Residential building work for an owner builder

There are a number of risks present if you decide to work for an owner builder. While they might be enthusiastic about their project, they do not have the experience of trained building professionals and common feedback is that their projects can be poorly organised, trades can be incorrectly sequenced and materials ordered can be wrong or of poor quality. Furthermore, if something goes wrong they can often look to blame to the licensed tradesperson or builder. 

What is an owner-builder? 

An owner-builder is a person who has been issued an owner-builder permit from NSW Fair Trading giving them the authority to undertake their own residential building works (any works involved in the construction of, or alterations, repairs or additions to a dwelling, including the supervision and coordination of works) on the property they own, when: 

• the reasonable market cost (including labour and materials) exceeds $10,000; AND 
• the work is being performed on a single dwelling-house, dual occupancy (limited circumstances) or a secondary dwelling that requires building approval. 

For work over $20,000 the person must also have completed an owner-builder course. 

Legal requirements when engaged by an owner-builder 

If you are contracted to perform any residential building work for a person who holds an owner-builder permit you must treat them like any ordinary home owner client. They are not a builder and you are not a ‘subcontractor’ to them. 

This means the following applies: 

Contract requirements 

If your contract with an owner-builder exceeds $5000 (inclusive of GST), you must use a contract that complies with the Home Building Act. This means the ordinary rules and restriction on deposits, progress payment and variations apply. 

Importantly, if you are engaged to provide project management or supervision services you are still doing residential building work so these rules will apply. 

If you are contracted to undertake only part of the work to be done on a site or to provide some limited supervisory or foremen functions, HIA recommends that your contract contains special conditions to specifically limit your scope of works to that agreed in order to ensure that you are only responsible for works that you have undertaken. These special conditions should also exclude the obligation to supervise other contractors not engaged by you and clearly state that you do not warrant work performed by other contractors not engaged by you. 

Warranty insurance 

For contracts with an owner-builder that exceed $20,000 (inclusive of GST), you must also have builders warranty insurance (insurance under the Home Building Compensation Fund), and you must give the owner-builder a certificate of currency prior to accepting, receiving or demanding any payment. This also applies where you contract to only supervise residential building work for a fee that exceeds $20,000. 

Workplace health and safety 

An owner-builder, where building work requires approval from the relevant building regulator is considered a PCBU under the Act and Regulations. Owner-builders have management or control of the workplace and take on the responsibility and liability that would normally fall on the principal contractor. 

As a builder or contractor engaged by the owner-builder you should still be aware that everyone involved in construction work has health and safety duties when carrying out the work. Where high-risk construction work is being undertaken, a safe work method statement should be provided and kept until the end of the job. 

To find out more, contact HIA's Building Services team.

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