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Defects Liability Period - Reduce the Costs Print E-mail

Defects Liability Period - Reduce the Costs  
Geoff Vick, Manager Safety Measures, reports on the difficulties property owners and facility managers experience during the defects liability period after the handover of a new building or a tenancy fit out. 

The defects liability period is usually a 12 month period post construction or fit out that is in effect a warranty on the building fabric, installed infrastructure (including testing and maintenance regimes) and workmanship.  The project manager or owner normally holds a retention sum under the terms of the building contract for this period and would only release this sum if all defects have been rectified and that maintenance services have been provided adequately during this period.

The potential financial and risk liability of the property owner or facility manager during and after the period can be reduced considerably.  This can be achieved by analysing the undesirable outcomes from previous projects and putting in place contractual requirements and managing defect issues to offset their future occurrence.

Building contractors through to tenants contribute to the facility managers' risks during the defects liability period. This causes contractual clauses to be examined and tested, creating a situation where the lack of clear guidelines (contractual requirements) for those in the process, leads to the facility manager being exposed to financial and liability risks such as liability for expensive rectification works after the defect liability period or non compliance penalties pursuant to state building occupancy regulations.

A far better option is to make those people who are contracted to deliver a service or product accountable to the facility manager, and to be aware of this accountability early in the delivery process. There are some items that are highly recommended to be included in a contract, and whilst in the main these items will not "add" extra cost to the contract value as they are already performed by most providers, they are not usually offered, as they are not requested. The lack of diligence in the contract liability period may lead to a lack of protection for the contractor, consultant or facility manager when issues arise in the post occupation period.

Facility managers therefore, need to be heavily involved at the commissioning stage with all those involved in the process of building a new building, altering an existing building or when issuing a tenancy agreement.

Builders
Most commercial building contracts require the head contractor (builder) to perform periodical maintenance including maintenance and testing of essential safety measures and establishment procedures such as cooling tower risk management plans/registration and implement maintenance and testing in the building during the defects liability period. The builders contract should have provision in its clauses for compliance by the builder during the defects period with mandatory statutory regulations:

  • Essential Safety Measures requirements
  • Occupancy approval – use, number of occupants, type of use as specified in occupancy permits, occupation certificates or certificates of classification etc.
  • Occupational health and safety requirements
  • Trade waste licences and agreements
  • Cooling tower registration, risk management plans and testing and maintenance regimes
  • Hazardous substances and dangerous goods

Regular inspections, testing and maintenance needs to be performed for each safety measure nominated, including passive safety measures such as exits, and fire resisting structures during the defect liability period. The facility manager needs to ensure the builder keeps a record of all inspections, tests and maintenance works performed in a log book(s), so that the signing of any annual statement will meet regulatory requirements.

The facility manager will need to establish whether it is a requirement of the builder to sign an 'annual statement'. If so, this action must be stated in the builder's contract, as all active and passive safety measures need inspecting throughout the preceding 12 month maintenance period at different times, and to meet minimum required standards.

Facility managers should also note that the builder's auditors, or inspectors of safety measures may not be as rigorous as those independently employed by the facility manager, as negative reports have a cost impact on the builder.

All statutory fines and penalties imposed on the owner due to unsatisfactory maintenance of safety measures should be reimbursed by the builder.

The facility manager must check and verify that all conditions on the development consent and construction approval have been met by the builder. This should also include the owners and consultants conditions.

Building Contractors
The general standard of commissioning completed safety measures (for example such items as fire services, exit signs, and smoke control measures), leaves a lot to be desired. Managers should ensure that contractors (and consultants engaged to design) who install and commission these systems are contractually bound to ensure that commissioning is done to a specific standard. This standard may be well in excess of the statutory requirements of the building approval and, therefore, the appointment of a building surveyor to issue construction approvals and occupancy approvals may not be sufficient protection for the manager.

We recommend the contract include specific provisions to require appropriate sign off of important features in the building. The following is a limited sample list.

Specify that a "contractor completion certificate" be provided upon completion of the work. The "contractor completion certificate" should also be accompanied by the following documentation:

  • Certificate of compliance of the installation from the contractor.
  • Where applicable a commissioning report signing off on a safety measure under the relevant Australian Standard and/ or
  • An independent certification of the installation.

Note: Most state and territory legislation does not require "contractor completion certificates", however, these documents are critical should "civil litigation" arise as a result of the inadequate installation of safety measures.

Engage competent consultants to oversee the building work, sign off (certify) the contractor’s installation work and witness commissioning tests. The consultant should then be required to certify that the completed work complies with the applicable Australian Standard and the construction approval.

Engage where possible only accredited certifiers to certify the completed works.

Note: Certifiers of contractor works may not need to be approved practitioners, therefore, like all industries, some certifiers are more competent than others. It is essential that the credentials of the proposed certifier be examined prior to their appointment to ensure that they have the appropriate qualifications and experience necessary for the proposed works. Industry bodies and accreditation boards (for example the Australian Fire Safety Practitioners Board and the Fire Protection Association of Australia) accredit practitioners to certify specific safety measures. These organisations should be contacted to confirm a certifier's accreditation. Check if they have professional indemnity insurance.

Ensure that the services consultant and certifier witness full scale commissioning of safety measures where the interfacing of a number of systems are involved (for example fire protection systems, HVAC plant, fire pumps, and EWIS systems) to ensure that all systems operate as intended.

Fire door certificates from the fire door installer, confirming installation compliance with AS/ NZS 1905.1.

A certificate from contractors that service penetrations through fire rated building elements have been correctly fire stopped pursuant to the tested prototype or smoke sealed for any penetrations through smoke walls.

A certificate from the sprinkler contractor and/ or independent certifier certifying that the sprinkler system installation has been carried out in accordance with the approved drawings, specifications and AS 2118.

A certificate from the mechanical contractor certifying that the air handling plant or system providing ventilation has been installed and commissioned in accordance with the approved drawings, specification and AS 1668.2. 

Verification from the contractor that fire dampers have been provided and installed in accordance with AS/ NZS 1668.1 and the approved drawings (a location plan should be a requirement).

Consultants
Contractual obligations placed on the consultant must include their engagement during the construction phase and the production of documents signing off the completed works. Typical considerations include:

A structural engineer's field reports, inspection reports and certifications for the structural building work.

Letter of compliance from the consulting engineer for the installation of the emergency lights and exit signs confirming compliance with relevant Standards (AS 2293.1, AS 3000) and that a logbook is provided on site for the owner.

The witnessing of tests done by an independent approved fire safety tester confirming flows, pressures and installation of the fire hydrant and that the fire hose reel is in accordance with AS 2419.1, AS 2441, AS 1221.

Letter of compliance from the consulting engineer for the installation of the smoke and thermal detectors confirming compliance with the approved drawings, specifications AS 1670 and AS 3000 together with evidence of alarm line connection and a copy of the commissioning report.

Letter of compliance including commissions testing and report from the consulting engineer for the installation of the emergency warning and intercommunication system (audible alarms and Brigade intercom), confirming compliance with the approved drawings, specifications and Standards AS 2220.1 and AS 1670.

Tenants
Tenants can severely affect the defects liability period by unwittingly interfering in the process. The facility manager must ensure that for the life of the tenancy agreement, control mechanisms are in the lease to ensure the tenant seeks the managers acknowledgement or specific written approvals where required.

Managers must ensure a 'double up' by contractors doesn't occur. Do not have a lease agreement requiring the tenant to employ maintenance contractors when the builder is contracted to maintain the same items for the first 12 months. This is a recipe for disaster.

The following issues should be considered by the manager:

Any proposed building works or alterations that require a development consent or construction approval are not to be raised with a controlling authority without first obtaining the managers consent in writing. Some intended uses may not be allowed and this can be a significant problem when the tenant is already in occupation.

The tenant must be required to provide a copy of any statutory approval or consent together with the approved drawings and documentation to the manager before building works are allowed to commence.

Upon completion of the building works, the tenant must also provide a copy of the council's or private certifier's confirmation of satisfactory completion of the building works under the state legislation.

The tenant, prior to making any formal applications, must provide the manager, in writing, the following documentation: 

  • Confirmation on the extent of regulatory compliance required. For example, does the whole building have to comply with certain provisions of the Building Code of Australia (BCA) that are not already embodied in the original Building Approval.
  • Confirmation on whether the building surveyor proposes to use performance based solutions under the BCA, and if so, detail these and the impact on the building, relative to increased maintenance costs, before the design is completed for the manager's consideration and approval to go ahead.
  • Sufficient evidence that the building surveyor has the necessary skill and experience to perform the tasks required for the proposed alterations.
  • The anticipated safety measures, listing the performance standards and frequency of inspection for the safety measures.

The tenant is to provide to the manager all supporting documents relied upon by the building surveyor to issue any statutory approval. The tenant shall upon completion of the building works or alterations provide to the manager a copy of the safety measures issued for inclusion in the buildings safety measures logbook.

If building works in the tenancy area (including works outside of the tenant’s area) causes an increase in maintenance costs for that tenancy or for the whole building, then these costs could be recovered, for example, by the facility manager under the lease.

The tenant or tenant's contractors must provide to the facility manager statements, certifications or certificates as required by the manager for inclusion in the safety measures logbook for presentation to the controlling authorities or other interested parties on an annual basis.

Commercial leases should ensure the tenant provides uninhibited access at all times for contractors, fire brigade officers, council building surveyors or consultants to inspect, test or maintain safety measures within the tenant's area where the tenant fails to comply with minimum mandatory standards.

Any legal documentation must prohibit a tenant from approaching a controlling authority requesting any information, service, or inspection or notice to be issued on the property unless first obtaining permission from the manager in writing.

The tenant is to allow for the posting within their tenancy, any statutory documentation required to be displayed by any controlling authority.

For the facility manager or owner, ensuring these requirements are effectively identified and managed will assist in ensuring risk is apportioned appropriately and mitigated wherever possible.

geoffv2_side_120   Geoff Vick
Manager Safety Measures
Essential Property Services
134 Johnston Street
Fitzroy, VIC  3065
Phone: (03) 8417 6555
Email: geoffv@epsau.com.au
Web: www.epsau.com.au
 

 

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