On 19 October 2011, the NSW Parliament passed a package of reforms to the Home Building Act 1989 which includes changes to:
These reforms apply to all residential building work covered by home warranty insurance but do not apply to claims that have already been made (whether finalised or not), or to legal proceedings underway or finalised.
The changes will commence in two stages, the first took effect on 25 October 2011, while second will begin on 1 February 2012.October 2011 changes
Home warranty insurance issued after 30 June 2002 protects consumers, including subsequent purchasers, from defective or incomplete work where the contractor, owner builder or developer becomes insolvent, dies, disappears or fails to comply with a money order of a Court or the Consumer, Trader and Tenancy Tribunal.
In general, home owners must lodge a claim for defective or incomplete building work within the insured period. If the work is defective, the home owner must lodge the claim within 6 months of becoming aware of the problem.
If the home owner becomes aware of a loss within the final 6 months of the insurance period, they can take an additional 6 months after the end of the insured period to lodge a claim with the insurer.
In cases where a claim cannot be made within the above time frames because an insured event has not occurred (ie the builder, owner builder or developer has not died, disappeared, become insolvent or failed to comply with a money order of a Court or the Tribunal), home owners may be able to make a claim after the period of insurance through a delayed claim.
In order to make a delayed claim, the home owner must:
If your certificate of home warranty insurance is dated after 30 June 2002 and you have ever verbally notified your insurer about making a claim, the law now requires that you make this notification in writing.
You have 6 months from 25 October 2011 to put into writing any previously given verbal notification. Contact your insurer or call Fair Trading on 13 32 20 if you are affected by this change.
Note: The above timeframes only relate to notifying the insurer of a loss. A formal claim may be lodged at a later date.
If your certificate of home warranty insurance is dated before 30 June 2002, the changes require you to make a claim within the insurance period. However, if the work is defective and the loss becomes apparent in the last 6 months of the insured period, you have a further 6 months after the end of the period to make your notification. This is known as an extended claim period.
If you have already properly notified your insurer in writing of the defective or incomplete work but have not yet made a claim, you have until 25 April 2012 to make your claim in order to comply with the new requirements.
Contact your insurer or call Fair Trading on 13 32 20 if you are affected by this change.
For any new claims against home warranty insurance policies issued after 30 June 2002, the home owner may be able to make a claim – a delayed claim – outside the insurance period provided they:
It is assumed that the homeowner has notified the insurer of every loss caused by the defect when making a notification about faulty work. This change applies regardless of what is in a homeowner’s policy.
For home warranty insurance policies issued before 1 July 2010, all claims (including related claims) must be lodged within 10 years of the work being completed.
The term ‘completed’ has a very important role in the legislation because it marks the beginning of the time periods for statutory warranties and home warranty insurance.
There is now a clear definition of what is meant by ‘completion’.
Residential building work is ‘complete’ when it is completed in accordance with the requirements of the contract.
If there is no contract, or the contract doesn’t specify ‘completion’, the work is regarded as ‘complete’ when it can be used for its intended purpose and is free of major defects. The earliest of the following events can be used to determine when this occurs:
A developer of residential building work also includes the owner of the land where the development is carried out and who owns, or will in future own, four or more of the existing or proposed dwellings. The definition also provides that if another person or organisation who will also own four or more of the units in the development entered into the building contract for the work, then they are also considered to be the developer.
Under the new laws, when a homeowner takes action against their builder or developer for defective or incomplete work, the builder or developer will not be able to limit their responsibility to the part of the work for which they were directly responsible, regardless of the provisions contained in the Civil Liability Act 2002.
The amendment does not prevent the builder or developer from taking subsequent, separate legal action against any responsible party, such as subcontractors, for substandard work.
Due to the success of the Fair Trading pilot of trader-initiated dispute resolution, this service is now available on an on-going basis under the new laws. This does not extend to traders’ disputes with other traders.
The reforms outlined below will apply to the following from 1 February 2012:
Builders, developers, owner–builders and tradespeople must warrant that, amongst other things, their work has been performed in a proper and workmanlike manner. Under the current law a homeowner, or subsequent purchaser, has the right to enforce these warranties for up to 7 years after the work was completed.
Commencing 1 February 2012, the warranty period will be 6 years for structural defects and 2 years for non–structural defects. These periods will be extended by 6 months if the homeowner or subsequent purchaser becomes aware of a defect in the last 6 months of these time periods.
Commencing 1 February 2012, all residential building work worth more than $20,000 must be covered by mandatory home warranty insurance. The current threshold is $12,000. The new threshold will also apply to the sale of a home by an owner–builder and to cooling off periods.
Residential building contracts must be in writing and include a number of requirements.
Commencing 1 February 2012, a new category of written contracts for ‘small jobs’ worth between $1,001 and $5,000 will come into effect. A small job contract must be in writing, dated and signed on behalf of both of the parties and contain the following information:
Under the existing law, if a homeowner makes a home warranty insurance claim, they must pay the first $500 of that claim. After 1 February 2012, homeowners will only be required to pay the first $250 of any claim.
In addition, all home warranty insurance policies issued after 1 February 2012 will receive a minimum cover of $340,000, regardless of the value of the work.
Under the existing law, an insurance policy may prevent a builder, developer or a ‘related’ corporation to a builder or developer from being a beneficiary of the home warranty insurance policy for that work.
The definition of a ‘related’ corporation in the existing law is quite narrow and doesn’t include corporations that most people would consider as being ‘related’. Accordingly the new law provides a wider definition of what it means to be a ‘related’ corporation.
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