Whether as an owner-builder or a contractor under a home building contract, home warranty insurance from an approved insurer is required for all residential building work exceeding $12,000.00.
If an owner-builder decides to sell the property within 6 years after completing the work, then the owner-builder must attach a copy of the home warranty insurance certificate to the contract of sale.
Under the home warranty insurance, the home owner can make a claim in respect of any:
- structural defects within 6 years after completion of the work and notification must be given to the insurer within 6 months of becoming aware of the defect;
- non-structural defects within 2 years after completion of the work;
- incomplete work within 12 months after the failure to commence the work or cessation of the work.
Obtaining home warranty insurance may also be the local authority's condition of approval of a development application.
An applicant for a contractor licence is required to provide evidence of current home warranty insurance or a current certificate of eligibility to obtain home warranty insurance from an approved insurer.
Note that developers of high-rise apartment buildings exceeding 3 stories are not required to arrange home warranty insurance for the building work nor are they required to attach a copy of the certificate to the sale contract.
A home owner can only make a claim under the home warranty insurance if the builder becomes bankrupt or insolvent, dies or cannot be located. If the insurer does not make a decision within 90 days from the date of lodgment of the claim, then the insurer is deemed to have accepted the liability. If the home owner is not happy with the insurer's decision, then the home owner must appeal to the Consumer, Trader and Tenancy Tribunal within 45 days of the decision.
Construction Risk or Builders All Risk Insurance (for owner-builder) Contract Works Insurance (for builder or tradesperson)
This covers the insured for loss or damage to materials and work. If insurance is not in place, the person risks the inconvenience, time delays and disputes where materials are damaged or stolen. When insuring, costs of other things such as costs of tools, equipment and cleaning up should be taken into account.
Workers Compensation Insurance
This covers workers or employees injured at the building site or in the normal course of employment.
Usually, individual builders who do not have a company or business may not carry workers compensation insurance. The land owner may become liable for injuries suffered by a worker at the building site pursuant to Workers Compensation Act 1987 (NSW).
Public Liability Insurance
This covers the insured in respect of injury caused to non-employees such as family members, or members of public at the building site. The land owner is otherwise liable if such person suffers injury.
Professional Indemnity Insurance (for building consultants)
Building consultants (holders of building consultancy licence) involved in preparing pre-purchase reports should consider having professional indemnity insurance in case of a claim in negligence.
Other persons involved in building advising, designing, contract administration and project management should ensure that they have professional indemnity insurance.
Manoj Narsey is a solicitor employed at LAC Lawyers Sydney http://www.laclawyers.com.au. He has nearly 12 years experience as a lawyer.
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