Home warrantry insurance and ownerbuilders requirements


The Home Building Act 1989 contains provisions requiring home warranty insurance to be obtained for residential building work undertaken by builders and owner-builders. The Act also requires that builders, owner-builders and developers provide homeowners with a Certificate of Insurance as evidence that a Contract of Home Warranty Insurance (i.e. policy) is in place for the work.

The statutory warranty period for residential building works has been reduced from 7 to 6 years. This means that the statutory warranty period and the Home Warranty Insurance period is now aligned so that all warranties will apply for 6 years on structural defects and 2 years on non-structural defects from the date of completion.

Further information regarding the requirements of the Home Building Act in relation to home warranty insurance is available from NSW Fair Trading (telephone: 13 32 20 www.fairtrading.nsw.gov.au).

The new home warranty insurance arrangements for New South Wales commenced on 1 July 2010 when the NSW Self Insurance Corporation became the sole provider of home warranty insurance. The Corporation trades as the NSW Home Warranty Insurance Fund.

Since 1 July 2010 Certificates of Insurance have been issued on behalf of the Home Warranty Insurance Fund by its insurance agents, Calliden Insurance Limited and QBE Insurance (Australia) Limited. Between 1 July and 30 September 2010 Vero Insurance Limited also issued Certificates of Insurance as an agent on behalf of the Home Warranty Insurance Fund and stopped issuing Certificates of Insurance from 1 October 2010.

The Certificate of Insurance provided to the homeowner should be the original certificate issued on behalf of the Home Warranty Insurance Fund and its agent. The certificate will also contain:

  • The date of issue of the Certificate of Insurance
  • The name of the builder or owner-builder
  • The address of the land on which the building work is located
  • A description of the building work

The name of the builder shown on the Certificate of Insurance should be exactly the same as the name of the builder appearing in the building contract and in the builders licence.

When a builder, owner-builder or developer is required to provide a Certificate of Insurance to a homeowner -

1. Building work carried out under contract

A builder must provide a Certificate of Insurance to the other party (e.g. homeowner, developer, and owner-builder) to a contract for residential building work prior to commencing the work under the contract and prior to receiving any payment (including deposit) under the contract.

2. Speculative building work

A builder must obtain a Certificate of Insurance for residential building work to be carried out, otherwise than under a contract (e.g. speculative work), prior to commencing work. A builder having carried out residential building work, otherwise than under a contract (e.g. speculative work), is required to attach the Certificate of Insurance to a contract for the sale of land on which the residential building work has been done (within 6 years of completion of the work), or is to be done.

3. Owner-builder work

An owner-builder must not enter into a contract for the sale of land on which owner-builder work has been done (within 6 years of completion of the work) unless a Certificate of Insurance has been obtained for the owner-builder work and is attached to the contract.

4. Developers

A developer must not enter into a contract for sale of land on which residential building work had been done (within 6 years of completion of the work), or is to be done, on the developer's behalf unless a Certificate of Insurance is attached to the contract of sale. Certain circumstance such as, new high-rise construction and sale off-the-plan may be exempt. Under the Home Building Act 1989 an individual, partnership or corporation having residential building work done in connection with an existing or proposed dwelling in a building or residential development where 4 or more of the existing or proposed dwellings are or will be owned by the individual, partnership or corporation is considered a 'developer'. Developers are not covered by the home warranty insurance policy but a purchaser of a property from a developer and their successors in title are covered by the policy.

NOTE:

Information, on any rights of a purchaser to cancel a contract before settlement if the Certificate of Insurance is not attached to the contract of sale, may be obtained from NSW Fair Trading, Conveyancer or Solicitor/Lawyer.

Owner-builders requirements to obtain home warranty insurance

When an owner-builder decides to sell a property, within six years of the completion of owner-builder work having been carried out on the property, the Home Building Act 1989 requires that home warranty insurance cover be taken out by the owner-builder and a Certificate of Insurance be attached to the contract for sale of the property. The requirement applies to owner-builder work where the reasonable market cost of the labour and materials involved exceeds $20,000.

For home warranty insurance purposes, owner-builder work is taken to have been completed on the date of the final inspection by the principal certifying authority or (if there is no such final inspection), 6 months after the issue of the owner-builder permit from the work.

Making application for a Certificate of Insurance for owner-builder

  1. Contact the NSW Home Warranty Insurance Fund nominated insurance agents below
    Calliden Insurance Limited Ph: 1300 880 037
    QBE Insurance (Australia) Limited Ph: 133 723
  2. Complete Home Warranty Insurance Fund application form (contact our office if you require a copy of this form).
  3. An approved insurance broker will submit the application form to the insurance agent for assessment and advise the outcome.

Application and assessment

Information and documentation required to accompany an application for a Certificate of Insurance includes:

  • A completed and signed application
  • Evidence of ownership of the property (copy of certificate of title or rates notice)
  • Owner-builder permit for the work
  • Development Consent or Complying Development Certificate for the work
  • Construction Certificate for the work (not required is Complying Development Certificate has been issued)
  • Copy of plans and specifications for the work including any engineers footing designs and soil classification reports
  • Occupation certificate for the work (where construction has been completed)
  • Certificates of Compliance for plumbing, gasfitting, electrical wiring work, waterproofing and glazing (if applicable or available)
  • If in a termite prone area a Termite Treatment Certificate/Notice. If the original certificate is older than 2 years, a pest inspection report may also be required
  • Details of building or trade licences held by the owner-builder or related entities
  • Details of any home warranty insurance claims or Consumer, Trader and Tenancy Tribunal orders in relation to the building work undertaken
  • A building inspection report not older than 6 months from the date of application, containing a list of defects and if appropriate, incomplete work.

Building Inspection Report requirements

  • The report must be performed by a qualified expert e.g. building consultant / inspector who has a valid professional indemnity policy in place and authorises the report being made available to third parties.
  • Details of qualifications, professional indemnity insurance and authority for the report to be made available to third parties should accompany the report.
  • The report should indicate the quality and completeness of works undertaken by the owner-builder including the following:
  • Name and address of the owner-builder
  • Site address
  • Documentation in relation to all Development Consents, Construction Certificates (or Complying Development Certificates) covering building work undertaken at the site during the previous 10years
  • Site profile (e.g. residential block with dwelling and detached garage)
  • Summary description of buildings (e.g. single /double storey, type of construction)
  • List of all works done at the site (irrespective of whether consent has been granted including works completed less than 6 1/2 years previously and any incomplete works)
  • Separate summary listing – all defects, incomplete work, inaccessible areas and second hand materials

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