Negotiating with the original owner to get defects fixed

The negotiating phase is the biggest hurdle of defect rectifications – get expert help from the outset

Once a committee has served the diagnosed defects on the original owner (that being the builder or developer), you’ll enter a negotiation phase. The negotiations with the original owner to get the defects fixed will be centred around trying to agree on what they recognise as a defect and what they are willing to fix.

The negotiation process should work towards achieving a consolidated list of defects that each party has agreed upon. Part of the agreement to fix the defects will require the original owner to provide a scope of works, detailing how they will make the rectifications. For example, if they are going to fix the defects bit by bit, or if they are going to rip out the existing work and start again to do it properly.

Negotiating with the original owner to get the defects fixed during this period can take many forms. While some are amicable and straightforward, others are more hostile and involve strenuous litigation. Reaching and agreeing upon scope of works and repairs is one of the most significant hurdles of the rectification process and will require legal guidance.

Use your legal counsel to navigate your negotiation process

As a professional negotiator, your lawyer can assist in de-escalating the conversation and keeping the agenda in control. When all parties agree to the defects that need to be fixed, your lawyer will need to draw up a deed that reflects the agreed-upon scope of works and repairs.

Entering negotiations for defects without a lawyer isn’t recommended because of the power of contractual obligations and how this could adversely impact you. For example, the original owner or builder might agree to fix your defects, but they might also try and contract out of obligations for the rectification work.
Lawyer support will also play a key role if the original owner, whether that be the developer, builder or other, refuses to respond or participate in the conversation. When the original owner doesn’t cooperate, your lawyer will start any necessary pre-litigation steps, like a letter of demand or begin the litigation process altogether.

Even when you’re in the ideal position of having the original owner cooperate and agree to fix the reported defects, you may need your lawyer to start proceedings on the basis that your statutory warranty period is running out. Here, you’ll start proceedings so that your ability to recoup the defects from the original owner remains valid or will contractually negotiate an extended warranty period with all parties.

While negotiating with the original owner to get defects fixed, your lawyer can help:

• Formalise a successful negotiation period via a deed or legal instrument
• Advise you with the commencement of litigation to preserve your rights
• Negotiate to extend your statutory warranty with all parties.

Electing a third party to certify the new work

Whether via litigation or negotiation, once your defects and the scope of work has been agreed upon, the committee and owners will need to appoint an independent third party to certify the repair work. This is to check that the work is performed properly and in accordance with the agreement.

When the rectification process has gone through litigation, this step is often court-ordered. The independent third party is a contractor that could be either an engineer, architect or a similarly qualified building expert who reports to owners.

Defect fatigue and the cost-benefit analysis

While appointing an independent third party to report to the owners corporation or body corporate is a necessity, it’s another added expense. Defect rectification processes are often long, highly stressful, and expensive. The mental, physical and psychological impacts can be huge, and a cost-benefit analysis should be undertaken.

For example, your defects might be worth $250,000, but the legal fees may be $150,000. Rather than arguing or pursuing litigation for the foreseeable future, owners and the committee may vote to raise a special levy or fee and undertake the repair work themselves. This would require a majority vote. There are also certain circumstances where owners and committees don’t have a choice.

Owners and committees have a legal requirement to maintain common property, which means once certain types of defects are known, they have a legal obligation to fix them and meet the statutory minimum requirements. This may even dictate the time allowed to have the defects fixed, as a tribunal could set the period.If you’d like to find out more about building compliance for your strata property, download our FREE Community Living guide. Or for a consultation to review your common property insurance by our CommunitySure insurance team, click here.