Owner Builder Warranty

Who needs an owner builder warranty?

Owner Builders are defined as someone who undertakes building, renovation or construction works or the supervision of required subcontractors on a property they own:

  • Which exceeds the minimum value required for contracted building works
  • Requires a building / planning permit

Why is it Important?

An Owner Builder Warranty provides purchasers with peace of mind and gives Insurers the information required to issue a policy for the benefit of the purchaser.  In states like NSW, VIC and WA this is mandatory, while in other states it is advisable but not mandatory.

 

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Additional Information

Owner Builder inspections identify:

  1. Defective building work
  2. Incomplete building work
  3. Use of second hand or recycled building materials

Owner Builder requirements in Australia

Requirements for the sale of Owner Built properties and homes in Australia differ from state to state.

  • Sydney & NSW
  • Melbourne & VIC
  • Perth & WA
  • Adelaide & SA
  • Brisbane & QLD
  • Hobart & TAS

Generally the requirement is that if you go to sell the property you have Owner Built within a few years of completion (usually around 6 – 7 years) you may be required to have an Owner Builder Inspection Report completed.

This Report is provided to an Insurer who will issue a policy in favour of the purchaser. It covers the purchaser in the event you abscond or are otherwise unable to provide redress for defects in the construction you did as an Owner Builder. The Inspection Report identifies for the Insurer any defective, incomplete works and the use of second hand building materials all of which are excluded from the insurance policy.

Key Information

NSW - Owner Builder Details

Owner Builder Warranty Inspections are mandatory in NSW.

In NSW when an owner builder decides to sell a property, within six years of the completion of owner builder work, the Home Building Act 1989 requires that home warranty insurance cover be taken out.

This is required where the reasonable market cost of labour and materials exceeds $20,000.

Cover must be taken out by the Owner Builder and a consequent Certificate of Insurance be attached to the contract of sale for the property.

For these purposes, Owner Builder work is taken to have been completed on the earlier of the date of issue of an Occupation Certificate or the date 18months after the issue of an owner builder permit for the work.

The Owner Builder warranty insurance policy for the owner builder work provides cover to the purchaser of the property and subsequent successors in title where the purchaser is unable to have any defective owner builder work – not apparent at the time of purchase – rectified because of death, disappearance or insolvency of the owner builder.

Please note: where the Owner Builder contracts work valued over $20k to a licensed builder or trade contractor the builder or contractor must obtain home warranty insurance for the work, in this case the owner builder is covered by the home warranty insurance.

 

Pending Regulatory Change

Following the passing of amendments to the Home Building Act 1989 by the NSW Parliament recently, it is likely that as from 1st December 2014 the NSW Self Insurance Corporation, which administers the Home Warranty Insurance Fund, will no longer be able to provide home warranty insurance cover for owner-builder work.

NSW Fair Trading has issued an exposure draft of the Home Building Regulation and is presently considering feedback received before confirming the date of commencement of the legislative amendments.

This may mean that NSW will fall into line with states such as Queensland where no insurance for Owner Builders will be extended, at least by the Home Warranty Insurance Fund, managed by the State Government.

Monitor the NSW Fair Trading website for more details from December 2014 onwards.

 

Owner Builder Inspection Reports are carried out by Jim’s Building Inspectors that meet the NSW Fair Trading requirements below:

  • Licensed as a Builder
  • Hold the qualifications and experience that would satisfy the Fair Trading’s builder’s licensing criteria

And / or be a:

  • Registered Building Certifier or Inspector
  • Registered Engineer or Architect

 

NSW Fair Trading also includes the requirement that your Inspector must be independent of you, the Owner Builder.  For example, you should have no prior personal association (friend or professional colleague) or association by marriage or family, with your Inspector.

Some of the existing Insurers will request that the Owner Builder supplies with the Inspection Report, information regarding the prerequisites your Inspector has met above.

In NSW you will be required to cooperate with your Inspector to provide:

  • Documentation in relation to Development Consents, Construction Certificates etc., for the previous 10 years
  • List of all works done at the site

 

They would be submitted by you the Owner Builder as an Appendix to your Inspection Report.

Your inspector will also issue you with a statement providing permission for the report to be made available to third parties accompanying the report.

The Owner Builder Inspection Report has a maximum duration or life span of 6 months. For example, if you do the inspection and the property sale falls through, the same report can be used during the next 6 months.  However, if a sale occurs or settles at 6months + 1 day, a new report is required by the Insurer.

NSW is comparatively specific in their documentation for what must be included in an Owner Builder report generally, but all the factors excepting the two items noted above are catered for in the Build Inspect App.

Source: https://homewarranty.nsw.gov.au/portal/server.pt/community/d%3Bowner-builders/258

Additional information:

Further information regarding owner-builder work and the requirements under the Home Building Act. in relation to owner-builders and home warranty insurance (including grounds for exemption) is available from NSW Fair Trading

Telephone: 13 32 20 www.fairtrading.nsw.gov.au

For more information, go to the Home warranty insurance fund website at www.homewarranty.nsw.gov.au

NSW - Owner Builder Details

Owner Builder Warranty Inspections are mandatory in WA.

In WA owner builders are responsible for the building work they carried out for a minimum of 6 years for works with a value of $20,000 or more.  However, unlike other states, this requirement excludes associated works like pergola’s, fences or pools.

If the owner builder sells the home within 7 years from the date a of a building licence or permit being issued they are required under the Home Building Contracts Act. 1991 to have in place a policy of home indemnity insurance.

This policy covers subsequent owners so that if problems develop with the building and the owner builder fails to rectify due to disappearance, death or insolvency, they are covered.

In WA it is called Home Indemnity Insurance.

Home indemnity insurance can be obtained by contacting an approved insurance provider.

SA - Owner Builder Details

Owner Builder Inspections are not mandatory in South Australia.

It is however advisable best practice to have an Owner Builder Warranty Inspection done when selling a property within 6 years of the Certificate of Practical Completion being issued.

Whether you simply provide the potential purchaser with a copy of the inspection report as a form of disclosure during the sales process, or whether you go the additional step to take out a policy in their favour, an Owner Builder Inspection Report will facilitate confidence in the sale process.

QLD - Owner Builder Details

In Queensland it is mandatory to disclose to the purchasing party that the property was either built or renovated under an Owner Builder arrangement.

The QBCC provides specific instructions which your property conveyancer or solicitor will assist with.

The Owner Builder notice to the purchaser takes the form of:

  • details of the owner builder work done under the permit
  • the name of the permit holder who carried out the work
  • a statement confirming the work was done under an owner builder permit
  • the following notice: “Warning – The building work to which this notice relates is not covered by insurance under the Queensland Building and Construction Commission Act 1991”.

You must give the buyer 2 copies of the notice. The buyer must sign 1 copy and return it to you on, or before, signing the contract of sale.

Consequently it is not mandatory to have an Owner Builder Inspection Report done or to issue an insurance policy in QLD.

It is however advisable best practice to have an Owner Builder Warranty Inspection done when selling a property within 6 years of the Certificate of Practical Completion being issued.

Whether you simply provide the potential purchaser with a copy of the inspection report as a form of disclosure during the sales process, or whether you go the additional step to take out a policy in their favour, an Owner Builder Inspection Report will facilitate confidence in the sale process.

Conversely, many inspections of Owner Built or Renovated properties in Queensland are being requested by the purchaser in the form of additional scope of works in a standard Pre-Purchase Building and Timber Pest Inspection Report.

TAS - Owner Builder Details

Builders Warranty Insurance is a voluntary scheme in Tasmania and the purchase of a policy is at the discretion of the Owner Builder in conjunction with a State run warranty scheme or private insurers.

It is however advisable best practice to have an Owner Builder Warranty Inspection done when selling a property within 6 years of the Certificate of Practical Completion being issued.

Whether you simply provide the potential purchaser with a copy of the inspection report as a form of disclosure during the sales process, or whether you go the additional step to take out a policy in their favour, an Owner Builder Inspection Report will facilitate confidence in the sale process.

Conversely many inspections of Owner Built or Renovated properties in Tasmania are being requested by the purchaser in the form of additional scope of works in a standard Pre-Purchase Building and Timber Pest Inspection Report.

Further Information: http://www.qbe.com.au/Business/Builders-Warranty/Insurance-Cover-State/TAS-Tasmania/Insurance.html

WA - Owner Builder Details

Jim’s Building Inspections does not currently offer this service in the Australian Capital Territory.

SA - Owner Builder Details

Jim’s Building Inspections does not currently offer this service in the Northern Territory.