It is an exciting time when a home is due to be constructed or renovated, however, this process does not often run as smoothly as expected. A common issue that arises concerns residential building delays. These delays in the completion of a residential project are often likely to result in an increased cost to the builder and some form of loss to the homeowner. We have also found that delays are a common reason or basis as to why building contracts, including Master Builder or HIA building contract terminations occur.
WHAT IS A RESIDENTIAL BUILDING DELAY AND WHY MIGHT IT OCCUR?
A delay, in the residential construction context, means a delay in the progress of the works which will result in an impact on the builder's ability to complete the works by the date provided in the contract.
There are a number of different delays, including:
- Builder delays construction works - e.g., the builder fails to obtain planning approval which it was contractually obligated to obtain;
- Homeowner delays construction works - e.g., the homeowner fails to communicate in a timely manner with the builder which results in a delay; or
- no party (e.g., intensive weather events occur resulting in work needing to be ceased).
WHAT ARE THE EFFECTS OF BUILDING DELAYS?
Building delays must cause a delay to the Builder's critical path to complete the building works, which will increase the amount of time required to complete a project and therefore will likely push back the date of practical completion. This presents practical and logistical problems for both the builder and homeowner who may have been reliant upon a home being built by a certain date.
BUILDING DELAYS AND EXTENSIONS OF TIME
If a building project is delayed, the builder should request an extension of time by referring back to the contract.
What is an extension of time claim in construction? An extension of time claim seeks to extend the date for practical completion (or perhaps a milestone for the construction works) for a contractually identified reason, which provides the builder with more time to progress the works. These reasons will vary from contract to contract, but some of the causes which would enable a builder to claim an entitlement for an extension of time, are included within the Master Builders' standard form contract being:
- a variation;
- a Latent Condition; and
- a breach of the Contract by the homeowner.
The question then becomes, how long does the builder have to notify the owner of an extension of time because of a delay?
This will depend upon your contract and the residential building legislation of the State where you are located in. For QLD, the Queensland Building and Construction Commission Act 1991 (QBCC Act), provides that the claim must be given to the home owner within 10 business days of the builder becoming aware (or reasonably ought to have become aware) of the cause and extent of the delay (QBCC Act schedule 1B, s 42).
What happens if an extension of time claim is declined? If an extension of time claim is rejected (validly or invalidly), the dispute is then to be handled in accordance with the dispute resolution process provided by the construction contract.
WHAT ARE THE DELAY COSTS IN CONSTRUCTION?
Building delays compensation is a hot topic of discussion for obvious reasons. Delays in the completion of a project almost inevitably cause an increase in the costs incurred by the homeowner and the builder. When the delay is caused by the builder's breach of contract, the homeowner will usually be entitled to recover damages (either liquidated or unliquidated) from the builder for the delay. Where, however, the delay was caused by the homeowner's breach of contract, the builder will ordinarily be entitled to recover damages for the costs incurred by it due to the prolongation of its works.
If you require any assistance with understanding your rights and obligations in situations in which your residential building work is delayed, or you believe it may be delayed, please do not hesitate to contact our dedicated team of construction lawyers.