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NSW Builders Warranty Changes

In NSW there were changes made to the warranties that a builder is required to provide on residential building work. Unit buildings in excess of 3 storeys of residential construction (excludes basement car parking and commercial) are exempt from the requirements of providing Home Owners Warranty Insurance, but are still required to provide a builders’ warranty. There are proposed changes on future high rise buildings that a developer deposit will be required to cover future repairs and is an alternative to the Home Owner Insurance for low rise and housing.

The changes that have occurred include, but are not limited to, the following :

  • A 6 year warranty for major defects and 2 years for other defects
  • Clarification on when building work is complete. This can include when the building is at a practical complete stage or deemed to have occurred
  • Contracts are required for all building work above $20,000 in value. There is a cap of a maximum 10% deposit for a contract above $20,000.
  • The mandatory minimum Home Owner’s Warranty Insurance is $340,000.
  • For building works between $1,000 and $5,000 a short form contract is required.
  • For building works between $5,000 and $20,000 a contract is required and a maximum of 10% deposit.

The following are changes which apply from 15 January 2015:

  • The term structural defect to be replaced with major defect. This would include the major element of a building including fire safety systems and waterproofing. The focus to be on the severity of the defect and impact on the building’s safety, use and performance. The word defect will be defined to a building failure to a breach of a statutory warranty.
  • The 2 year (builders’) warranty will apply to those not covered by the major element definition. Homeowner’s are to have an obligation to mitigate loss.
  • Homeowners to claim within 6 months of being aware of a defect. If this not done, then any claim would take into consideration the further loss or the deterioration that occurred after that time period.

 

DISPUTE RESOLUTION

There will be attempts to identify the actual defects at an early time. Currently most claims take a considerable time and incur substantial costs in having solicitors involved and having experts technical reports which vary between the parties involved.

There will be attempts to identify the actual defects at an early stage and overcome issues of adjournments, incomplete pleadings, ambit claims and issues of cost recovery.

To prevent rectification work being stalled, an order can be given to oblige consumers to pay to the builder any money owed under the contract.

Builders may be required to be given reasonable access to rectify defective works. If the homeowner refuses access, the NCAT or Court can nullify any work orders and prevent the homeowner from applying for a money order or take further steps in the dispute.

There is discussion for repeat offenders, where the builder refuses to undertake a work order, that it can be a criminal offence with possible imprisonment.

 

OWNER BUILDERS

  • Owner/Builders will be required to name ALL owners of the land. Any owners named cannot apply for another Owner Builder Permit for 5 years.
  • Owner/Builders will not be able to obtain statutory insurance. If the property is sold within the warranty period, the contract must clearly state that there is no statutory warranty insurance on the property.
  • Contractors working for an Owner/Builder will still need to provide certificates of insurance for work over $20,000.

 

INSURANCE

The words “Home Owner Warranty Insurance” is to be changed because of the perception that owners have an “Insurance” that they can easily claim on. The actual cover is conditional on several of the items which are noted above, as well as many other factors. The actual wording of the Home Owner Warranty is the Home Building Compensation Fund.

 

NEW WINDOW SAFETY LAWS TO PREVENT CHILD FALLS

The Government will be amending the strata laws to require all windows in residential strata schemes that pose a safety risk to young children to be fitted with window safety devices. Owner’s Corporations will need to ensure that the safety devices are properly fitted before March 2018 or face possible fines.