On 21 May, Watkins Tapsell had their latest Builder's Information Update. This presentation covers the liability points of Building and Construction Law and why Builders need to protect themselves and get the structure right to protect themselves.

1. “Buying, Selling and
Developing Property –
Structuring and Liability
Issues”
Sonja Daly – Partner
Peter Rusbourne – Partner

2. Disclaimer
This presentation is for information only and
is not advice. Each situation is different and
must be looked at on its particular
circumstances.

3. • Residential building works:
― Home Owners Warranty Insurance
Policy for work valued at over $20,000

4. • Residential Building Work: Builders at
risk:
• 6 years for structural defects.
• 2 years for non-structural defects.

5. • For commercial builders – while you
cannot be sued for breach of warranty
under the Home Building Act you can still
be sued for:
– Breach of contract = 6 years; or
– Negligence = 6 years; or
– Misrepresentation under the Australian
Consumer Law = 6 years.
– Case of Brookfield but watch this space

6. • In order to protect your assets you need to
examine your current way of doing
business and structure. You need to
properly consider whether you should
operate as a:
– Sole trader; or
– Partnership; or
– Company; or
– Family Trust Structure.

7. • Sole Trader
– Advantages
– Set up costs
– Ongoing costs
– Disadvantages
– Assets at risk
– Taxation
– Transfer of interest
Structuring your business to
protect assets and minimise tax.

8. •Partnership
–Advantages
–Set up costs
–Ongoing costs
–Disadvantages
–Asset risk
–Taxation
–Transfer of interest
Structuring your business to
protect assets and minimise tax.

9. •Company
–Advantages
–Set up costs are “one off insurance
- premium”
–Disadvantages
–Ongoing costs
–Asset protection
–Taxation
–Transfer of interest
Structuring your business to
protect assets and minimise tax.

10. • Family Trust Structure
–Advantages
–Company trustee so same
- advantages as with a company
–Taxation and income splitting
–Disadvantages
–Ongoing costs
Structuring your business to
protect assets and minimise tax.

11. Structure Limited
Liability
Liable for
partner’s/director’s
actions
Personal assets
at risk
Sole Trader No Not relevant Yes
Partnership No Yes, in full Yes, in full
Company Yes Company may not
be liable
Not generally
Trust Company
trustee: Yes
Company may not
be liable
Not generally

12. You purchased the land.
You are a builder who completed a combined residential and
commercial project on that land.
You have sold the residential and commercial properties and
there are now owners and tenants occupying all of the premises.
A number of owners of both the commercial space and the
residential space are now complaining of water penetration on
the balconies and cracked tiling in the units.
Proceedings are commenced against you for the cost to rectify
and it is in excess of $50,000.
Case Study

13. Questions?