In residential building works, delays can be inevitable. There are various factors that can impact a builder’s ability to complete work within the agreed timeframe, such as the unpredictable events or homeowners’ decisions to vary the scope of works. In home building contracts, extensions of time (EOT) is a legal mechanism that allows builders to adjust the completion date when delays occur, provided they meet specific legal and procedural requirements.
This article outlines the valid grounds for EOT claims, the notice and documentation procedures involved, and key considerations for both builders and homeowners.
Valid Grounds for Delay
EOT claims are only permitted under certain conditions. Broadly, the valid grounds can fall into three main categories:
- Unforeseeable Circumstances
These are delays that were not reasonably predictable and are beyond the builder’s control. Common examples include natural disasters or extreme weather events, public health directives (eg. COVID-19 lockdowns), or shortages in materials or labour, unless the builder caused or failed to mitigate the shortage.
The unforeseeable nature of these events must be clearly demonstrated. Builders must also show that they have taken reasonable steps to avoid or mitigate the negative impacts on the home building works.
- Owner-Caused Delays
Delays caused by the homeowner’s actions or inaction can also constitute valid grounds for EOT, such as the late selections or changes to fixtures and finishes, the delays in granting access to site or providing required information, or the requests for out-of-scope work without formal approved variation.
It is essential that such delays are directly attributable to the homeowner’s conduct rather than due to misunderstandings or miscommunication.
- Approved Variations
If a homeowner requests a change in the scope of work, and the builder agrees to a variation, any delays resulting from that variation may justify an EOT, provided it is properly documented, and formally approved by both parties in accordance with the contract.
Failure to comply with procedural requirements can render the variation invalid and thus cause the delay ineligible for extension.
Procedural Requirements
Builders must strictly adhere to procedural rules to claim an extension of time.
- Notice Requirements
- Timing: Builders must notify the homeowner in writing within 10 business days of becoming aware of the delay (or other such period of time specified in the contract).
- Details: The notice must outline the cause of the delay and the estimated additional time needed.
If the builder misses this deadline, the claim may be denied, even if the reason for delay is otherwise valid.
- Owner Approval
The homeowner must approve or deny the EOT claim in writing. If the homeowner disputes the EOT claim, it typically triggers the dispute resolution mechanism provided for in the contract, which may include mediation, adjudication, or arbitration.
- Documentation Obligations
The builder must supply a signed copy of the EOT to the homeowner within five business days (or other such time specified in the contract).
Key Considerations
- Strict Timeframes
Missing the 10-day window, or as otherwise specified in the contract, for notification can jeopardise a builder’s entitlement to additional time, even if the delay is clearly outside their control.
- Documentation is Crucial
Written records are essential. Verbal agreements or informal communications generally carry very little weight if a dispute arises.
- Practical Implications
Delays with similar causes may be included into a single EOT notice to streamline the process. However, the builder must always act to reduce delays wherever possible. Non-compliance with procedural requirements do not automatically void the contract, but may affect specific entitlements when dispute arises.
- Dispute Resolution
When parties cannot agree on whether a delay justifies an extension, or the length of time that should be granted, the matter must be resolved through the dispute resolution process specified in the contract. In some jurisdictions, courts or tribunals may still allow an extension despite procedural defects if doing so is deemed fair and reasonable.
Understanding your rights and obligations when it comes to delays in residential building projects is critical for both builders and homeowners. Proper handling of EOT claims can prevent costly disputes and help projects stay on track legally and financially.
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.
