Defects liability period: what the builder owes you after handover
You signed off at handover, then the cracks appeared. Here is what counts as a defect, how long the builder must fix it, and how withheld money keeps them on the hook.
Handover should feel like the finish line. Then a door sticks, a tile lifts, or a hairline crack widens, and you wonder who pays to fix it. The answer usually sits inside your defects liability period, the window after completion when your builder must come back and put things right at their own cost.
This guide explains what is and is not a defect, how long the builder stays responsible, and the simple record-fix-evidence loop that keeps rectification on track. It also covers how withheld retention money sits in the project account and can fund repairs if your builder stalls or walks away.
What the defects liability period actually is
The defects liability period is a defined window after practical completion during which your builder must rectify defects in their work at no cost to you. It is written into your building contract, and the clock usually starts at handover.
Common periods run from 3 to 12 months for general building work, with longer cover for structural items under state law and home warranty schemes. The exact length lives in your contract, so read that clause before you sign off at completion.
This period is not a second chance to renegotiate the build. It exists to catch faults that only show up once the home is lived in: a tap that drips, a cornice that cracks as the slab settles, paint that peels in a wet area. The builder fixes those because the work was theirs.
Statutory warranties sit alongside the contract period and often outlast it. Bodies like the Victorian Managed Insurance Authority and the Queensland Building and Construction Commission set minimum cover and insurance rules that apply regardless of what a contract says.
What counts as a defect, and what does not
The line between a defect and normal wear matters, because it decides who pays. A defect is work that falls short of the contract, the plans, the relevant standards, or reasonable workmanship.
Workmanship defects
Poor finishing the builder is responsible for: lippage in tiling, gaps in joinery, doors that bind, uneven paint, or trims that were never properly fixed.
Material and installation faults
A failed seal around a shower, a leaking roof flashing, or a fixture installed against the manufacturer's instructions. The fault traces back to the build, not your use.
Settlement and shrinkage cracks
Hairline cracking as the structure settles is often expected and may be excluded for a set period. Wide, recurring, or structural cracking is a different matter and usually a defect.
Not a defect: normal wear and tear
Scuffs, faded paint over years, worn seals, or damage from how the home is used and maintained. These sit with you, not the builder, because they are not faults in the original work.
Not a defect: owner changes
Anything you altered, added, or had a third party touch after handover. Work outside the builder's original scope is not theirs to rectify.
When you and the builder disagree on which category an item falls into, photo evidence and the contract specification settle most arguments before they escalate.
The record-fix-evidence loop
Defects get resolved fastest when the process is structured rather than a string of texts and phone calls. The pattern is simple: record the defect with evidence, agree a rectification, then confirm the fix with evidence.
Record means logging each item with a clear description, the location, and dated photos. A photo of a cracked tile next to the contract finish schedule is far harder to dispute than a memory of a conversation.
Fix means the builder schedules and completes the defect rectification, and you get a realistic timeframe rather than an open-ended promise. Minor items are quick; some need a trade booked, materials ordered, or a wall to dry out first.
Evidence means closing the loop. A dated after photo, an inspection note, or a sign-off against the original record shows the item is genuinely resolved, not just promised. This evidence trail is also what links to money, which is the next section.
BuildFair lets owners and builders record defects with photo evidence and tracks each item to resolution, so nothing falls through the cracks between handover and final sign-off.
How retention keeps the builder on the hook
The strongest protection during the liability period is money the builder has not been paid yet. Retention, sometimes called a retention or maintenance amount, is a portion of the contract sum withheld until defects are resolved.
Under progress payments, you pay across staged claims as work is verified. A final amount and any retention are held back rather than released in full at handover, which is the practical leverage that gets defects fixed.
If your builder rectifies on time, the held money is released on the agreed conditions. If they stall, the withheld amount stays put and can fund another trade to complete the repairs, depending on your contract terms.
On BuildFair, owner deposits and progress payments are held in regulated custody with BuildFair banking partner Kobble, separate from the builder operating account. Kobble operates under AFSL 545391 (Yondr Money Pty Ltd). Retention-style withheld amounts are not released until open defects are resolved, and every step is recorded on a double-entry, hash-chained ledger.
Because the records and the money sit in one place, the link between an open defect and a held payment is explicit. You are not chasing a builder for a refund after the fact; the funds were never released while the defect stayed open. For more on how that withholding is sized, see our guide on how much retention to hold.
When the builder stalls, disputes, or disappears
Most defects get sorted with a clear record and a structured process. When they do not, escalate in steady steps rather than going straight to conflict.
Put it in writing
Send a dated list of open defects with photos and a reasonable timeframe to rectify. A written record beats verbal follow-ups if things go further.
Lean on withheld funds
Remind the builder that retention and any final amount stay withheld until defects are resolved. Money still in the account is your strongest, calmest leverage.
Use your warranty scheme
Where the builder cannot or will not fix the work, state home warranty insurance and your state building authority may step in. Check your state scheme, such as the QBCC.
Get proper advice
For disputes that will not resolve, speak to a construction lawyer or your state tribunal, for example VCAT in Victoria or NCAT in New South Wales, or Legal Aid. They can advise on your specific rights.
This guide is general information, not legal or financial advice. For a dispute about your own build, get advice from a lawyer, your state tribunal, or Legal Aid before acting.
Set yourself up before you sign off
The defects liability period works best when you prepare for it before handover, not after the cracks appear. Walk the home carefully at the final inspection and record every item, however small.
Know your numbers going in. Understand how much is being withheld, what conditions release it, and exactly when the liability period starts and ends under your contract.
Keep your evidence in one organised place. Dated photos, the finish schedule, inspection notes, and a running defect list turn a vague dispute into a clear, resolvable record.
Choosing a builder with a clean payment and rectification track record reduces the odds you ever need this protection. Our guides on how to choose a builder and payment reputation for builders cover what to check before you commit.
FAQ
Frequently asked questions
How long is the defects liability period in Australia?
It depends on your contract, but general building defect periods commonly run from 3 to 12 months after practical completion. Structural items are usually covered for far longer under state law and home warranty schemes. Read your contract clause and check your state building authority for the statutory minimums that apply.
What is the difference between a defect and normal wear and tear?
A defect is work that falls short of the contract, plans, standards, or reasonable workmanship, so the builder must fix it. Normal wear and tear is everyday ageing and use, like scuffs or faded paint over years, which sits with you. Dated photos against the contract specification usually settle which category an item falls into.
Can the builder refuse to fix defects after handover?
They should not refuse genuine defects within the liability period, since rectification is a contract obligation. If they stall, withheld retention can fund repairs, and your state home warranty scheme may step in. For an unresolved dispute, get advice from a lawyer, your state tribunal such as VCAT or NCAT, or Legal Aid.
How does retention protect me during the defects liability period?
Retention is a portion of the contract sum withheld until defects are resolved, so the builder has a financial reason to come back. On BuildFair, held funds sit in regulated custody with banking partner Kobble (AFSL 545391, Yondr Money Pty Ltd) and are not released while open defects remain. See how much retention to hold.
What should I do if my builder goes broke during the liability period?
Any money still withheld in the project account is your strongest position, because it was never released. State home warranty insurance may cover incomplete or defective work where the builder cannot finish. Read more in our guide to builder insolvency in Australia, and seek legal advice for your situation.