Home Warranty Insurance for Owner Builders and related issues
Page Navigation
- Home Warranty Insurance overview
- Home Warranty Certificates for when Owner Building
- Successive Purchasers of Owner Builder properties
- Obligations of Owner Builders when selling property
- Tips for Owner Builders and Home Owners
- OB Construction & Public Liability Insurance Quote Request
Related pages for Owner Builders
- Important Information for Owner Builders
- Contracts, and dealing with Contractors
- Owner Builder Courses
Home Warranty Insurance overview
Generally, "Home Warranty Insurance" can be defined as the insurance cover provided on a new or renovated house (for a period of 6 years running from the date of completion of the building project), to both an Owner Builder & successive purchaser of a house, which has been built or renovated by an Owner Builder.
This simplistic definition of Home Warranty Insurance has two facets. To understand more clearly how the Home Warranty Insurance scheme works (as required under the Home Building Act 1989), we divide it into two categories, which make it simpler to explain & understand - Home Warranty Insurance for Owner Builders and Home Warranty Insurance for Successive Purchasers.
Home Warranty Certificates for when Owner Building
The first facet of Home Warranty Insurance relates to Owner Builders and tradesmen or contractors whom they engage at any point during the lifetime of the building or renovating project.
As an Owner Builder building a new home, you will engage various tradesmen or contractors, who will come together at various stages, to build your home. The costs of the building works, which each of these tradesmen or contractors do, is important, because if the work done by any tradesman or contractor exceeds $12,000 (including labour and materials), that tradesman or contractor has to provide you, as an Owner Builder, with a Home Warranty Certificate on the work that they have undertaken. This is a statutory legal requirement since the 2nd April 2002.
So basically, if an Owner Builder, engages 6 different tradesmen or contractors to do the different building work involved for the completion of the new house or renovating project, and the individual cost for the work(inc. labour & materials) of 4 of these tradesmen or contractors will exceed $12,000, then each of these individual tradesmen will have to provide the Owner Builder with a Home Warranty Certificate, to cover the work which they have completed.
The remaining two tradesmen or contractors whose work will cost less than $12,000 each, will not have to provide any Home Warranty Certificate to an Owner Builder.
Home Warranty Insurance is a very important safety net scheme for Owner Builders because it ensures that they are protected for the first 6 years of the life of their new or renovated home, on the major sections of building work (which cost over $12,000), even in the events when a tradesman or contractor that did the work, goes out of business, goes bankrupt or becomes deceased.
PLEASE NOTE: Home Warranty Insurance will not cover an Owner Builder if he can maintain an action for rectification of damages against the tradesman or contractor who did the work. It will only cover Owner Builders in those special kinds of circumstances mentioned above - where an action cannot be maintained.
Successive Purchasers of Owner Builder properties
The second facet of Home Warranty Insurance has to do with the Owner Builder and any successive purchaser of the Owner Builder built property. If an Owner Builder decides to sell his property within the first 6 years from its date of completion or major renovation, he's required to take out a separate Home Warranty Insurance Cover. This form of Home Warranty Insurance is a separate form of warranty from that given to Owner Builder by different tradesmen or contractors, and is designed to cover successive purchasers of the property from any building problems or defects, which may arise within the first 6 years from the project completion date.
This protects the purchaser from situations where it would become impossible for the purchaser to make a claim against a tradesman or contractor for any building defects or faults. Again, the reasons include a tradesman or contractor going out of business, becoming bankrupt or deceased, or from any other limitations arising out of the doctrine of privity of contract.
It is important to note that this type of Home Warranty Insurance will only cover a successive purchaser, for the balance of the 6 year period, from the date of completion of the Owner Building project. So for instance, if an Owner Builder completed the building work on the 1st March 2002, and has sold the property to a purchaser on the 1st March 2006, then the purchaser would only be covered until 1st March 2008 - the balance of the 6 year period, which is 2 years.
Obligations of Owner Builders when selling property
Under S 95 (2) of the Home Building Act 1989, it is strictly illegal for Owner Builders to enter into a contract for the sale of their properties, unless more than 6 years has passed since the date of building or major renovation completion on the property - S 95 (3), without attaching a valid Home Warranty Certificate to the contract.
The contract for the sale of the land must also include disclosure of the fact that an Owner Builder Permit was issued in relation to the work and that the work done under the permit requiring Home Warranty Insurance.
If there is a non-disclosure of the Owner Builder status of the sale, and Home Warranty Insurance is not arranged, not only can the purchaser rescind the contract for sale of the land before settlement, but an Owner Builder may also face penalties.
If the Home Warranty Insurance certificate is not attached but the Owner Builder had arranged the insurance before entering into the sale contract, the contract is not voidable by the purchaser. However, an Owner Builder must provide the Home Warranty Insurance Certificate to the purchaser prior to settlement.
As an Owner Builder you are guaranteeing the work you undertake. If you should decide to sell within the 6 year period, it is advisable that you contact a reputable insurer, (who will provide you with the appropriate cover required under the Home Building Act 1989), well in advance of marketing your property. We can assist you in obtaining Owner Builder Home Warranty Insurance, simply by calling us on (02) 8303 0545 Monday to Friday 9am to 5pm (AEST).
Another thing to keep in mind as an Owner Builder, is that before issuing any Insurance Certificates, insurance companies will usually require that an inspection of the house be undertaken. This is a risk management issue, designed to make sure that there are no matters that need to be remedied, or work completed before insurance can be issued. So if you wish to sell your property within the first 6 years of completing your building work, we can also assist you in the organisation of Owner Builder work Defects Reports for compliance, to help you obtain your Owner Builder Home Warranty Insurance Certificate. Please contact our Inspections Team on (02) 8303 0545 Monday to Friday 9am to 5pm (AEST), or complete Inspection Quote Request on-line.
Tips for Owner Builders and Home Owners
Owner Builders should always insist on receiving a written receipt of payments that have been made, along with a Home Warranty Certificates where the value of the work exceeds $12,000.
Home Owners beware, if you do not want the responsibility of being the builder in charge, be wary of a builder who suggests that you obtain an Owner Builder Permit while they do all the building work for you. If any of these suggestions are made to you, then it may well signal that the builder is either unlicensed or unable to obtain insurance himself (potentially for a variety of reasons including previous bad records with regard to building insurance claims), or the builder may be trying to "shirk" the responsibility for the building work, leaving it on your shoulders as an Owner Builder, while you still pay him the premium builder fees.
