Recent Home Building Act Amendments

On 5 June 2014 the Home Building Amendment Bill 2014 was passed by NSW parliament. Changes to the Act have been introduced to reduce unnecessary red tape for the industry as well as to ensure appropriate protection for consumers.

There are over 50 reforms included in the Home Building Amendment Bill 2004. The amendments include changes to:

1. Home building contracts;
2. Statutory warranties;
3. Dispute resolution;
4. Owner-builders;
5. Home Warranty Insurance; and
6. Licensing.

The commencement date of the new changes is still to be proclaimed.

Summary of reforms

1. Home building contracts:

• Deposits for all material building works increase to 10%.
• Contracts for residential building works must include details of any progress payments payable under the contract. Two specific types of payments are defined.

2. Statutory warranties:

• The six year implied warranty for “structural defects” changes to “major defects”. There is a two-step test to determine whether a ‘major defect’ exists.
• ‘Completion’ is redefined as “the date of issue of an occupation certificate that authorises completion and the use of the whole building”.
• Homeowners have a duty to mitigate their losses in relation to a breach of statutory warranty.
• Homeowners must make reasonable efforts to advise a builder of an alleged breach of the statutory warranties within six months.
• A builder can rely on written instructions provided by a relevant professional acting for a homeowner in reference to a claim for breach of statutory warranty. If this is the case, a defence is available to the builder.
• Statutory warranties are implied into every contract to do residential building work, including subcontracts.

3. Dispute resolution:

• Provisions for Fair Trading inspectors extend allowing them to order a builder to fix defective or incomplete work.
• A builder has the right to enter a property to carry out rectification works.
• Courts and Tribunals must have regard to the principle that rectification of defective work by the responsible party (as opposed to payment of compensation) is the preferred outcome in building disputes.

4. Owner-builders:

• Changes ensure that the owner-builder permit system is not being misused for commercial reasons by unlicensed builders.

5. Home Warranty Insurance:

• Home Warranty Insurance will be known as insurance under the Home Building Compensation Fund.
• A contract for Sale of Land on which owner-builder work has been carried out must contain a conspicuous consumer warning stating that work done under an owner-builder permit is not required to be insured unless done by a contractor to the owner-builder.
• ‘Disappeared’ is defined as a contractor, supplier or owner-builder that cannot be found in Australia.
• A Home Warranty Insurance Policy Certificates Register will be made available to combat the use of false insurance certificates.

6. Licensing:

• Builders who repeatedly perform unlicensed work may be subject to a maximum fine of $55,000 or imprisonment or both.
• Requirements for building license eligibility are extended.

Practical tips

• Builders will need to review their standard form residential building contracts to ensure compliance with new mandatory contract terms.
• Builders need to be aware of their ongoing mandatory disclosure obligations.
• Contracts for sale will need to have a warning if property does not require protection of insurance under the Home Building Compensation Fund.
• Contractors performing work under contract with an owner-builder must take out insurance.
• Defences to builders on breach of statutory warranty have been expanded.

CONTACT US

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

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