The construction industry has a big problem with defects. With the standard post construction Defects Liability Period being 12 months to 10 years, owners can report the smallest defect to major structural defects. How can the industry manage this period more efficiently?
Post the construction boom, profit margins for builders and developers have come back down to earth, slimmer than ever. Developers and builders are looking at ways they can more profitably grow in 2021, and the spotlight is shining on areas previously overlooked. But there’s a new opportunity cost in town, and it’s called Retentions. Tied to the Defects Liability Period (DLP), these monies sit in the balance sheets of many of the major builders in Australia – and can amount to several hundred million dollars. If anything should prevent release of retentions, it can have a serious impact on the bottom line, growth, and even survival of the company.
The construction boom and an increase in high profile construction failures has raised the question, "are all builders created equal?" The construction industry It has also triggered a raft of new legislation which provides powerful new consumer protection. The Duty of Care law enacted this year enables owners a guaranteed period after construction is completed, to report major defects and fairly wide reaching powers to have them resolved.
The construction boom triggered many changes. Buildings went up faster, using sub optimal materials occasionally, and the industry bore the brunt of this. Cladding and major defects became a legal battlefield, testing the reputations of builders and developers. The industry is now facing the economic fallout of the COVID-19 crisis, magnifying the housing cost and affordability issue. At the same time, there may be a saviour on the rise, in the form of digitisation, powered by an innovative start-up community who are exploring and exploiting opportunities to disrupt the industry by bringing new technologies to the industry.