Reform of the residential home building laws
Home warranty insurance needs to be provided by:
On 1 July 2010, the NSW Self Insurance Corporation, trading as the NSW Home Warranty Insurance Fund, took over as the sole provider of home warranty insurance in NSW.
QBE Insurance (Australia) Limited and Calliden Insurance Limited were appointed as insurance agents of the NSW Self Insurance Corporation, through a contractual arrangement.
Licensees should contact their insurance broker to obtain policies and certificates of insurance for construction projects.
A new premium structure was implemented by the NSW Home Warranty Insurance Fund for certificates of insurance issued from 1 October 2010.
From 1 February 2012, home warranty insurance is required to be obtained where the contract price is over $20,000 or, if the contract price is not known, the reasonable market cost of the labour and materials involved is over $20,000.
Where the contract price or the reasonable market cost of the labour and materials involved does not exceed the above threshold, there is no legal requirement for home warranty insurance to be obtained.
Contractors who carry out residential building work must still hold an appropriate licence with Fair Trading where the labour and materials involved are valued at over $1,000.
Persons who contract and/or carry out specialist work (ie. electrical wiring, plumbing, gas-fitting, air-conditioning and refrigeration) require a licence regardless of the value of the work.
Home warranty insurance must be obtained by the home building contractor. To apply to take out insurance, contractors will need to get an application form from their insurance broker.
You can minimise delays with your application by:
You are generally required to provide the following information:
The name on your licence and the name on the application form must be the same. That is, if you are:
For contact details of insurance agents and their brokers, refer to the Approved insurance agents and Past approved insurers pages. Should further assistance be required, contact NSW Fair Trading on 13 32 20.
Some licences on the public register may show the condition 'Only For Contracts Not Requiring Home Warranty Insurance', which means a licensee can enter into contract for a price up to $20,000.
'Eligibility' is the term used to describe the entitlement that a builder has to apply for a Certificate of Insurance (project certificate) and the conditions under which the certificate may be granted.
Caution - A certificate of eligibility is not a certificate of insurance for a specific project. A certificate of eligibility merely means that you have been assessed by an approved insurance agent and has been granted the entitlement to apply for job-specific certificates of insurance.
Examples of certificates of eligibility are:
Examples of certificates of insurance are:
When an applicant for a Building Contractor Licence does not provide evidence of holding current Eligibility for Home Warranty Insurance with the Home Warranty Insurance Fund (HWIF), the licence will be issued with the condition 'Only For Contracts Not Requiring Home Warranty Insurance'. This condition on the licence will remain on the public register until Fair Trading receives advice from the HWIF that the licence holder has Home Warranty Insurance Eligibility, at which time the condition will be removed and the public register updated to reflect the new status of the licence.
When the Home Warranty Insurance Fund (HWIF) advises Fair Trading that the Building Contractor Licence holder ceased to have Home Warranty Insurance with the HWIF the licence will be conditioned 'Only For Contracts Not Requiring Home Warranty Insurance'. This condition will remain on the public register until Fair Trading receives advice from the HWIF that the licence holder has obtained Home Warranty Insurance Eligibility, at which time the condition will be removed and the public register updated to reflect the new status of the licence
From 1 February 2012, home warranty insurance policies must provide cover of at least $340,000. Between 28 February 2007 and 31 January 2012, the minimum cover that had to be provided was $300,000.
Future increases in the minimum cover provided under the scheme will be in line with any corresponding increase in the Producer Price Index [Materials used in House Building (Sydney)] that might have occurred since the previous increase.
The cover may be subject to limitations relating to over payment of deposits and progress payments and other limitations specified in the policy.
Claims for incomplete work are limited to 20% of the contract price (up to a maximum of the cover provided under the policy).
Home warranty insurance provides a set period of cover for loss caused by defective or incomplete work in the event of the death, disappearance or insolvency of the contractor.
Home warranty insurance policies issued from 19 May 2009 also enable home owners to claim on the policy where the licence of the builder or tradesperson responsible for the work is suspended or cancelled for failing to comply with a money (compensation) order made by the Tribunal or a Court.
Cover for loss arising from defective work is provided for a period of:
An additional 6 months cover applies in cases where the loss becomes apparent in the final 6 months of the period of insurance. The 6-month period starts from the date of the loss becoming apparent.
Cover is also provided for loss arising from non-completion of work for a period of 12 months after the failure to commence, or cessation of, the work.
For policies issued prior to 1 February 2012, builders and consumers are encouraged to check their insurance documents for information about coverage and time periods.
For more information about when work is complete, to the Definition of completed work section on the Contracts page on Fair Trading's website.
The disappearance of a builder is one of the grounds for lodging a claim under the present version of the home warranty insurance scheme.
NSW Fair Trading and home warranty insurers have agreed on guidelines to be followed where a beneficiary of a home warranty insurance policy cannot locate the builder.
A home owner who has a concern regarding defective or incomplete building work and who is unable to locate their builder should, in the first instance, lodge a complaint with Fair Trading. In the event that Fair Trading cannot find the builder, a letter will be provided to the homeowner stating that the builder is unable to be located, which can be submitted with any claim to an insurer under a home warranty insurance policy.
The provision of the letter will not in any way oblige an insurer to approve a claim or preclude an insurer from making its own enquiries to try to locate the builder. The period in which an insurer is required to determine a claim (ie. 45 or 90 days, depending on when the policy was issued) will commence when the insurer receives the claim information.
The letter will, however, be accepted by the insurers as evidence of the home owner's belief that the contractor has disappeared and of the home owner having made all efforts to locate the builder. The home owner will not be required by an insurer to undertake a further search for the builder.
Fair Trading will be responsible for issuing the letter to the homeowner on completion of its assessment of the complaint.
Market practice guidelines to govern the operation of home warranty insurers were introduced on 1 September 2004. Compliance with the guidelines is a condition of the approval for insurers to provide home warranty insurance in New South Wales.
The guidelines are designed to bring more transparency and accountability to the provision of home warranty insurance. Core features of the guidelines include making the following information publicly available:
View or download in PDF format:
A person may lodge a complaint about a home warranty insurer where the insurer does not comply with the provisions of the guidelines.
Go to the Complaints against insurers page for more information.
In the past, some builders and contractors provided securities such as bank guarantees to the former private home warranty insurers in order to be elegible for home warranty insurance.
Fair Trading, insurers and building industry groups have negotiated a framework and consistent industry process for the return of eligible securities. View or download in PDF format: Insurers release and retention of securities (size: 14kb).
Information about securites under the current scheme can be found on the Home Warranty Insurance Fund website.
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