Defect Liability Period (DLP)

What the Defect Liability Period Covers

The DLP is a contractual and regulatory provision that holds the contractor and/or developer responsible for defects in completed work for a specified period after handover. During this period, if a defect emerges that is attributable to poor workmanship, substandard materials, or design errors, the responsible party must rectify the defect at their own expense.

In Indian construction, DLP provisions exist at two levels. In the contractor agreement: the developer-contractor contract typically includes a 12-month DLP, during which the contractor must fix defects in their work. A portion of the contract payment (typically 5-10%) is retained as security and released only after the DLP expires without unresolved defects.

In RERA regulations: state RERA acts mandate a 5-year structural defect liability from the date of possession. Some states extend this to non-structural defects as well, with shorter periods (1-2 years).

The Documentation Problem During DLP

When a buyer reports a waterproofing defect 30 months after possession, the developer faces a chain of questions: Which contractor did the waterproofing on this specific unit? What material was used? Was the pre-application inspection conducted? Who approved it? Is the defect due to poor workmanship (contractor's liability) or design error (consultant's liability)?

Answering these questions requires tracing records from 3+ years ago. If the construction phase used paper-based QC checklists, the relevant forms may be stored in cartons in a warehouse - if they exist at all. If material test reports were filed in project folders that have since been archived or lost, the evidence trail is broken.

This documentation gap creates two problems. First, the developer can't definitively identify the responsible contractor, making recovery of rectification costs difficult. Second, the developer can't demonstrate to the RERA authority that construction was executed properly, weakening their position in complaint proceedings.

DLP Management Best Practices

Proactive DLP management starts during construction, not after handover. Key practices include: maintaining digital records of all QC inspections linked to specific locations (tower, floor, unit, room), preserving material test certificates with batch numbers traceable to specific building areas, documenting pre-handover snagging with before-and-after photos, and establishing a post-handover complaint management system with defined response timelines.

Retention Money and DLP

The financial mechanism behind DLP is retention money. A typical Indian construction contract retains 5-10% of each Running Account Bill (RA Bill) as retention. Half is typically released at project completion. The remaining half is released at the end of the DLP, subject to no unresolved defects.

For contractors, retention money represents significant locked-up capital. For developers, it's the financial lever that ensures contractors respond to defect complaints during the DLP. When a contractor has Rs 50 lakh in retention money tied to a project, they have a financial incentive to fix defects promptly rather than risk forfeiting the retention.