Warranty insurance for domestic building work

When do you need warranty insurance?
If you have a contract to do domestic building work worth $12,000 or more for a client (not as a subcontractor) you must take out warranty insurance.

What is domestic building work?
Domestic building work includes, but is not limited to:

• the construction, renovation, removal or demolition of a home.
• work associated with the construction or renovation of a home e.g. landscaping, paving, fencing, retaining walls, swimming pools, spas etc.
• the construction of garages, decks, pergolas etc. on residential land.
• site works for the above projects.

When must warranty insurance be obtained?
Before signing a HIA contract you need to ensure that either an insurance policy or certificate of currency for the warranty insurance has been obtained. If this is not in place and has not been provided to the owner, then the contract is conditional upon the owner receiving either one of these. Without a warranty insurance, you cannot enforce the contract, commence work or receive money from your client until warranty insurance is in effect and your client has been given a copy of the insurance certificate. HIA recommends you should use a preliminary agreement to be paid the premium from your client before you have to pay it to the warranty insurer.

Insurance Certificate
You must give your client a copy of the warranty insurance certificate within 7 days of receiving it.

What events must the warranty insurance cover?
Warranty insurance is for the benefit of the client. It covers your client (and future owners) against loss or damage resulting from non-completion of the building work or from: defects in the building work; a breach of any warranty implied under the Domestic Building Contracts Act; a failure to maintain a standard or quality of building work specified in the building contract; conduct by the builder or trade contractor in connection with the building contract that contravenes a provision under the Trade Practices Act or the Fair Trading Act.

Policies issued after June 2002
Claims on policies issued after 30 June 2002 may only be made if you are dead, insolvent or you have disappeared. The warranty insurance covers non-completion of the building work and structural defects in the work (for up to 6 years) and non structural defects (for up to 2 years) from completion.
What amount of cover is required?
The minimum amount of cover required is $200,000.00. You should be aware that policies usually limit claims for non completion to 20 per cent of the original contract price.

For more information call the HIA member Hotline on 1300 650 620

_{DISCLAIMER – the above is intended to provide general information in summary form. The contents do not constitute specific adive and should not be relied upon as such. Formal specific advice should be sought by members with respect to particular matters before taking action.}