Homeowner Warranty Insurance
I was recently talking to a builder friend of mine and we got talking about “Homeowner Warranty Insurance” and the value of it. Basically the builder has to be “dead or dead broke” for the client to use it he said.
Anyway, he mentioned that he’d just taken over a couple of projects because the previous builder had gone “broke”. It seems that the previous builder had convinced that home owner that they should get an “owner builder’s license”, to avoid having to pay the Home Owners Warranty fees and he would “manage” the projects for him. Little did the home owner know that the builder in question, have exceeded the limit of his insurance and therefore shouldn’t have taken on any more work at that time. Needless to say the previous builder had taken on too much work, got himself into cash flow difficulties and had to cease trade.
Not only were the home owners not covered by the insurance, they also found out that the builder had been claiming too in his progress claims. The owners had paid about 20% more than the works done and now had a budget problem of their own.
The Home Warranty Insurance scheme, now called Home Building Compensation Fund, is a JOB SPECIFIC insurance required to be taken out by all builders for projects over $20 000. In short it covers you (and subsequent purchasers) if you “become aware of defective or incomplete work” and can not get the builder, trades person or developer to complete or rectify the defective work.
Those with an owner builders license also can be called upon if you sell your home within 7 year of the Occupation certificate being granted.
So a word of warning! make sure the builder take’s out the Homeowner Warranty Insurance and think about appointing your Architect to do the contract administration for you. We’ve been trained to help protect you.
For more details on the Home Building Compensation Fund see the NSW Government – Fairtrading website or follow this link.