| We are often approached by people who have | | | | contractors all risks policy. Essentially the |
| decided to build their own home as owner builders | | | | protection under any one of them is not |
| rather than retain a licensed builder. There is a | | | | duplicated by the others as they all fit together to |
| common misconception that not only will the | | | | provide cover. |
| house be cheaper but owner builders do not bear | | | | It is important to recall that with home warranty |
| the same responsibilities with respect to home | | | | insurance it is not issued on a general replacement |
| warranty insurance as licensed builders. As advised | | | | value basis but is subject to either a limit of |
| in previous articles, licensed builders bear a | | | | indemnity of $300,000 as from 1.3.07 (previously |
| mandatory obligation to take out home warranty | | | | $200,000) or a limit specified and agreed to by |
| insurance if the value of the contract exceeds | | | | the insured to cover the cost of construction. It |
| $12,000. This insurance protects against the | | | | should always be remembered that this limit may |
| death, disappearance or insolvency of the builder. | | | | prove to be inadequate because building costs |
| It does not protect against defects. Where | | | | often escalate for any number of reasons |
| defects cover was previously available it allowed | | | | including variations and therefore this is something |
| the nominated insurer to compensate the home | | | | which needs to be watched closely by the home |
| owner for defects yet they were entitled to | | | | owner. Sometimes builders deliberately understate |
| recover their losses from the builder/responsible | | | | the actual construction costs to obtain a cheaper |
| party. | | | | premium. It is worth noting that although this area |
| Owner/builders are not necessarily required to | | | | falls under the control of the Office of Fair |
| carry home warranty insurance during the course | | | | Trading as home warranty insurance is a matter |
| of building their own home or when they are living | | | | dealt with by the States, this does not |
| in it, but when they seek to sell the property | | | | automatically exclude the operation of the Trade |
| they are required to obtain a certificate of home | | | | Practises Act. |
| warranty insurance. There are a number of | | | | From 1 January 1999 any licensed contractor who |
| brokers and insurers that offer this cover. Where | | | | contracts with an owner builder to undertake |
| problems arise the buyer can rely upon this | | | | residential building work must provide home |
| insurance for protection. Irrespective many owner | | | | warranty insurance from an approved insurer. |
| builders believe that home warranty insurance is | | | | Currently insurance is required where the work to |
| all-encompassing including defects which it is not. | | | | be performed by that tradesperson exceeds |
| There are a number of owner builders including | | | | $12,000. For the sake of completeness where an |
| tradespersons who take the view that provided | | | | owner builder decides to sell his/her home within a |
| council has inspected the dwelling during the | | | | period of six years of completing the work they |
| course of construction they don't bear any liability | | | | will need to take out home warranty insurance |
| for defects but council does. This could not be | | | | where the value of the works performed |
| further from the truth as Council has attended as | | | | exceeds $12,000. Currently, under home warranty |
| an inspectorial authority to ensure that what is | | | | insurance an approved insurer is taken to have |
| being built accords with what has been approved. | | | | admitted a claim after 90 days if they have not |
| It is not there to ensure that the building is | | | | obtained an extension of time either from the |
| without defects or to protect both the owner | | | | OFT or the tribunal. Three months or more is a |
| builder or any subsequent buyer from problems | | | | long time to wait for an insurer to respond to any |
| associated with the death, disappearance or | | | | claim particularly given the history normally |
| insolvency of any person involved with the | | | | associated with these matters. Insurers in this |
| construction of the dwelling. | | | | area are trying to minimise their financial exposure |
| Owner builders often forget that where they | | | | and although there are a number of safeguards |
| substitute for a licensed builder they assume the | | | | under the legislation these can be easily |
| role and responsibilities of the builder and need to | | | | circumvented. |
| ensure that they comply with their statutory | | | | Legislative changes have also had an impact in |
| obligations. Owner builders have obligations under | | | | regard to making sure that where a property is |
| the NSW Workers Compensation Act 1987 and | | | | sold by an owner builder within the six-year period |
| the Occupational Health & Safety Act 2000. The | | | | then the contract for sale must include a note |
| Occupational Health & Safety Act 2000 extends | | | | that an owner builder permit was issued in relation |
| to include any employees of theirs or anybody | | | | to the work; that the work done under the |
| who visits the site at any time during the course | | | | permit required home warranty insurance; and |
| of construction. Owner builders need insurance to | | | | attach a copy of the home warranty insurance |
| protect both themselves and the site works | | | | certificate. |
| which can be done by effecting: | | | | Whether you be home owner, builder or owner |
| 1 home warranty insurance; | | | | builder and encounter any problems associated |
| 2 workers compensation insurance; | | | | with building and construction or home warranty |
| 3 contract works insurance; and | | | | insurance please do not hesitate to contact LAC |
| 4 public liability insurance. | | | | Lawyers on 1300 799 888 to arrange an |
| Home Warranty and Workers Compensation | | | | appointment. Remember, matters only get worse |
| Insurance are required by law. As for contract | | | | the longer you leave them and the more they |
| works and public liability insurance, they are | | | | cost to resolve. Further reforms are |
| optional and often bundled together and sold as a | | | | contemplated in this area. |