Rising Costs in the Building Industry, The Challenges for Builders and Property Owners
Significant increases in labor and material costs have placed builders, both large and small, under considerable financial strain, affecting their cash flow. Over the past two years, several building companies in Perth have entered administration, disrupting construction projects and leaving property owners within the Builder’s Liability Period (BLP) vulnerable.
How Builder Insolvency Affects Strata Properties
In Perth, two strata properties completed in the past three years are now facing serious issues due to poor workmanship and material defects. Unfortunately, these defects are no longer covered by the insolvent builders, shifting the burden of repair costs to the property owners. In one case, a couple was left homeless as their property was deemed uninhabitable, with a single defect expected to cost over $700,000 to repair. This situation highlights the risks owners and investors face, as they may be unable to lease, sell, or insure their properties if such problems continue to rise.
According to Sam Reece of WAAA, research shows that about 52% of apartment owners in WA have had or are currently experiencing defects.
What to Do If Your Builder Has Gone Out of Business
If your property was recently completed and your builder has ceased trading, the first step is to hire a qualified building inspector to assess the common areas and provide a comprehensive defects report. Additionally, an asset register should be obtained, as the Strata Manager will now oversee repairs and maintenance on behalf of the owners.
Understanding the Defects Report
The defects report, which is similar to a Ten-Year Plan, will help manage and finance necessary repairs. The inspector will work with you to ensure your budget can accommodate the repairs, prioritizing the most critical issues to prevent further damage.
Many building materials come with warranties of 10-15 years. If the defect is identified as a material fault, owners may be able to seek compensation from the manufacturer if the builder is no longer solvent.
What the Initial BCI WA Assessment Will Identify
The BCI WA assessment will determine whether the building and materials are performing as expected and whether the building elements comply with the Building Code of Australia or fall within the Standards and Tolerances guidelines.
Common Building Defects and Their Causes
Every identified defect will include a description, priority, location, cause, recommended tradesperson, and suggested rectification. Some of the most common issues include moisture ingress such as roof leaks or improper drainage, incorrectly installed window frames, cracks in internal or external walls, rising damp caused by poor drainage around the building perimeter, and substandard workmanship and materials.
The inspector will evaluate whether the defect is due to design flaws, material issues, or poor workmanship.
Proactive Steps for Property Owners
The best course of action for property owners is to have a defects report completed while the builder is still solvent, ensuring that necessary repairs can be made at the builder’s expense. Given the current economic uncertainty, it’s hard to predict how long a company will stay in business.
For further information feel free to contact us at BCI WA.