Buying a New or Near-New Home? Do Not Assume New Means Risk-Free

Buying a newly built or recently completed home can feel safer than buying an older property.

In many cases, it is. The building is newer, the materials should have a longer life ahead of them, and there may be fewer obvious maintenance issues.

However, “new” does not mean risk-free.

New and near-new homes can still have serious defects. Some of the most expensive problems are not obvious at the time of purchase. Issues involving water ingress, poor workmanship, defective materials, inadequate ventilation, movement, moisture, mould or structural deterioration may only become apparent months or years after settlement.

By that stage, a buyer may discover that their rights are more complicated than expected.

The builder may not be the seller. The buyer may not have a contract with the builder. Relevant complaint or warranty time limits may have expired or be close to expiring. The buyer may need expert evidence to prove not only that there is a defect, but that the defect arose from the original building work and caused the loss claimed.

For buyers, the practical message is simple: do your due diligence before you buy, and act quickly if defects appear.

Who Are You Actually Buying From?

One common issue in new developments is that the person selling the property is not necessarily the builder.

A buyer may be purchasing from a developer, an investment entity or a previous owner. The actual construction work may have been carried out by a separate licensed builder.

That distinction can matter.

If there is no contract between the buyer and the builder, the buyer may not have a straightforward breach of contract claim against the builder. The buyer may need to rely on other rights, such as statutory warranties, negligence, the terms of the sale contract, a QBCC complaint, or a claim through the Queensland Home Warranty Scheme, which provides statutory insurance cover for certain residential building work in Queensland.

A recent QCAT decision, Pedersen v Contrast Constructions Pty Ltd, illustrates the point. The buyers had purchased from a developer. The builder was a separate party. QCAT noted that there was no contract between the buyers and the builder, and no evidence establishing a statutory warranty claim by the buyers against the builder. The claim therefore had to be considered as a negligence claim. 

That does not mean buyers are without rights. It does mean buyers should understand who they are contracting with, what rights are included in the sale contract, and what documents and evidence they may need if a defect later appears.

Proving the Defect Is Only Part of the Problem

The same case also shows that identifying a defect may not be enough.

A buyer may still need to prove what caused the defect, who is legally responsible, and what loss was caused by it.

In Pedersen, the buyers alleged that missing ducting caused mould in the property. QCAT accepted that there were issues with the ducting, but the question did not end there. The Tribunal also considered whether the mould and the loss claimed were actually caused by that defective work.

That distinction mattered. The evidence suggested that there were other contributors to the mould issue, including weather conditions, moisture under the dwelling, and the way the property was being ventilated by the occupants. QCAT was not satisfied that the defective building work caused the particular loss claimed by the buyers.

The proceeding was dismissed.

That is an important practical warning. A report identifying a defect may be helpful, but it may not answer every legal question. For serious building issues, particularly where water, moisture or mould are involved, a buyer may need expert evidence that identifies the likely source of the problem, the affected building elements, the cause of the damage, and the link between the defect and the loss being claimed.

Do Not Rely on Assumptions About the Builder Being Liable

A buyer may assume that if a serious defect appears, the original builder will have to fix it.

That assumption is not always correct.

In Raymond v Lewis, a later purchaser brought a claim against the original builder after discovering serious defects in the property. The Queensland Court of Appeal ultimately found in favour of the builder. One important issue was whether the purchaser had been able to protect herself from the risk of that loss before buying the property. 

The practical lesson is not that buyers can never bring claims against builders. The lesson is that a later claim may be affected by what happened before settlement.

If the buyer had the opportunity to obtain independent inspections, ask further questions, review available reports or investigate warning signs before buying, that may matter later.

This is particularly important where a buyer is given a building and pest report by the seller or agent. Vendor-supplied reports can be useful, but they are not always a substitute for independent advice. If a report refers to inaccessible areas, limitations, qualifications, moisture, movement, drainage issues or areas not inspected, those comments should be taken seriously.

QBCC Time Limits Can Be Critical

For building defects in Queensland, timing matters.

The Queensland Building and Construction Commission, commonly known as QBCC, is the regulator for the Queensland building industry. Among other things, QBCC deals with complaints about defective building work, administers aspects of the Queensland Home Warranty Scheme, and may in some circumstances require a builder to fix defective or incomplete work.

One way QBCC may do this is by issuing a Direction to Rectify. In general terms, a Direction to Rectify is a formal direction requiring a builder to rectify defective building work or remedy consequential damage. It is not automatically issued every time a homeowner makes a complaint. QBCC must consider the complaint, the nature of the alleged defect, the evidence, and whether the statutory requirements are met.

This is where time limits become important.

Many buyers assume that if a home is relatively new, QBCC will be able to step in. That is not always so. QBCC processes, including Directions to Rectify, and Queensland Home Warranty Scheme claims are all subject to rules and time limits. Depending on the type of issue, the relevant date may not be the date the buyer noticed the problem. It may relate to when the building work was completed, when the contract was entered into, when work commenced, when insurance was paid, or when the defect first became apparent.

The QCAT decision in Oracle Building Corporation Pty Ltd v Queensland Building and Construction Commission shows how technical those issues can become. That case involved a Direction to Rectify and statutory time limits, including whether time should be extended where no application to extend time had been made. QCAT ultimately set aside the decision to issue the Direction to Rectify and substituted a decision not to issue one. 

For buyers, the practical point is clear: if you notice signs of water ingress, mould, staining, bubbling paint, swollen flooring, soft timber, unusual drainage or cracking, do not sit on it. Delay can affect what remedies are available.

What Buyers Should Look Out for Before Signing

Before buying a new or near-new home, buyers should consider the following steps:

1. Obtain independent building and pest advice. Do not assume that a report provided by the seller or agent is enough. If the report contains exclusions or qualifications, get advice about what those qualifications mean. 
2. Ask for key building documents. These may include final inspection certificates, Form 11 certificates, QBCC insurance documents, warranties, plans, approvals, maintenance records and any records of previous rectification work. 
3. Check who the seller is. Is the seller the builder, a developer, a related company or a previous owner? This may affect who the buyer has rights against if something goes wrong. 
4. Obtain legal advice on the contract before signing. For newly completed homes, off-the-plan purchases and developer sales, special conditions may deal with defects, inspection rights, notification periods and rectification obligations. Those clauses should be reviewed carefully before the buyer is locked into the contract.
5. Pay special attention to moisture and maintenance issues. Staining, mould, swelling, cracking, unusual smells, drainage concerns, poor ventilation or evidence of previous repairs may indicate issues that require further investigation. 
6. Ask questions about previous problems. If there have been leaks, mould, drainage works, repairs, insurance claims, body corporate issues, builder attendances or previous QBCC involvement, obtain the documents before settlement. 

What Buyers Should Do if Defects Appear After Settlement

If defects appear after settlement, buyers should act quickly.

Take photos and keep records. Note when the issue was first observed. Keep copies of correspondence with the seller, builder, body corporate, property manager, tenant, insurer, QBCC or any contractor.

Obtain advice before carrying out major rectification work, unless urgent safety or mitigation work is required. If the issue may become a dispute, it is important to preserve evidence.

Consider whether the issue should be raised with QBCC, an insurer, the seller, the builder, the body corporate or another party. The correct pathway will depend on the property, the contract, the defect and the timing.

Different issues may arise where the property is part of a community titles scheme, particularly where the defect concerns common property or building elements managed by the body corporate. For more information about that issue, see our article on rectification of building defects in a body corporate setting.

Most importantly, do not assume that because the property is new or near-new, there will be an easy remedy. Time limits and evidence can make a significant difference.

Conclusion

Before signing, buyers should understand who they are contracting with, what protections are included in the contract, what inspections have been carried out, and whether any further enquiries are needed. If defects appear after settlement, prompt action is often critical.

If you have any questions in relation to building defects, or any other property law matter, please contact our Property Law team on (07) 5532 3199 or enquire online for tailored advice.