Builders warranty is a topic not often discussed, but we think this is a valuable and important discussion to have. As we specialise in buying new and off-the-plan property, we want to share some usual details.
As property advisers, when buying an off-the-plan property we do our due diligence on both the developer and builder. Sometimes this can be the same person. A good reputable builder who holds a consistent construction service will generally provide a great job. Unfortunately, sometimes things can go wrong. This doesn’t mean ‘disaster’, but it is possible for problems to occur. If your builder doesn’t deliver the finished product or their finished work isn’t what was expected, you can be left out of pocket. That’s where Builders Warranty insurance may come into play.
What is Builders Warranty insurance?
Builders Warranty Insurance is a policy covering a builder’s client for loss of deposit, failure to start or finish a job and defective work on a completed job. If this happens to you, the first step is to try and recover your costs directly from your builder. But if they’ve died, disappeared or become insolvent that might not be possible. If so, you may be able to claim on the Builders Warranty policy covering your building contract.
Is builders warranty a requirement in my state?
The rules vary from state to state, but in many places it’s a legal requirement for jobs above a certain dollar amount, but the basic legal protections are the same.
| State | Known as | Legal requirement? | More information |
|---|---|---|---|
| ACT | Residential Building Warranty Insurance | Yes, for work valued over $12,000 | ACT Government Planning |
| NSW | Home Building Compensation Fund | Yes, for work valued over $20,000 | Home Building Compensation Fund |
| NT | N/A | No | Northern Territory Government |
| QLD | Home Warranty Insurance | Yes, for work valued over $3,300 | Queensland Building and Construction Commission |
| SA | Building Indemnity Insurance | Yes, for work valued over $12,000 | Consumer and Business Services |
| TAS | Residential Building Warranty Insurance | No, in Tasmania it’s a voluntary scheme | WorkSafe Tasmania |
| VIC | Domestic Building Insurance | Yes, for work valued over $16,000 | Victorian Managed Insurance Authority |
| WA | Home Indemnity Insurance | Yes, for work valued over $20,000 | WA Department of Commerce |
How do I get builders warranty insurance?
Any off-the-plan development, including Apartments, stand-alone houses Townhouses or house and land, will surpass the minimum legal requirement. Therefore the developer/builder must pay for the Builders Warranty insurance as part of their service. This means you do not have to purchase the policy at all. In fact, no building work can be done without having Builders Warranty insurance. Builders must submit proof of insurance to your local council before your development application can be approved.
When you sign a Contract of Sale with your builder/developer, they must provide you with a copy of the Builders Warranty certificate. It’s wise to have your nominated conveyancer scan over this to confirm. To make a claim, you would require the certificate.
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more, please contact us. We welcome the opportunity to assist you.
June 2018
