Home Indemnity Insurance in Western Australia

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).

What does HII cover?

The HII policy is taken out for the benefit of current and future homeowners. It covers the homeowner for:

• loss of deposit
• non-completion of building work; and
• defective workmanship for a period of 6 years after practical completion.

An owner can make a claim under the HII policy if the builder: 

• is deceased
• is missing
• is insolvent
• was a company and no longer exists or
• has had its registration cancelled or declined for renewal due to failure to satisfy the financial requirements.

When does a HII certificate need to be provided?

The builder must ensure they provide the homeowner with the HII certificate prior to:

• commencing any residential building work; or
• requesting any money under the contract, including the deposit.

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.

What type of work requires HII?

There are three steps in deciding whether you need to take out HII:

1. Are you carrying out “residential building work”?
2. Does the work require a building permit?
3. Are there any applicable exemptions?

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.

What type of work does not require HII?

Some examples of building work that does not require HII include:

• work worth less than $20,000;
• work that is not required to be carried out by a registered builder;
• work under contracts for ‘associated work’ alone, e.g. swimming pools, retaining walls, garages, pergolas; and
• non-residential (commercial) building work.

What exemptions are available?

Exemptions are available for:

• A registered building contractor (individual) who is building their own home. The builder must seek an exemption by making a declaration that they have not obtained an exemption within previous last 6 years. HII must be obtained within 7 years of the date of the building permit if the home is sold.
• Owner-builders. However, if the owner-builder sells the home within 7 years of the date of the building permit, they will be required to obtain HII for the benefit of the new owner.
• Multi-storey, multi-unit developments, which have either:
  • 4 storeys or more; or
  • have more than one basement level.
• Work on retirement villages in which all the dwellings are or are intended to be occupied under a residential tenancy agreement or other lease arrangement.

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.

What if it is unclear whether HII is required?

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.

Who pays for HII?

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.

Annexure A - Do you require HII?

Annexure B – Example Scenarios

To find out more, contact HIA's Workplace Services team

Email us

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