How Builders & Developers Resist Strata Building Defect Claims [the free version]

Knowing 21 ways builders & developers play the defects game helps you win …

If strata buildings want to get builders and developers to fix their defects and to win their claims, then they need to play the defects game better. One easy way is to know and understand their opponents’ approaches, strategies and game plans …

[9.0 minutes estimated reading time, 1846 words]

Introduction

Have you heard of the Sicilian Defence in chess?  It’s a strategy played by black to counter a typical white first move [1.e4] and which is both aggressive and strategic.

To win at chess you need to anticipate and recognise the Sicilian Defence [as well as many other plays from your opponent] and counter them.

In this article I’m going to reveal the strategies developers and builders use [like the Sicilian Defense] to avoid, resist and defend strata building defects claims [don’t tell them you now know] so strata buildings can know what to expect and hopefully prepare for, counteract and pursue their claims more successfully.

Some of what I describe below will probably resonate with you if you’ve ever been involved in a strata building defect claim.

Defect claim resistance strategies

Here are 21 the things builders and developers do as strategies to avoid, resist or defend strata building defect claims.

In this free version of my article, I’ve summarised each strategy.  But, they are also discussed in more detail in the paid subscriber version here.

If you want to become a paid subscriber you can do so here.

1.   Ignore [or avoid] contact

It sounds pretty basic, but avoiding strata owner contact over building defects is an effective strategy that works because time is the strata building’s enemy on defect claims, delays prejudice the strata building and there’s no extra accountability on builders or developers for ignoring complaints.

2.   Delay action/s

Even when a builder or developer responds they can just delay action/s in many ways. And, once again, delays disadvantage the strata building and have no adverse consequences on the builders or developers.

Strata owners and strata buildings will usually accept such delays as they optimistically hope for favourable responses and actions by the builder or developer.  Plus, their only option is to start claims or legal actions which seem out of proportion to the delays at the early stages [or anytime].

3.   Divide and conquer

Even though most strata building defects affect common property they are experienced and notified by strata owners and residents. So, there’s a disconnect that builders and developers can exploit which works in two ways:

• making it easier for builders and developers as they only need to convince single strata owners who are weaker and less-resourced, and

• delaying or avoiding strata building awareness of the defect when it is systemic or repeating throughout the building.

4.   Do little things

Often the builder or developer will agree to fix reported defects when they are minor, easy to fix or cosmetic as a salve to the complaining strata owner or strata building.  But, the serious and difficult defects don’t get fixed at all or until later which works for them to achieve multiple advantages.

We’ve all heard the sad story of the builder’s defect fixer wandering around new strata buildings with a bucket and silicone gun to repair water leak defects.

5.   Refuse to provide information

In almost all strata building defect claims, the strata building will need information that only the builder and developer have including things like the building contacts, plans, drawings, specifications, technical materials, engineering advice, certifications, etc, etc, etc and can be withheld, effectively keeping defects, defect causes and liability evidence away from the strata building long enough to prevent defect claims starting or from properly identifying things.

And, despite obligations under strata laws on developers to hand them over, these documents are not generally provided.

6.   Co-opt an internal contact

Another effective strategy that builders and developers adopt is to engage with and co-opt someone [or multiple people] inside the strata building as allies so as to secure smoother and more favourable treatment.

That can occur by fair means, such as by creating friendly and cooperative working relationships with strata building staff or committee members.  Or, it can be achieved by corrupt means, by fixing that person’s strata apartment first or by inducements.

This strategy works in both the short term [whilst builders hope to delay claims beyond the expiry of 2-year time limits] and longer-term [when strata buildings are running up against legal claim time limits have to make decisions in general meetings to start legal action].

7.   Run the clock

Some of the earlier strategies I’ve identified are part of the broader strategy of all builders and developers to try to run out the clock on strata defect claim time limits which are strict and apply at different stages and works well given the usual friction and inertia in strata building operational systems.

I can’t count the number of times strata buildings came to me about building defects in the last few weeks before their legal claim limitations periods were about to expire [and, sadly sometimes after they had] leading to a mad scramble to urgently start legal action, whilst everyone is upset, and, based on incomplete information.

8.   Challenge expert advice

Once a strata building makes a claim based on advice from one or more experts, builders and developers universally challenge the experts’ advice, expertise, methods, etc. 

Plus, builders and developers will also say they need time for their expert to review everything, inspect the building and report on things: further running out the clock.

9.   Challenge legal advice

After strata buildings engage lawyers to assist them with building defects, it’s almost guaranteed that builders and developers will challenge the strata building lawyers in a range of ways including over their advice and their self-interest.

This is a great strategy works because it relies on general mistrust of lawyers, resentment at the cost of legal advice and work, and the inability of lawyers to give definitive answers or guarantee outcomes.

10. Spook strata owners at meetings

Since in many parts of Australia, strata buildings must approve legal action over building defects in an owners meeting, eventually there’s going to be a meeting where this hard [and expensive] decision has to be made and sometimes, the builders and/or the developers will attend that meeting via proxies from retained lots or internally co-opted strata owners or by invitation to try to stop decisions to pursue claims.

11. Blame materials, design, certifiers or standards

Once a building defect claim is underway, builders and developers will try to assign the causes of the defects to something other than their construction work including design, materials, certification, etc.

This strategy is, like the challenging experts, designed to undermine the basis for and proof of the defects.

12.   Blame strata maintenance [or lack of it]

Another strategy designed to undermine the defects themselves is to suggest that the matters complained of are not defects since the problems are the result of the strata building not properly maintaining the structure from when it was built.  Or, that the defects are worse than they would be due to the lack of maintenance.

And, in NSW it’s arguably worse since section 115 of the strata laws requires the developer to prepare an initial maintenance schedule and any failure by the strata building to comply with it can be considered in a defect claim.

13.   Make a [small] settlement offer early

Often a settlement offer will be made early in the defect claim process by the builders and developers; typically for less than all the defects that have been identified.  This can be attractive as an early [and cheap] way to resolve the defect claims and an early settlement offer can get ahead of the strata building learning more about the building defects.

14.    Hire expensive & aggressive defence lawyers

After a strata building defect claim becomes litigious, the game changes character as builders and developers typically engage large law firms from the top or second tier with construction law expertise [often with whom they already have a relationship] and then brief them to defend the litigation aggressively, with teams of lawyers and counsel on the work and with significant legal budgets.

So, this strategy works because it results in a builder/developer legal team that is bigger, better resourced, and more practised than the strata building’s team.

15.     Run interlocutory arguments

Initially, in strata building defect litigation builder and developer defendants will raise many interlocutory [preliminary] issues in the litigation to complicate the proceedings, to out lawyer the strata building, cause it to spend more money on the litigation and delay things even further.

Plus, if any of the interlocutory arguments succeed, then they will weaken, reduce or [in worst cases] eliminate the strata building’s defect claims.

16.    Complicate the Court expert processes

Strata building defect litigation depends on the experts and their evidence to establish the existence, extent, causes or and fixes for the building defects.  So, that aspect of the litigation is a major strategic focus of the defendant builders and developers [and any other joined parties] as any weakening of the strata building’s expert material reduces exposure to damages.

So, a range of strategies will be adopted to challenge and complicate the experts’ advice.

Sadly, these strategies work as these processes almost always [in my experience] end up with strata building experts watering down their initial views about the building defects and, as a result, reducing the scope and extent of the strata building’s defect claims.

17.    Mediate it

Since virtually all Courts require parties in complex disputes to mediate them before hearing, this conveniently benefits builder and developer defendants’ strategies by delaying things, adding the costs of mediation, and forcing position disclosure by the strata building with no assurance of settlement.

18.    Extend hearing times

Whether it’s intentional or not, in my experience, builder and developer defendants want to have longer than shorter hearings when strata building defects claims finally get to a hearing due to wanting to more issues and because there are often multiple defendants.

And, extended hearing times [again] prejudice the strata building more than the builders and developers for all the usual reasons explained earlier in this article.

19    Morph the dispute from defects to costs

A key strategy used by builder and developer defendants in strata building defect litigation is to create costs risks and exposures for the strata building along the way so that eventually the litigation becomes as much about the costs as it is about the damages for the defects.

That can happen in a number of ways but especially via Calderbank settlement offers which can successfully create costs exposures for the strata building. So, they effectively offset those costs against earlier costs and the judgment.

There are a number of high-profile strata building defect claims where a winning strata building that refused an earlier Calderbank offer ended up paying more to the builder or developer in costs than it recovered as damages.

20.    Appeal

Of course, even when they lose, builders or developers often appeal the decision on legal and, sometimes, factual bases.

Apart from the usual delay, cost, exposure and exhaustion impacts this has on strata buildings, it can be strategically important to appeal for builders or developers to appeal cases so as to prevent precedents emerging that are adverse to them, to maintain legal doubts about issues, and, to show other strata buildings that they will fight claims hard to discourage them.

Remember, that builders and developers often have to deal with defects in more than one strata building, whilst each strata building will only ever have one building defect claim. So, they take a much longer and strategic view of building defect claims.

21.    Exhaust the strata owners

Strata building and strata owner exhaustion is the overall result of the compilation of all these developer and builder strategies during strata building defect claims.

It’s a real phenomenon that I’ve seen many times when the strata building defect claim last more than 2-3 years and/or it costs the strata owners too much [the amount strata owners find too much is hard to predict but it’s lower than you’d think]. 

That’s why so many of these builders’ and developers’ strategies are focused on creating delay, cost and uncertainty.

Conclusions

In a future article, I’ll discuss why a builder or developer would prefer to adopt all these strategies and spend money litigating defect claims rather than actually fixing defects or compensating strata buildings for those defects.

But, as you can see from the long list of strategies employed, there are many opportunities for and ways for builders and developers to deflect, derail and reduce claims for building defects made by strata buildings.  They are all legitimate and legal so we can’t really complain that builders and developers use them.  And, to be honest, the strategies work.

So, regardless of the reasons why these things happen, strata buildings that don’t prepare for and handle all these strategies will have very poor defect claims experiences and outcomes.

July 28, 2021

Francesco ….