Licenses & Insurance
For your own protection make sure your builder in licensed and carries current home warranty insurance.



> Home insurance
> Compulsory
> Owner-builder
 > Contract Specifications
> Under the Contract


Builders' licence

Make sure any builder or tradesperson you commission to do work on your home is licensed to do the work. This makes common sense because many people passing themselves off as builders are in fact unlicensed.

It was disclosed in NSW recently that about seven per cent of people in the building and contruction industry worked without licences. That's about one in every 15 'builders and tradesmen'. Some paid up to $30,000 for fake licences.

Therefore, you have every right to inspect their licence card.  Take down the name and licence number and check it online at your relevant State Government department or authority (in NSW it is Fair Trading).

A licence in the name of an individual does not permit the individual's company or partnership to make the contract with you, even if the individual is a director of the company or member of the partnership.

If the company or partnership is making the contract, the company or partnership needs to be licensed in the company name. So go to the Department's online licence check and look up the details of the contractor you are dealing with before you sign the contract.

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Home Warranty Insurance

In legal terms, a warranty is an assurance. In any contract for residential building work certain warranties are taken to be included whether the contract is in writing or not or whether the contractor is licensed or not.

Home warranty insurance - also known as builders' warranty, building, housing or home indemnity insurance - is a consumer safeguard to protect you against a breach of these warranties. These warranties are that the builder will do the work:
 
  • In a proper manner;
  • Using good and suitable materials;
  • Using new materials unless otherwise stated;
  • In accordance with the plans and specifications in the contract;
  • In accordance with the laws including the building act and regulations;
  • Within the time specified in the contract;
  • So as to be fit to be occupied when completed, if that's the intention;
  • So as to live up to any result your builder agrees it must achieve;
  • So as to comply with the standards set out in the contract.

    These warranties are in place for six years from completion of the work.

    Home warranty insurance is mandatory when building contracts reach a certain amount. In NSW, Western Australia, South Australia, Victoria and Tasmania home warranty insurance is compulsory for residential building work carried out by builders / contractors valued at over $12,000 where specified in the relevant State Legislation.

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Compulsory

About 75 per cent of Australia's home warranty insurance is taken out in NSW and Victoria, where the following observations can be made:

  • Home warranty insurance is compulsory (for residential building projects worth $12,000 or more) and the builder is likely to charge you (perhaps indirectly) for the premiums they pay.
  • click here  Before they start work, builders must let you know the insurance company that is underwriting home warranty risk (in NSW they have to provide the original  insurance certificate and in Victoria they have to disclose the details in the contract).

    • In terms of structural defects, the insurance is valid for the construction period  and the following six years.
    • In NSW and Victoria you can only make a claim under this insurance if the 
      builder has died, disappeared or become insolvent.
    • The most you can claim for incomplete work is 20 per cent of the contract value,up to $200,000.
    • Buildings above three storeys are exempt.
    • Owner-builder work worth more than $12,000 is exempt from the insurance
      requirement, unless the home is sold within six years of completion.


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Owner-builder

Work performed by owner-builders is exempt from warranty insurance, unless the home is sold within six years, in which case owner-builders also need insurance.

Beware  some builders who can't get insurance or do not want to pay for it are using this exemption as a loophole. So watch out for builders who suggest that you split contracts and take out an owner-builder licence. This means that you would take on the responsibility for the building or renovation work yourself and have no grounds for complaint if the work breaches the statutory warranties.



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