Review of Home Building Act 1989: Update Position Paper Released September 2013

In September 2013, the Government released a Position Paper which sets out the NSW Government’s Key Proposals for reform to the Home Building Act 1989. The Government intends to give effect to the reforms later in 2013. There are 50 proposed reforms.

Here we outline some of the key items which will affect builders of homes.

1. Contracts

• Increase the cap on deposits for work over $20,000 from 5% to 10% regardless of work value.
• Cap progress payments to not more than 20% of Contract price and require contracts to include a progress payment schedule.
• Contracts over $20,000 in value to contain a termination clause setting out the circumstances in which a Contract can be terminated and processes to be followed to terminate the Contract.
• Increase to the threshold for general works Contract requirements from over $5,000 to over $20,000.

2. Statutory Warranties

• A two step test to determine whether a problem with building work was a major defect:
  1. Was the defect in a major element of the building?
  A major element would include a structural element, but also other major elements
  such as fire safety systems and water proofing.
  2. How severely has the defect impacted the building’s safety, use and performance?
• The term ‘defect’ to be defined to mean a building failure due to breach of a Statutory Warranty.
• The two year warranty will apply to those defects not covered by ‘major defect’ definition.
• Clarify that while subcontractors are responsible for complying with Statutory Warranties, it is the principal who is primarily responsible to the homeowner for all breaches of the Statutory Warranties.
• Clarify that homeowners have an obligation to take reasonable steps to mitigate loss arising from a breach of the statutory warranties.
• Allow a licensee to limit liability for a loss arising from a breach of the Statutory Warranty to the extent that the loss arises from a reasonable reliance on instructions provided by a professional engaged by the homeowner.

3. Dispute Resolution

• Introduction of an expert determination model to enable technical issues about home building defects in dispute to be established at the beginning of the dispute resolution process.
• Require the homeowner to give the builder reasonable access to a property to perform works under a rectification order given by the Fair Trading Inspector; the CTTT or the Court.
• Failure to provide reasonable access could have adverse consequences.
• Homeowner to notify a builder of a defect within six months of when the homeowner became or ought to have become aware of the defect.
• Establish the offence for a licensee who breaches a rectification order issued by a Fair Trading Inspector and allow a penalty notice to be given for such offences.

4. Owner-Builders

• Prohibit owner-builder work on dual occupancy where the land is capable of being subdivided and on sold. An exemption can be obtained in exceptional circumstances.
• Require proof of a valid white card as a pre-requisite to obtaining an owner-builder permit and raise the threshold for when owner-builder course must be undertaken from $12,000 to $20,000.

5. Home Warranty Insurance

• Establish a public register of home warranty insurance certificates.
• Allow a claim after the period of insurance has expired (a delayed claim) to be made for a loss arising from the non-completion of work where the home owner has been diligently pursuing the builder and properly notified the claim within the insured period.
• Prohibit owner-builders from obtaining home warranty insurance.
• Contracts for sale will require a conspicuous note stating the date the owner-builder permit was issued and any other necessary information.
• Exempt built in furniture and cabinetry (including kitchen cabinetry) from the home warranty insurance requirements when the work is done as a standalone contract.
• Rename the Home Warranty Insurance Scheme.
• Clarify that rectification work done under an original contract by the original builder for no additional payment, does not require a separate home warranty insurance policy as the work will continue to be covered under the original policy.
• Continue high rise exemption from Home Warranty Insurance requirements.
• Clarify the definition of ‘storey’ and ‘rise in storeys’ to align with the Building Code of Australia.
• Clarify for purposes of Home Warranty Insurance that “disappeared” means “cannot be found in Australia”.
• Require vendors of property designed and constructed as commercial premises but sold as residences within six years of completion to disclose in the Contract for Sale that the property is not afforded the protection of the Act.
• Clarify that a Home Warranty Insurance claim can be made on the insolvency trigger if a partnership licence has been cancelled because of the insolvency of a partner in the partnership.
• A non-completion claim on work that is not commenced is limited to the value of the deposit only.

Summary

With these proposed changes, the NSW Government aims to protect homeowners without imposing unnecessary red tape that may impede home building activity and investment in NSW.

CONTACT US

Please contact Kreisson on 02 8239 6500 or email us at excellence@kreisson.com.au for further information.

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