Home Building Act changes: what home owners and tradespersons need to know

Requirement to notify home warranty insurers in writing

Verbal notification to home warranty insurers by a home owner is no longer sufficient – it must be in writing.  Where previous verbal notifications have been made, home owners must put the notice in writing before 25 April 2012.

Time limits on home warranty insurance claims for policies dated before 30 June 2002

Home owners must make a claim within the insurance period. However the time for notification will be extended by 6 months if the work is defective and the loss becomes apparent during the last 6 months of the insured period. This means that if a home owner has notified the insurer but not made a claim, they have until 25 April 2012 to make the claim.

Claims under home warranty insurance policies issued after 30 June 2002

Home owners can make a claim outside of the insurance period if they can show:

• builder was diligently pursued to rectify the problem; and
• they have properly notified the insurer in writing during the insurance period.

10 year limit on policies issued before 1 July 2010

For home warranty policies issued before this time, all claims must be lodged within 10 years of work being completed (including related claims)

A clearer definition of ‘completed’

The definition of ‘completed’ is important as it determines the running of time for the statutory warranty period and home warranty insurance periods.

If there is a contract, the work is ‘complete’ when it is completed in accordance with the requirements of the contract.

If there is no contract or ‘completion’ isn’t defined, the work will be ‘complete’ when the work is complete except for minor defects or omissions that do not prevent the work from being reasonably capable of being used its intended purpose. Unless an early date can be established, this will be the earliest of:

• the date the builder handed over the project;
• the date the contract last carried out work (excluding remedying minor defects);
• the date of issue or an occupation certificate; and
• in the case of owner builders, 18 months after the owner builder permit was issued.

Definition of ‘Developer’ amended

A developer will now include:

•  the owner of land where the development is carried out and who owns or will in the future own 4 or more existing or proposed dwellings; and
• any other person who will also own 4 or more of the existing or proposed dwellings.

Proportionate liability

In proceedings taken by the home owner against the builder or developer for defective or incomplete work, the builder or developer cannot limit their responsibility in those proceedings under the Civil Liability Act (NSW) 2002.

Reduction in statutory warranty period

The statutory warranty period of 7 years for workmanship and materials will be reduced to:

• 6 years after completion for structural defects; and
• 2 years after completion for non structural defects.

Where the work was not completed, the warranty period starts on:

• the date the contract is terminated; and
• if the contract is not terminated – the date work ceased.

There will be an extension of 6 months if the home owner becomes aware of defects in the last 6 months of the statutory warranty period.

Difference between ‘structural’ and ‘non structural defects

For the purposes of the statutory warranty period, structural defects are defects in the structural element of a building. This includes:

• any component essential to the stability of the building or any part of it (including foundations, floors, walls, columns, and beams); and
• any component (including weatherproofing) that forms part of the external walls or roof of the building.

The defect must:

• result in or is likely to result in the building being closed or prohibited from being used;
• prevents or is likely to prevent the continued practical use of any part of the building;
• result in or likely to result in destruction or physical damage to any part of the building; or
• result in or is likely to result in a threat of imminent collapse.

Increased threshold for mandatory home warranty insurance

Home warranty insurance will be mandatory for residential building work worth more than $20,000 (increased from $12,000).

Small job contracts

For ‘small jobs’ worth between $1,001 and $5,000 there must be a written agreement signed on behalf of both parties which includes:

• names of the parties and the number of the holder of the contractor licence
• description of the work, including plans and specifications
• the contract price, if known

Additional home warranty insurance benefits for homeowners

The excess payable by the home owner for a claim has been reduced from $500 to $250.

All policies issued after 1 February 2012 will receive a minimum cover of $340,000 regardless of the value of the work.

Definition of ‘related’ corporations

This definition has been expanded, further limiting the ability of related parties of the builder to benefit from home warranty insurance for the work they have undertaken.