Owner Builder Warranty and Defects Obligations
Owner Builder course students should be aware of their responsibilities when it comes to warranties and defects on their owner builder projects.
First we should consider the obligations that a registered or licensed builder would have in respect to works they complete.
Generally, a builder has an obligation for the structural components of a dwelling for a period of not less than 6 years, although some major reputable builders are now offering a warranty period of up to 50 years. Yes, you heard correctly, 50 years.
For an owner builder, it is legally required that you will live in the home you build for a specified period before you are able to sell it without restriction. This time can be reduced or varied at the discretion of the regulator with regard to special circumstances.
Nevertheless, in some states and territories, it is a requirement that all owner builder works are identified on any contract of sale which affect the property and alerts potential buyers of the possibility that works completed by the owner builder may not be covered by a statutory state backed insurance scheme.
When you contract with a builder, they are required to effect individual cover for each project to protect the consumer against failure to complete works as contracted insolvency, bankruptcy or significant structural failure.
This insurance, is called Home Warranty Insurance in some states and territories and is taken out by the principal or head contractor.
But here's the rub.
In many instances, owner builders are not permitted to take out Home Warranty Insurance, go figure!
So how do you protect yourself.
Well this is where it gets confusing and where I have had many differences of opinions with a range of experts in this field.
Under contract law as it is written across the states and territories, there is a requirement for a written contract to exist where the contract value exceeds a specified amount. In some states, this is as little as $1,000.00. ($3,300.00 for Queensland).
Now there is no difference in the requirements for this contract to exist between parties, regardless of if the Principal Contractor is an Owner Builder or a Licenced/Registered Builder. The requirement includes sub contracts.
So, in my opinion, and it is a view not unanimously shared, if an owner builder enters into a contract, with a Licenced contractor, above the specified amount that requires the contractor to effect insurance, then the works carried out under that contract are covered by the contractors effected statutory insurance.
Confused?, Don't worry, so are most trade contractors and registered builders, not to mention the regulator.
When I raise this questions, often the eyes just glaze over and the response is basically to put it in the too hard basket.
Did this post help?
Possibly not, but at least it will raise comment and evoke a discussion. I would like to see what everyone else take on this is.
I know we have an insurance expert (particularly in Owner Builder Insurances) that follows this blog. I look forward to his comments on this post.
Should be interesting.
Happy Owner Building,
Rick Heaton is a Building and Construction Industry professional with formal tertiary qualifications in management and training.