Building contract deposits and insurance
July 13, 2020
With the current difficult situation many members are facing requests from clients to cancel recently signed contracts. Sometimes this request can be complicated if the builder has received the deposit without first obtaining domestic building insurance for the client.
The Building Act, and the Ministerial Order made requiring domestic building insurance for domestic building work, provide that a domestic building contract with a price over $16,000 cannot receive payment of the deposit until the client has been issued with domestic building insurance for that project. The legal requirement is reflected in clause 7 of the HIA domestic building contracts. If domestic building insurance is obtained it is possible to cancel the policy and get a refund if the deposit has not been paid or work has not commenced on the project.
If a builder collects a deposit without obtaining the domestic building insurance for the project then they face the prospect of having to refund the entire deposit if the client later decides to cancel. This will be the case even if the builder has a request of the client incurred expenses in preparing for the project.
Usually the use of a preliminary agreement or a minor change to business practices can address this issue.
If members need assistance with this issue they can contact HIA Workplace Services on 1300 650 620.