Key Takeaways
- The Defects Liability Period usually runs for 12 months from the Certificate of Practical Completion, and defects notified during it must be rectified
- Rectifying your own defects protects your margin, because a backcharge for another contractor’s rectification price almost always costs more
- Restart clauses create a fresh period for rectified work only, and paired with a Final Completion release trigger they can delay your final retention release
- In Queensland, a 12 month default period applies where the contract is silent, and the holder must notify you before the period ends under s 67NC, QBCC Act
The Defects Liability Period Explained in Brief
The Defects Liability Period is the window after Practical Completion during which you must return and rectify defects notified in your completed Works. The period protects both parties, because the Principal gets defects fixed without suing anyone, and you keep the right to fix your own work at cost rather than paying another contractor’s price through a backcharge.
For the full definition, the origins of the concept and how the period compares with your statutory warranties, read our guide on what the Defects Liability Period means.
How the Defects Liability Period Runs Under Your Contract
The period begins when Practical Completion is certified, and most Australian commercial contracts adopt 12 months, though 6 and 24 month periods appear in amended contracts. During the period the Principal or the Superintendent notifies defects as they appear, you rectify them within the time directed, and the Principal must give you access to do so.
Check three details in your own clause before you rely on any of that. The event that begins the period, because a clause tied to completion of the whole Project can leave a Subcontractor exposed long after leaving site. The length of the period. And whether rectified work attracts a fresh period, which is the detail most Contractors miss.
Where the Defects Liability Period Can Eat Your Margin
The Defects Liability Period keeps costing you after handover, and most Contractors never price it. Your retention stays held, your bank guarantees stay out and keep consuming facility headroom, and your team stays on call for rectification work months after demobilising, with every callback funded from a margin you booked long ago.
Price the period at tender like any other risk. A 24 month period costs roughly double a 12 month period in held security and callback exposure, and an Evergreen DLP clause multiplies both, so the cheapest fix available is negotiating the clause before you sign rather than funding it afterwards.
The Restart Clause and the Evergreen DLP
Some contracts state that a fresh Defects Liability Period runs for rectified work from the date the rectification is completed. A fresh period runs for the rectified work only, and the trap arises where the contract ties final release to Final Completion, because rolling rectification periods push Final Completion out.
If your contract pairs an Evergreen DLP clause with a Final Completion or Final Certificate trigger, get advice before the next rectification notice restarts the cycle, because each round of minor defects delays the money again.
The Defects Liability Period and Your Security Release
The end of the Defects Liability Period is the trigger for the second half of your retention money under most contracts, and often for the return of bank guarantees as well. Under AS 4000:2025, security reduces on the issue of the Certificate of Practical Completion and the remaining entitlement ceases 14 days after the Final Certificate, and the rules for every form of security are covered on our Security in Construction Contracts page.
In Queensland, a 12 month default period applies where the contract is silent or unclear on release under s 67NA, QBCC Act, and the party holding your retention must notify you within 10 business days before the period ends under s 67NC, QBCC Act. Treat that notice as your cue to act, and the full retention rules, including the Queensland caps and trust account protection, are on our Retention Money page.
Defects Notified During the Period
When a defect is notified, your first decision is whether the defect is yours, because rectifying work that another trade damaged hands the cost to the wrong party. Where the defect is yours, rectify it within the directed time and to the contract standard, and where the contract requires the Superintendent to certify the rectification, request the certificate in writing once the work is done.
Where you dispute the defect and the Principal does not agree, the disagreement itself can hold your retention in place, and you may need to commence the dispute resolution process under the contract before the money moves.
Time Limits That Run From the Period’s End
The end of the last Defects Liability Period starts a statutory clock. In Queensland, a payment claim for a final payment must be served before the longest of the contract period, 28 days after the end of the last Defects Liability Period, or 6 months after completing all work under the contract, so a Contractor who waits out the period and then waits some more can lose the fast adjudication path entirely.
Our guide on how to get retention money released takes you through the claim sequence and the deadlines that apply.
Negotiate the Defects Liability Period Before You Sign
Almost everything about the period is negotiable at tender stage, and nothing about it is negotiable once the money is held. Push for 12 months rather than 24, a single period with no restart for rectified work or a hard cap on the total duration, and release triggers tied to Practical Completion of your own Works rather than the whole Project.
At contract review, Rachelle pushes back hardest on three clause types. Restart wording that applies a fresh period to the whole of the Works rather than the rectified part. Release triggers linked to Final Completion or the Head Contract. And defects clauses with no certification step, because a clause with no certificate leaves release arguable forever. A Statement of Departures at tender fixes all three for the price of a page.
The restart clause is the one I circle first in every Defects Liability clause I review. One Subcontractor client came to me convinced their final retention was three months away, and the contract restarted the period for every rectified item and tied release to Final Completion of the whole Project. We negotiated a deed carving their trade out of the rolling periods, and the retention was released within the month. Read the restart wording before you price the job, because that one sentence can add a year to your final payment.
How Rachelle Helps With Your Defects Liability Position
Rachelle reviews the Defects Liability, security and release provisions as part of every Construction Contract Review, flags restart clauses and completion-linked triggers before you sign, and advises on the fastest path when a notified defect or a stalled release is holding your money. Every engagement runs on a Fixed-Price Quote, so you know the cost before you commit.
FAQs about the Defects Liability Period
Most Australian commercial contracts adopt 12 months from Practical Completion, with 6 and 24 month periods appearing in amended contracts. In Queensland a 12 month default applies where the contract is silent or unclear on release under s 67NA, QBCC Act.
Under an Evergreen DLP clause, a fresh period runs for the rectified work only, and the original period keeps running for everything else. The risk arises where the contract ties final release to Final Completion, because rolling periods delay that milestone and the money with it.
The second half of your retention money generally falls due, subject to notified defects being rectified, and in Queensland the holder must notify you before the end under s 67NC, QBCC Act. Statutory time limits for a final payment claim also run from the period’s end, so act promptly once it arrives.
You have the right and the obligation to rectify your own defective work, which usually costs far less than the backcharge for another contractor doing it. The Principal must give you access, and some contracts require the Superintendent to direct and then certify the rectification.
The period is a contractual window for rectifying notified defects, while your statutory warranties and your liability for defective work can continue for years afterwards under the limitation periods. The end of the period releases security, and your responsibility for the work continues beyond it.
In Queensland a default period of 12 months from Practical Completion applies to the release of retention and security where the contract is silent or unclear under s 67NA, QBCC Act. Elsewhere the contract terms and the general law govern the position, so take advice before assuming the money is due.
Everything about the period is negotiable before you sign, including the length, the restart wording, the release triggers and the certification process, and nothing about it is negotiable once your money is held. A Statement of Departures at tender is the standard vehicle for pushing the changes.
Know Your Defects Liability Position Before You Sign
The restart wording and the release triggers in your Defects Liability clause determine when the last of your money arrives. Have Rachelle read the clause before you price the job, and if a notified defect or a stalled release is holding your retention now, call today.
