Refusing Builder Access for Defect Rectification: Mitigation of Loss & Your Strata’s Rights

Introduction

When a dispute arises over strata building defects, owners corporations often face the difficult decision of whether to allow the original builder back on site to rectify them. The law requires owners to act reasonably, which raises the question of when can you refuse to let the builder back to fix defects, as there is no absolute obligation to allow builder access in every circumstance.

A refusal to allow the builder an opportunity to rectify may be justified if there are reasonable grounds, such as a genuine loss of confidence in the builder’s ability or willingness to perform rectification work. Consulting a strata lawyer is essential to assess whether your decision aligns with your duty to mitigate loss and to ensure you have the right legal representation for your owners corporation throughout the dispute.

Understanding Your Duty to Mitigate Loss in a Building Dispute

The Legal Principle of Mitigation

When a breach of contract leads to a loss, the affected party has a duty to act reasonably to mitigate that loss. This means you must take sensible steps to prevent the situation from getting worse.

The overarching principle is that a person cannot recover losses that are attributable to their own unreasonable conduct. In the context of defective building works, this duty to mitigate loss is a key factor in a building dispute.

Generally, an owner must give the builder a reasonable opportunity to rectify any defects. This obligation is based on the idea that allowing the original builder to perform the rectification work can be a cost-effective way to minimise the damages.

Losses that could have been avoided by taking reasonable action may not be recoverable from the builder. Therefore, it is important to:

• Give the builder a reasonable chance to fix defects
• Avoid actions that could unnecessarily increase the loss

The Onus of Proof Falls on the Builder

A critical aspect of the duty to mitigate is determining who has the responsibility to prove whether an owner’s actions were reasonable. The law is clear that the onus of proof falls squarely on the builder.

It is not the owner’s responsibility to prove that their refusal to allow the builder back on site was reasonable. Instead, the builder, as the defendant in a dispute, must establish that the owner’s refusal to grant builder access for rectification work was unreasonable in the circumstances.

If the builder cannot prove this, their failure to mitigate defence will likely fail. This principle ensures that the burden rests with the party who originally caused the defect to show that the owner’s subsequent actions were unjustified.

The Court of Appeal Ruling on Mitigation of Loss

Case Study: Ceerose Pty Ltd v The Owners – Strata Plan No 89074

The landmark case of Ceerose Pty Ltd v The Owners – Strata Plan No 89074 [2025] NSWCA 23 involved a dispute over defective building works in a residential apartment building in Sydney. After the project’s completion in 2014, the Owners Corporation identified numerous defects and pursued the builder, Ceerose Pty Ltd, for damages under the statutory warranties of the Home Building Act 1989 (NSW).

The dispute was marked by a prolonged period of delays and stalled negotiations between 2016 and 2019. Although the parties had agreed in principle to a plan for the builder to perform rectification work, the process never moved forward.

Over time, the Owners Corporation developed and documented a significant loss of confidence in the builder’s ability and willingness to properly rectify the defective work. This loss of faith was evidenced through:

• Strata committee meeting minutes showing the owners felt the builder was stalling.
• Numerous communications to the builder expressing concerns about their capacity to complete the rectification work.
• A complete breakdown in the relationship after extended and unproductive negotiations.

Ultimately, the Owners Corporation refused to allow the builder access to the site to carry out the repairs. Ceerose argued that this refusal constituted a failure to mitigate loss. However, the NSW Court of Appeal affirmed that the owners’ loss of confidence, developed over a long period, was a reasonable basis for refusing the builder an opportunity to rectify the defects.

Key Legal Principles from the Ceerose Decision

The ruling in the Ceerose Pty Ltd v The Owners – Strata Plan No 89074 established several crucial legal principles regarding an owner’s duty to mitigate loss in a building dispute. The decision clarified that there is no absolute requirement for an owner to allow a builder back on site to perform rectification work.

Key takeaways from the Court of Appeal’s findings include:

• No Invariable Rule: The Court confirmed there is no “positive obligation” or “invariable rule” that forces an owner to give a builder an opportunity to rectify defects. The primary consideration is whether the owner’s refusal to do so was reasonable in the specific circumstances.
• Loss of Confidence is a Valid Reason: A genuine and evidenced loss of confidence in the builder’s ability or willingness to perform the work can justify a refusal to grant access. This is particularly relevant when there is a history of delays or inadequate repair attempts.
• Onus of Proof on the Builder: The burden rests entirely on the builder to prove that the owner’s refusal to allow access for rectification work was unreasonable. The onus does not shift to the owner to prove their actions were reasonable, even if the builder remains willing to conduct the repairs.

Key Factors in Assessing Your Strata Scheme’s Reasonable Conduct

The Extent & Seriousness of the Defects

The significance and scale of the defective work are crucial in determining whether an owner’s refusal to allow the builder back on-site is reasonable. When defects are widespread, such as in cases involving systemic building defects, or pose a serious risk to the building’s integrity, they substantially undermine confidence in the builder’s ability to carry out rectification work.

Courts typically differentiate defects in two broad categories: 

• Minor cosmetic problems that do not impact structural integrity. 
• Major structural flaws where the builder’s work is systemically defective across multiple areas, justifying the engagement of a more capable contractor.

The Builder’s Past Performance & Quality of Rectification

A builder’s history of attempting to fix defective work strongly influences the assessment of an owner’s conduct. If a builder has made previous, inadequate repairs, an owners corporation may reasonably lose confidence in their ability to complete rectification successfully.

When weighing this factor, courts look at elements such as: 

• Inadequate past repairs, indicating limited competence. 
• Documented case outcomes, for example The Owners – Strata Plan No 76674 v Di Blasio Constructions Pty Ltd [2014] NSWSC 1067, where the builder’s poor rectification attempts supported the owners corporation’s decision to seek another contractor.

The Nature of the Builder’s Engagement & Proposed Solutions

The way a builder responds to a defect dispute heavily influences whether an owner’s refusal to grant access is reasonable. Timely responses, serious engagement with complaints and proposing an appropriate rectification method all carry weight.

Owners may legitimately refuse access when the proposed solution is inadequate:

• Reliance on expert advice—for instance, following an architect’s opinion that the builder’s method is unsuitable. 
• Failure to propose a workable scope of works, making it reasonable to engage a different builder.

The Futility of Continuing Negotiations with the Builder

Sometimes the owner–builder relationship deteriorates so badly that further engagement is pointless. Extended, unproductive negotiations, a common feature of strata disputes and how to resolve them, can demonstrate that it is no longer reasonable to expect an owner to continue dealing with the original builder.

Courts consider several warning signs of futility:

• Repeated stalling or non-constructive responses from the builder.
• Complete breakdown in communication, showing the builder is unwilling or unable to proceed with appropriate rectification work.

If negotiations stagnate under these conditions, an owner’s decision to end discussions and hire another contractor is more likely to be viewed as reasonable. Assessing this point often benefits from the guidance of a strata lawyer.

When Your Strata Corporation’s Refusal for Builder Access is Reasonable

A Reasonable Loss of Confidence in the Builder’s Ability or Willingness

An owners corporation may be justified in refusing to allow a builder back on site if it has reasonably lost confidence in the builder’s capacity or commitment to perform the rectification work properly. This loss of confidence must be genuine and based on the builder’s previous actions or inactions throughout the dispute.

Courts recognise that a history of unsatisfactory work can lead to a reasonable refusal to grant the builder further access. Key factors that can contribute to a justifiable loss of confidence include:

• A history of unsatisfactory work: If a builder has made previous, inadequate attempts to repair defects, it can demonstrate a lack of competence or willingness to complete the work to the required standard.
• Significant delays: Prolonged and unexplained delays in starting or completing rectification work can indicate that the builder is stalling or is not taking the matter seriously.
• Poor communication: A builder who is unresponsive, dismissive of concerns, or fails to engage constructively in discussions about the scope of works can erode an owner’s trust.

In cases like The Owners – Strata Plan No 76674 v Di Blasio Constructions, the court acknowledged that an owner could reasonably lose confidence in a builder’s ability and willingness to do the work. It is crucial to document these issues, and consulting a strata lawyer can help ensure your evidence effectively supports your position in a building strata dispute.

The Builder Denies Defects or Fails to Return to Site

It is generally considered reasonable to refuse a builder an opportunity to rectify defective work if the builder consistently denies that the defects exist. When a builder refuses to acknowledge proven issues, it demonstrates an unwillingness to fulfil their obligations, making further engagement futile.

The builder’s refusal to admit to most of the defects until well into the legal proceedings may be a key factor in the owner’s refusal being deemed reasonable. An owner is not expected to continue offering access to a builder who will not even concede that there is a problem to fix.

Similarly, if a builder abandons the project by failing to return to the site or if a builder goes bust midway through a project, an owners corporation is not obligated to keep the offer open indefinitely. A builder who chooses not to undertake agreed-upon repairs cannot later claim that the owner failed to mitigate their loss by hiring another contractor to complete the job.

Consequences for Your Owners Corporation for Unreasonably Refusing Builder Access

Reduction of Damages for a Failure to Mitigate

If a court determines that your owners corporation acted unreasonably by refusing to allow a builder back on site to rectify defective work, the primary consequence is a reduction in the damages you can recover. The law prevents a party from recovering losses that are attributable to their own unreasonable conduct.

This means that:

• Any additional costs incurred because of an unreasonable refusal to grant builder access may not be claimable in a building dispute.
• The principle of mitigation requires an owner to take reasonable steps to avoid worsening their loss.

When an owners corporation fails to provide a reasonable opportunity to rectify, it may be seen as a failure to mitigate. As a result, the damages awarded could be substantially reduced, since you cannot claim for losses that could have been reasonably avoided.

Distinguishing Recoverable Costs from Unrecoverable Losses

While losses stemming from an unreasonable refusal are not recoverable, an owners corporation can still claim the costs of any reasonable steps taken to mitigate its loss. These expenses are considered a recoverable head of damage, even if the attempts to fix the defective work were not ultimately successful or cost more than the loss that was being mitigated.

The key distinction lies in the reasonableness of the action. For example:

• Costs incurred in hiring an expert to assess defects
• Engaging an alternative contractor after a builder has demonstrated incompetence

Both of these would likely be recoverable.

Consulting a strata lawyer is crucial to help distinguish between recoverable and unrecoverable costs, ensuring your actions align with your duty to mitigate and protecting your financial position.

Why Your Strata Scheme Should Consult a Strata Lawyer

Assessing the Reasonableness of Your Refusal

Deciding whether to refuse a builder an opportunity to rectify defective work involves complex legal considerations. An experienced strata lawyer can provide a crucial, objective assessment of whether your owners corporation’s reasons for refusal are legally sound and likely to be upheld in a tribunal or court:

• confirm the legal soundness of each reason for refusal
• estimate the likelihood of success in a tribunal or court setting

Engaging a lawyer is vital when determining if your refusal is reasonable in the specific circumstances of your building dispute. They can:

• analyse the facts of your case against established legal principles and relevant case law
• clarify the potential consequences of your decision, helping you avoid a finding of failure to mitigate your loss

Documenting Your Case & Corresponding with the Builder

A strata lawyer plays a critical role in preparing a strong case by assisting your owners corporation to properly document all relevant evidence:

• gather comprehensive records of the builder’s conduct
• capture details of previous inadequate repair attempts
• note delays and communications that reveal a loss of confidence

Furthermore, a lawyer can manage all correspondence with the builder to protect your legal position. It is often beneficial to record, in writing, any concerns about the builder’s ability or willingness to perform the rectification work and to allow them a chance to respond, which a legal professional can handle strategically.

Conclusion

In a building dispute, an owners corporation must act reasonably to mitigate its loss, but this does not create an absolute obligation to allow a builder back on site to rectify defective work. A genuine loss of confidence, supported by evidence of the builder’s poor performance or delays, can be a reasonable basis for refusal, and the onus is always on the builder to prove an owner’s conduct was unreasonable.

Given the complexities involved, it is essential to consult with the experienced strata lawyers at PBL Law Group before refusing a builder an opportunity to rectify defects. For trusted expertise in protecting your strata scheme’s interests, our team will ensure your decision is legally sound and fully aligned with your obligations.

Frequently Asked Questions