The defects liability period (or "DLP") is a fixed period of time, starting from the date of practical completion, during which the contractor has an express contractual right to return to lớn the site to rectify defects.

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During the defects liability period, typically:

the contractor has the right khổng lồ return lớn the site to lớn rectify defects or complete unfinished work;the principal is entitled khổng lồ continue holding security, to secure the contractor’s obligations in respect of incomplete or defective work; andthe superintendent continues to lớn remain involved in the project.

Under some contracts, if the contractor rectifies a defect during the defects liability period, there will be a new defects liability period in respect of that rectification work.

Why vị defects liability periods exist?

Defects liability periods (and the concept of ‘practical completion’) exist for the benefit of both the principal & the contractor.

Most principals would prefer khổng lồ occupy và start using the works as soon as the works are capable of being used, even if there are minor defects or incomplete works. Hence the concept of ‘practical completion’. You can read more about the date of practical completion here.

Conversely, most contractors would prefer lớn have the opportunity lớn rectify defects or finish any incomplete items of work themselves, rather than having lớn pay the principal’s costs of engaging someone else khổng lồ vị that work (potentially at a higher cost).

The concept of practical completion and the existence of a contractual defects liability period provide a compromise. This means that the principal is able to lớn occupy the works even though they may not be 100% complete, but on the basis that the contractor will have an express right to come baông xã to lớn the site khổng lồ address any defects themselves, rather than immediately being at risk of having lớn pay the principal’s costs of engaging others lớn vì so.

How long is the defects liability period?

Although there are exceptions, most building contracts in nước Australia prescribe a 12 month defects liability period.

Again, this period represents a compromise.

On the one h&, not all defects will be reasonably capable of detection at the time of practical completion. Consequently, most principals would expect that as they become aware of defects, they will be able lớn Gọi on the contractor khổng lồ address them. Practically speaking, it usually takes a period of time before all defects have sầu been identified.

On the other h&, while most contractors are willing to allow the principal khổng lồ retain security in respect of the contractor’s defect obligations, they will not agree lớn that security being held by the principal indefinitely.

In most cases, 12 months is seen as a period of time that appropriately balances the interests of both parties.

Can the contractor be liable for defects after the defects liability period?

The answer is ‘yes’.

There is a common misconception that the defects liability period marks the kết thúc of the contractor’s liability for defects. In this sense, the expression ‘defects liability period’ is misleading.

In most cases, the defects liability period is merely the minimum amount of time the contractor will remain exposed khổng lồ the risk và cost of rectifying defects. You can read more about this here.

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Does a certificate of practical completion affect the contractor’s defect obligations?

Generally speaking, ‘no’.

A certificate of practical completion is not evidence of the works being complete. Rather, it is merely evidence of the superintendent’s view that the works have sầu reached the stage of practical completion.

The concept of ‘practical completion’ expressly recognises that there may be minor defects or items of incomplete work when the principal takes possession.


What is the procedure for dealing with defects during the defects liability period?

Although the process will be similar under most agreements, the exact process will depover on the terms of the contract concerned.

Clause 35 of AS 4000 is fairly typical. It contemplates the following process:

1. The principal discovers a defect và brings it to lớn the superintendent’s attention.

2. The superintendent directs the contractor lớn address the defect. The superintendent’s direction must be in writing, provide sufficient particulars of the defect & state a completion date (& ideally a completion time) for the rectification work. A direction that does not satisfy these requirements may not be effective sầu.

3. The contractor must rectify the defect in accordance with the superintendent’s direction, causing as little inconvenience as possible.

4. The superintendent’s direction may provide that there will be a further defects liability period in respect of the rectification work. If a further defect appears during this extended period, this process may be repeated until the defect has been satisfactorily rectified.

5. If the contractor does not comply with the superintendent’s direction, the principal can have sầu another contractor carry out the rectification works and can recover the costs of doing so from the contractor. The superintendent will certify these costs, và the principal can have sầu recourse lớn the contractor’s security if the contractor fails khổng lồ pay them.

What happens at the kết thúc of the defects liability period?

Once the defects liability period has expired, the contractor is typically entitled khổng lồ make a ‘final claim’ for any outstanding monies that may be owing lớn it, and to lớn request the return of its security.

After the final clalặng has been received or the period for making a final clayên ổn has expired, the superintendent will issue a ‘final certificate’ identifying the final amount khổng lồ be paid by the principal khổng lồ the contractor (or vice versa).

If there is no money owing to lớn the principal và there are no outstanding defects or unresolved disputes, the principal will then be required to release and return the balance of the contractor’s security.

How does a final certificate affect the contractor’s defects obligations?

For defects that were not identified, and were not reasonably capable of being identified before the over of the defects liability period, a final certificate is unlikely khổng lồ have any effect on the contractor’s obligations.

For defects that should have been identified & brought khổng lồ the contractor’s attention during the defects liability period, a final certificate may make it difficult for a principal to lớn bring a clayên ổn against the contractor. You can read more about this issue here.

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