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Your legal obligations to owner builders in WA

Owner-builders sometimes contract directly with licensed builders to either carry out residential building work or supervise this type of work. These types of arrangements often cause confusion, so it’s important that you’re aware of your legal obligations in these circumstances. The following information provides you with an overview of your obligations as a licensed builder when contracting with an owner-builder. If your client does not have an owner-builder permit, then this must be treated as a normal contract and not a contract with an owner-builder.

Who is an owner-builder? 

An owner-builder is a person who intends to have residential building work valued at $20,000 or more performed on their property and who holds a relevant permit to do that work. If the person does not hold the necessary owner-builder permit, then that person is not recognised as an owner-builder. 

Residential building work 

It’s advisable that you contract as the builder to perform the work in any instance. If you are contracting with an owner-builder you must use a contract that complies with the Home Building Contracts Act 1991. If you are using an HIA contract, HIA recommends that you insert some special conditions to reflect your circumstances, including: 

  • a clause narrowly defining the scope of works. This will help ensure that you are not taken to have a wider and more onerous role than that which you have agreed to 
  • a special condition excluding any obligation to supervise contractors not engaged by you and clearly stating that you do not warrant work performed by contractors not engaged by you. 

Supervision of owner-builder work

If you are approached to supervise owner-builder work then you should ensure you carry out regular and staged inspections, and require any faulty or defective work to be rectified by the contractor immediately. If defects are found, supervisors may be liable to future owners of the property for up to six years from the date the defects are discovered. 

If you are not actually doing the building work then do not let your licence be used by another person to do building work (i.e. do not lend your licence). As the licensed building work contractor whose licence has been used for the work, there is a liability on you to provide this statement. 

Dangers for owner-builders

There are perceived advantages for owner-builders such as lower costs by having the flexibility to pick and choose their own building materials and contractors on the basis of a lowest price. However, there are also significant risks involved with owner-building arrangements or with arrangements where the owner seeks to directly engage a number of sub trades in the building project. 

Some of the obligations that owner-builders may not be aware of include: 

  • an owner-builder who performs the work is responsible for the standard of the building work and structural soundness of the building for at least six years after the home is built and will be directly liable to any subsequent purchasers for defective work 
  • as the principal contractor, the owner-builder will be directly liable for Occupational Health and Safety and will be liable for any OHS breaches or accidents onsite 
  • an owner-builder must manage the contract(s) and trades persons on a daily basis during the construction stage 
  • owner-builders cannot sell or otherwise dispose of their property for at least three years from the date the building licence was issued, unless they have a written exemption from the Commissioner of Consumer Protection 
  • owner-builders can only be issued with a building licence once every six years unless they have a written exemption from the Commissioner of Consumer Protection. 

Home indemnity insurance 

Where the value of residential building work under the contract with an owner-builder exceeds $20,000 (inclusive of GST), you must take out home indemnity insurance and you must give the owner-builder a certificate of currency prior to accepting, receiving or demanding any payment. So the ordinary rules apply. 

This also applies if you are engaged to supervise residential building work for a fee that exceeds $20,000. 

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

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