Defects liability period

The period starts on the date of practical completion. During it, the principal or superintendent can direct the contractor in writing to fix defects that appear, with a reasonable time to do the work. If the contractor does not fix them, the principal can usually have someone else do the work and recover the cost, often from the security.

When the period ends, any remaining security is released once outstanding defects are fixed and amounts owed are settled, and the final payment process usually follows. Where a defect is fixed during the period, some contracts start a fresh defects liability period for that repaired work.

The defects liability clause sets out how the period runs, how defects are notified and what happens if they are not fixed. The length of the period is stated in the annexure.

• AS 4000-1997. Clause 35, Defects liability.

• Your contract. Check the length of the period, whether separable portions have separate periods, and whether repaired work gets an extended period.

The defects liability period is a contractual mechanism to get defects fixed quickly. It does not end the contractor's liability for defective work. The principal can usually still claim for defective work after the period ends, within the time limits set by state legislation.

Those limits differ by state and by type of work. For example, many states set a 10 year long stop period for building actions, and residential work has separate statutory warranties. Check the legislation in the state where the project is built.

Defects should be notified in writing, describing the defect, its location and, where the contract requires, the time allowed to fix it. A photo and a reference number make it easier to track.

The contractor should acknowledge each notice, inspect, and either fix the defect within the time allowed or explain in writing why it does not consider the item a defect, for example damage caused by the occupier or normal wear. Work in occupied buildings often has to be scheduled around the users, so agree access early.

Close each item out with a record of the repair and sign-off. At the end of the period, a final inspection and a clean defect register support the request for release of security.

• Losing track of the end date. Record practical completion and the end of the period so you can apply for release of security on time.

• Ignoring defect notices. Not responding lets the principal bring in another contractor at your cost.

• Not flowing it down. Make sure subcontract defects liability periods line up with or run longer than the head contract.

• Poor records at handover. A defect list with photos at practical completion helps prove what existed then and what appeared later.