Defects Liability Period

The defects liability period — typically 12 months from practical completion — is your safety net after handover. During this time, the contractor is contractually obligated to return and fix any defects that become apparent, at their own cost. It's not a warranty in the consumer law sense, but it serves a similar purpose: protecting the developer against workmanship and material issues that weren't visible at PC.

The DLP duration is set in the contract. Twelve months is standard on most Australian residential and small commercial projects. Some contracts allow for longer periods on specific elements — structural work or waterproofing might carry a 24-month DLP even if the general DLP is 12 months. The period starts from the date of practical completion, not from when the contractor finishes their last defect item. That distinction matters because contractors sometimes try to argue the DLP restarts when they fix a defect. It doesn't.

What obligations does the contractor have during the DLP? They must return to site within a reasonable time after being notified of a defect and rectify it to the standard required by the contract. "Reasonable time" depends on the nature of the defect — a leaking roof needs urgent attention, while a minor paint blemish can wait. The contractor bears all costs of rectification, including making good any damage caused by their return to site. They can't charge you for fixing their own defective work.

How are defects identified and managed? It starts at PC itself. The superintendent prepares a list of defects and incomplete items as part of the PC assessment. The contractor addresses these items, ideally within weeks. But new defects also emerge over time — things that weren't visible at handover. Waterproofing failures might take months to appear. Settling cracks show up after a few thermal cycles. Paint defects become visible as the building is lived in. You need a systematic process for logging these, notifying the contractor in writing, and tracking rectification.

Most contracts require the superintendent to issue a final defects list near the end of the DLP — typically 14 days before expiry. This is your last chance to identify defects that the contractor is obligated to fix under the contract. Miss this window and you lose your contractual entitlement. The contractor then has a reasonable period (usually specified in the contract) to complete all rectification work.

The financial link between the DLP and retention is direct. The second half of retention — typically 2.5% of the contract sum — stays held until the DLP expires and all defects are rectified to the superintendent's satisfaction. On a $2 million contract, that's $50,000 in leverage. If the contractor refuses to fix defects or disappears, you can use that retention to engage another contractor to do the work. But you must follow the contractual process: notify the contractor, give them the opportunity to rectify, and only if they fail to do so can you have the work done by others and deduct the cost from retention.

Where developers often get caught out is on multi-unit or multi-stage projects. Each stage reaches PC at a different time, so each has its own DLP start date, its own expiry date, and its own retention release trigger. Without clear tracking, you might release retention on Stage 1 while Stage 2's defects are still unresolved — or worse, miss the final defects list deadline entirely because you lost track of the dates.