Homeowners entering residential building contracts often assume that defect rectification will be swift and straightforward. However, when builders fail to respond to defect notices or rectify issues in a timely manner, homeowners are left wondering what rights they have to engage someone else. The short answer is yes, but only after providing the builder with a reasonable opportunity to rectify the defects, unless circumstances justify otherwise.

Legal Right to Engage Another Contractor

Under both contract law principles and standard building contract terms, a homeowner generally has the legal right to engage another contractor to fix building defects if:

  • the builder fails to correct the defects within the period specified in the contract, usually 10 working days after written notice or as specified in the contract.
  • the builder fails to show reasonable cause for delay or does not provide an acceptable plan or timetable for rectification.
  • the building contract explicitly allows the homeowner to engage another party when the builder fails to rectify within a set timeframe (a clause commonly included in standard contracts such as those from the HIA or Master Builders Association).

Reasonable Opportunity to Rectify

However, the homeowner’s right to engage another contractor is not absolute. Even when the builder fails to rectify, homeowners are not immediately free to appoint a third party. In The Owners SP 76674 v Di Blasio Constructions PL [2014] NSWSC 1067, it was decided that the homeowners are required give the builder a reasonable opportunity to inspect the property and rectify the defects, and the homeowners ability to recover the damages and costs would be impacted if they failed to give reasonable opportunity to the builder to rectify the defects. 

This requirement applies even if it is not expressly mentioned in the contract. This obligation arises from two important principles:

  • mitigation of damages: the homeowner must act to minimise their own financial loss.
  • opportunity to rectify: the builder has the right to correct their work and minimise their liability.

Exceptions to Builder’s Reasonable Opportunity to Rectify

Homeowners are not always required to provide the builder reasonable opportunity to rectify, given that the homeowner is able to demonstrate the following factors:

  • the homeowner has reasonably lost confidence in the builder’s ability or willingness to do the job properly.
  • the relationship between the parties has irretrievably broken down.
  • the builder refuses outright to carry out the repairs.
  • the builder does not offer an acceptable plan for rectification.
  • previous rectification attempts by the builder have failed.

In these cases, the homeowner may be justified in bypassing the builder and engaging a third party directly.

Cost Implications of Engaging Another Contractor

Engaging another contractor is often more expensive than having the original builder rectify the defects. To recover these costs, whether through legal action or insurance, the homeowner must be able to demonstrate that the work carried out was necessary and reasonable and they acted reasonably in attempting to mitigate their loss. Failure to satisfy these requirements may result in reduced compensation or difficulty recovering costs.

Key Considerations

  1. Contractual Obligations

Homeowners should review their building contracts for:

  • Specific defect notification requirements.
  • Timeframes for rectification.
  • Procedures governing third-party engagement.
  1. Risk Factors

Before engaging another contractor, consider:

  • Whether the relationship with the builder is beyond repair.
  • The complexity and extent of the defects.
  • The builder’s history with past rectifications.
  • The cost difference between the builder’s potential rectification and that of a third party.
  1. Legal Compliance

Always ensure compliance with:

  • Contractual terms and timelines.
  • Statutory obligations and building regulations.
  • The legal duty to mitigate damages.

Engaging a third-party contractor to rectify defects is not a decision to be taken lightly. It is legally permissible, but only after the homeowner has fulfilled their obligations to notify the builder and provide a reasonable chance to fix the issues. Where the builder fails or refuses to act, and particularly where trust has broken down, homeowners may proceed, provided they carefully document their actions and act reasonably.

Feel free to contact Damin Murdock at Leo Lawyers via our website, on (02) 8201 0051 or at office@leolawyers.com.au. Further, if you liked this article, please subscribe to our social media accounts.

DISCLAIMER: This is not legal advice and is general information only. You should not rely upon the information contained in this article and if you require specific legal advice, please contact us.