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Home indemnity insurance is a compulsory policy of insurance that must be held by a builder when carrying out residential building work. In WA HII is a requirement under the Home Building Contracts Act 1991 (the HBCA).
The HII policy is taken out for the benefit of current and future homeowners. It covers the homeowner for:
An owner can make a claim under the HII policy if the builder:
The builder must ensure they provide the homeowner with the HII certificate prior to:
A copy of the HII certificate will also be required as a part of the building permit application.
If a builder does not provide the owner with the HII certificate in accordance with the requirements of the HBCA, they may be subject to a substantial fine. It may also impact the builder’s registration.
There are three steps in deciding whether you need to take out HII:
The flow chart included at Annexure A provides some further detail and may assist members in determining HII requirements.
Some example scenarios have also been provided under Annexure B.
Some examples of building work that does not require HII include:
Exemptions are available for:
A partial exemption is also available for ‘developers’. Developers are property owners who carry on a business selling or leasing developments of four or more dwellings.
Builders must take out HII when contracting with a developer and must provide the developer with the HII certificate prior to commencing work or taking any payment. However, the HII coverage applies to defective workmanship for a period of 6 years from practical completion only. Builders do not need to provide developers with HII coverage for loss of deposit or non-completion of the works.
This same partial exemption also applies to builders carrying out work under a cost-plus contract.
Sometimes it is not immediately clear whether HII is required. If the legislation does not specifically address the type of project you are working on, you should make enquiries with your insurer or HIA’s Workplace Services team.
If a dispute arises and it is unclear whether HII is required, the ambiguity will likely be resolved in favour of the consumer. For example, in a recent court case it was determined that short-term residential accommodation may require HII in some circumstances.
The builder is required to pay for HII when taking out the cover.
This cost can then be passed on to the homeowner as a part of the contract price. The builder must ensure they make an allowance for the cost of HII in the price to ensure they can claim for it.
If you require HII for your upcoming projects, contact HIA Insurance Services to discuss the options available for your business.
If you require advice on building permit requirements, the HIA Technical Services team can assist.
Luxury Estate Builders is a registered building company who are intending to enter into a building contract with the Don and Jill Amara. They are building a new home with landscaping and a swimming pool, worth $1.2 million in total.
|1. Is the work Residential Building Work?||Yes. The work includes building a dwelling and associated work and is valued over $20,000.|
|2. Does the work require a building permit?||Yes. The work is structural and the builder has checked this with HIA Technical Services.|
|3. Is there an applicable exemption?||No.|
|Is HII required?||Yes, for the full value of the works.|
Max Smithson Designs (MSD) specialises in kitchen, bathroom and laundry works. Darren appoints MSD to carry out the installation of new kitchen cabinets, benchtops, splashback and appliances in his home, worth $53,700 including GST.
|1. Is the work Residential Building Work?||Yes. The work includes renovation work and is worth over $20,000.|
|2. Does the work require a building permit?||No. Despite being valued over $20,000, the work is not structural. The builder has confirmed this with the local authority.|
|3. Is there an applicable exemption?||No.|
|Is HII required?||No.|
Envelope Construction Pty Ltd has been engaged by Pristine Developments to build a five-storey apartment block, including two retail tenancies on the ground floor and 14 apartments above. The value of the development is $12 million + GST.
|1. Is the work Residential Building Work?||Yes. The work includes building dwellings and is worth over $20,000.|
|2. Does the work require a building permit?||Yes. The work is structural and the builder has confirmed with HIA Technical Services.|
|3. Is there an applicable exemption?||Yes. The multi-storey multi-unit exemption applies.|
|Is HII required?||No, however the exemption process must be followed.|
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