. The notice is the formal record that the defects existed at handover. Without it, every defect later becomes a he-said she-said dispute about whether it was there on day one or appeared after the owner moved in.

When the notice is given

A notice of defects is usually given immediately after the practical completion inspection. Under the major Australian residential building contracts (HIA, Master Builders Association, ABIC) the builder gives the owner a notice of practical completion. The owner then has a short period (often five business days) to inspect and respond with either acceptance or a list of defects.

If the defects are minor and do not prevent occupation, practical completion is still reached and the items go on a defects list to be rectified during the defects liability period. If the defects are material (waterproofing failures, structural items, safety issues, missing safety paperwork) the owner can refuse to accept practical completion.

What goes on the list

A useful notice of defects has, for every item:

• A location precise enough that a tradesperson can find it without help.
• A short description of what is wrong, in plain language.
• A photo with the date stamp visible (a modern phone camera saves this in the file metadata).
• Where possible, a reference to the standard, the plans or the specification that the work fails to meet.

Avoid lumping items together. Twenty individual line items are easier to track and close out than one entry that says rectify all paintwork.

Categorising defects

Defects fall into two broad categories under most Australian statutes. Major defects (sometimes called structural defects) are defects that affect a major element of the building, cause or are likely to cause the inability to use the building for its intended purpose, or threaten health and safety. Minor defects are everything else.

Major defects on a notice get priority. The builder is liable for them under the statutory warranty for the long period (six years in NSW, Vic and Qld). Minor defects are still covered but for a shorter window (two years in NSW).

The defects liability period

Once the notice is given, rectification happens during the defects liability period set in the contract. The standard period is thirteen weeks under the HIA fixed price contract but it varies. Some contracts set six months. The defects liability period is a contractual mechanism, not a statutory one.

Importantly, the defects liability period does not cap the builder's liability. When the contractual period ends, the statutory warranty regime takes over.

Statutory warranty regimes

The statutory warranties run from the date of practical completion (or the date the contract is terminated). The periods are:

• New South Wales: section 18E of the Home Building Act 1989 sets six years for major defects and two years for other losses.
• Victoria: section 134 of the Building Act 1993 sets ten years from issue of the occupancy permit or final inspection paperwork for any cause of action arising from the building work.
• Queensland: the Queensland Home Warranty Scheme administered by the QBCC covers structural defects for six years and three months and non-structural defects for one year.

These periods apply regardless of what the contract says. A clause that purports to shorten the statutory warranty period is unenforceable.

What if the builder refuses to rectify

If the builder refuses to attend or the rectification work is itself defective, the owner can escalate:

1. A formal letter of demand citing the statutory warranty section and the specific defect.
2. A complaint to the state regulator (NSW Fair Trading, Victorian Building Authority, QBCC).
3. An application to the relevant tribunal (NCAT in NSW, VCAT in Vic, QCAT in Qld) for an order to rectify or for damages.

The tribunals can order the builder to rectify, can order payment of the cost of having another contractor rectify, and can award damages. They cannot make orders against an insolvent builder beyond what the home warranty insurance covers, which is why getting the notice in early matters.

Practical tips before handover

Walk the home with a printed copy of the plans and the specification. Tick off finishes against what you paid for. Run a moisture meter over the wet area floors and the slab near external walls. Photograph the switchboard with the meter readings visible. Get the compliance paperwork in hand before you sign acceptance of practical completion. Once the keys are handed over, the bargaining position shifts.