Owner-builders require the Building Practitioners Board’s consent. Permits are issued by building surveyors, who inspect work and issue the occupancy certificate. Architects are useful for planning. The Bushfire Building Standard applies in bushfire-prone areas. Building contracts imply warranties over the quality of workmanship and materials. Limits exist on progress payments. Home warranty insurance offers limited cover. Check your builder has public liability insurance. Definitions vary for the finish date or completion of works. Wrongfully terminating a contract may make the consumer liable for damages to the builder. The Building Advice and Conciliation Service Victoria can help with complaints about builders. The Domestic Building List of VCAT hears disputes and may require compulsory conferences. VCAT may award costs.

Contributor

Mark Attard

Partner, Clyde & Co.

Insurance

Last updated

1 July 2020

Home warranty insurance

The level of cover provided by home warranty insurance policies is set out in ministerial orders.

Home warranty insurance is only required if the contract price is more than $16 000. Accordingly, a large amount of minor work does not carry home warranty insurance. Typically, the policies cover:

  • defective building work (including breach of the implied warranties);
  • non-completion of work;
  • loss of deposit or progress payment;
  • alternative accommodation; and
  • breaches by the builder of the ACL&FTA.

Structural defects are normally covered for six years, non-structural claims must be made within two years.

In most cases, the insurance policy will not assist owners and they will need to deal with the builder. Domestic building insurance is insurance of last resort. It can only be claimed if the builder has died, gone bankrupt, or disappears. If the builder does not satisfactorily address the owner’s concerns, it may mean lengthy and expensive legal proceedings against the builder. Home warranty insurance is presently under­written by the Victorian Managed Insurance Authority (www.vmia.vic.gov.au).

Cover for completion costs is capped at 20 per cent of the contract price. Also, legal costs and expenses are included in the policy limit. Therefore, cover could be eroded by legal costs.

A consumer must make a claim within 180 days of the date when they first became aware, or might reasonably be expected to become aware, of the circumstance giving rise to a claim. If an insurer declines a claim, any appeal must be brought within 28 days at the Victorian Civil and Administrative Tribunal (VCAT).

An insurer must make a decision on a claim within 90 days, failing which the claim is deemed to have been accepted by the insurer.

Section 54 of the Insurance Contracts Act 1984 (Cth) should assist consumers who notify defects outside of the policy period, provided that the defects were detected within the policy period (see Chapter 10.4: Insurance). It is important that you read the home warranty insurance policy carefully. Not all defects are covered. In all instances, your first contact should be the builder. You may need to negotiate with the builder to get them to return and repair defects.

For policies issued after 1 July 2015, important changes have been introduced. The policy limit is now $300 000. The new policies pay claims if the builder has failed to comply with a final VCAT or court order. If you have an order, it is not necessary to wait for the builder to die, disappear, or become insolvent. Any appeal periods must have expired.

Consumers can search the database to confirm that their builder is eligible for insurance (but only if the builder has agreed to be included in the search database). The status of policies issued after this date can be checked on VMIA’s website.

Owner–builders are not required to carry home warranty insurance unless they sell their home within six-and-a-half years of the date of the occupancy permit. At that time, they must apply for insurance and this requires an inspection report by a registered building inspector.

Other insurance

Consumers should insist that their builder is covered by contract works and public liability insurance. This insurance normally covers damage to the works (e.g. by fire), liability to others such as neighbours arising during the work, and injury to others arising from the works. Consumers should check these policies to ensure they are named or included in the coverage provided by the policies.

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