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In the Spotlight: Builders Warranty
Building contract and home building compensation (HBC) insurance or home warranty insurance – is an important consumer protection for homeowners. This safety net ensures proper insurance covers for your residential building projects.
It helps homeowners if their licensed builder cannot complete building work or fix defects because the builder becomes insolvent, dies, disappears or has their licence suspended or cancelled. The statutory warranty provides protection for both structural defects and other defects.
Builders warranty insurance does not cover damage to the home while construction work is being done or injury to people. Contract Works insurance should be in place for these risks before you start the building process. The contract price will reflect these insurance requirements.
Who is Covered?
Both existing and new owners of a residential property are covered for up to six years for major defects in the work and up to two years for other losses from the date of completion of the work. If you need to make a claim, you may want to seek legal advice regarding construction law.
The builder purchases the insurance and will pass the cost on to the homeowners. The maximum amount covered depends on your policy.
Before Starting Work
Before undertaking a building project (in NSW, for example) for any work over $20,000, the builder is legally required to give proof of HBCF cover and a certificate of insurance to the homeowner or developer before asking for a deposit or commencing the job. NSW Fair Trading and your local council can provide guidance on requirements. States and territories have different limits for the work when home warranty coverage is required, so it’s best to talk with your insurance adviser.
Why is it Important?
- Financial protection: The primary purpose of a builders warranty is to protect homeowners from the financial cost of repairing defective work, if the builder doesn’t undertake repairs. This ensures the building meets its intended purpose.
- Legal requirement: Most state and territory governments require some type of home warranty insurance to be in place before work is commenced. The NSW Civil and Administrative Tribunal handles related disputes.
Owner Builders
You are an owner builder if you:
- Intend to use your skills to build, extend or renovate your property.
- Intend to manage sub-contractors to do the work and oversee materials used.
- You are a registered builder who builds, extends or renovates a home on your property?
As an owner builder, you take on many of the obligations of a registered builder and accept any associated financial risks. Requirements for whether cover is required will vary for each state and territory, so it’s best to check before you start. Note that warranties may not cover damage from natural disasters.
Builders warranty is an important financial safeguard for homeowners and is usually required to be in place by state and territory laws before work commences. Contract Works insurance should also be in place and purchased by the Owner Builder or Contractor before work commences. Your certificate of completion will include important details about your coverage.
Get in Touch with Adroit
Contact us today to find out more about how to protect your residential building work.