Information for Homeowners

information for homeowners

Introduction

A builder is obliged by law to obtain a Certificate of Insurance (CoI) under the HBCF scheme before commencing the work and before taking any money under the contract towards residential construction, addition, or alteration project with a contractual value over $20,000. 
 
The Home Building Act 1989 contains provisions requiring HBCF insurance cover to be obtained for most residential building work undertaken by building contractors with some construction types exempted E.g. Construction of a new high-rise building. The Act also requires that builders and developers provide homeowners with a CoI as evidence that a contract of insurance (i.e. policy) is in place for the work.

Caution:

A Certificate of Insurance (CoI) is separate to a Certificate of Eligibility. A CoI is a cover issued specifically for a residential building project, however, ‘eligibility’ merely means that the builder has been assessed by an approved insurance agent and has been granted the entitlement to apply for job-specific CoI. Homeowners should ensure that the CoI they receive is a job/project-specific Certificate.

What if the builder is still trading? 

Where the builder is still trading and in business, the homeowner must take action to have the builder finish any incomplete work and rectify any defective building work.  Actions might include:
 
• lodging a complaint with NSW Fair Trading
• lodging a building claim with the NSW Civil & Administrative Tribunal (NCAT)
• commencing Court proceedings against the builder.
 
Where a homeowner does not take action to enforce a statutory warranty, the HBCF may reduce its liability (or the amount paid under a claim), to the extent that its interests have been prejudiced as a result of the homeowner not trying to have the builder complete or repair the work.

What does the CoI cover you for?

This insurance gives protection to the homeowner, including subsequent purchasers, for losses arising from defective and incomplete work where the builder or developer: becomes insolvent, dies, disappears, or has their building licence suspended due to non-compliance with a money Order made by the Tribunal or a Court. The period of cover lasts for six years from the date of job completion.
 
The certificate of insurance should be an original issued by the insurer and should have the name of the contractor, homeowner, property address and total value of the contract. The builder’s name shown on the insurance certificate should be exactly the same as that on the building contract and the builder’s licence issued by NSW Fair Trading.

Certificates of Insurance are project-specific

Each CoI issued under the HBCF scheme is specific to a building project, and has the name of the building contractor, the homeowner, the building site address, a description of the job, and the total value of the contract. The building contractor’s name on the CoI should be exactly the same as the name on the building contract and on the builder's licence issued by NSW Fair Trading.

Before making any payment under a sale or building contract, it is strongly recommended that homeowners check the validity of the CoI at the Certificates Register link on this website. 

Please note that a CoI is different from a Certificate of Eligibility (COE). A COE means that the builder has been assessed and granted the right to apply for a job-specific CoI.

A CoI issued under the HBCF scheme is specific to a building project, and has the name of the building contractor, the homeowner, the building site address, a description of the job, and the total value of the contract etc. The building contractor’s name on the CoI should be identical to the name on the building contract and on the building licence issued by NSW Fair Trading.
 
Before making any payment under a sale or building contract, it is strongly recommended that potential purchasers check the validity of the CoI at the Certificates Register on this website. 
 
Please note that a CoI is different from a Certificate of Eligibility. A Certificate of Eligibility means that the builder has been assessed and granted the right to apply for a job-specific CoI.

Legislative Requirements

The Home Building Act 1989 requires that builders and developers provide homeowners with a Certificate of Insurance (COI) as evidence that a HBCF insurance policy is in place for the work. It is also a standard condition of Council planning approval for a residential building project that insurance cover is in place.
 
Where insurance under HBCF is not obtained, the Council or Principal Certifying Authority (PCA) may not be able to issue an Occupancy Certificate for the completed building work. This may impact on the ability to legally occupy the completed building work and may also adversely impact on the future saleability of the property and its market price.

CoI issued prior to 1 July 2010

For information regarding Certificates of Insurance issued by private insurers operating in the home warranty market prior to 1 July 2010, please contact the insurer named on the CoI or the Insurance Broker that issued the certificate on behalf of the insurer. 
 
Further information including contact details of former insurers may be obtained from NSW Fair Trading (telephone: 13 32 20 www.fairtrading.nsw.gov.au).

Certificates of Insurance issued from 1 July 2010 by the NSW HBCF

Since 1 July 2010 Certificates of Insurance have been issued on behalf of the Home Building Compensation Fund by its Insurance Agents, Residential Builders Underwriting Agency (RBUA) and QBE Insurance (Australia) Limited.
 
Between 1 July and 30 September 2010 Vero Insurance Limited also issued Certificates of Insurance as an Agent on behalf the HBCF. Vero ceased to be an Insurance Agent of the Fund and ceased issuing Certificates of Insurance from 1 October 2010.

Speculative development

A speculative development is the general term for a residential building project undertaken by a builder on land owned by that builder - that is, residential building work carried out other than under a building contract with another party. The building work is speculative in that the property is generally intended for resale or retention for investment/ income purposes on completion of the building work.
 
In this type of circumstances, builder must obtain a CoI for speculative residential building work prior to commencing work.
 
A builder having carried out speculative residential building work is also required to attach the CoI to a contract for the sale of land on which the residential building work has been done (within 6 years of completion of the work), or is to be done. 
 
Information on any rights of a purchaser to cancel a contract before settlement if the CoI is not attached to the contract of sale may be obtained at www.fairtrading.nsw.gov.au

Developers

Under the Home Building Act 1989 an individual, partnership or corporation having residential building work done in connection with an existing or proposed dwelling in a building or residential development where four or more of the existing or proposed dwellings are or will be owned by the individual, partnership or corporation is considered to be a ‘developer’.  
 
A developer of residential building work also includes the owner of the land where the development is carried out and who owns, or will in future own, four (4) or more of the existing or proposed dwellings. The definition also provides that if another person or organisation who will also own four or more of the units in the development entered into the building contract for the work, then they are also considered to be a developer.
 
A developer must not enter into a contract for the sale of land on which residential building work has been done (within 6 years of completion of the work), or is to be done, on the developer’s behalf unless a CoI is attached to the contract of sale.
 
Certain circumstances, such as new high-rise construction and sale off-the-plan, may be exempt. Information on such exemptions and any rights of a purchaser to cancel a contract before settlement if the CoI is not attached to the contract of sale may be obtained at www.fairtrading.nsw.gov.au.
 
Developers are not covered or protected by an insurance policy under the HBCF scheme, however, a purchaser of a property from a developer and their successors in title are covered by the policy.

Premiums

HBCF has developed a Pricing Calculator to assist homeowners and builders to estimate the insurance premium payable for their residential building work.   

Progress payments and deposits

An insurance policy issued under the HBCF scheme limits the amount of compensation for incomplete work to 20% of the original contract price (including variations). Accordingly, it is essential that homeowners do not agree to arrangements for progress payments that do not match the work performed up to the date of the payment. 

Consumer Building Guide

NSW Fair Trading publishes a Consumer Building Guide which contains essential information for homeowners intending to enter into a building contract or undertake a building project.
 
Guide to Standards and Tolerances
 
Fair Trading also provides access to a Guide on Standards and Tolerances developed by the Building Commission of Victoria which assists homeowners and builders in determining whether work is of an acceptable standard. Both Guides are available at www.fairtrading.nsw.gov.au.