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Comparison of home building laws 

The tables below detail changes that will affect consumers and tradespeople within the home building industry.

Back to the Major changes to Home Building laws page

Licensing 

The following new laws started on 15 January 2015.

Current laws

New laws

Threshold for when a licence is required:

  • Specialist work – all work irrespective of value
  • Residential building work – over $1,000 (market value of labour and materials).

Threshold for when a licence is required:

  • Specialist work – all work irrespective of value
  • Residential building work – over $5,000 (market value of labour and materials).
Administrative policies were used to require that some licensees must sub-contract specialist work to a licensed specialist (e.g. electrical wiring work involved in constructing a home must be sub-contracted to a licensed electrician). The Regulation makes it a standard condition of all general building work licences that any specialist work must be sub-contracted to a licensed contractor in the relevant category of specialist work.
No fees for the renewal or restoration of a supervisor or tradesperson certificate. $47 fee for renewing or restoring supervisor and tradesperson certificates.
Licensed contractors who do work on behalf of a developer of a retirement village are exempt from holding home warranty insurance in relation to that work. Licensed contractors who do work on behalf of a retirement village operator are now also exempt from holding insurance in relation to that work.
The scope of work of structural landscapers is linked to whether development consent is required for the work, does not include work on decks, and cannot include head contracting of specialist work other than urban irrigation.

The new definition clarifies that structural landscapers may build decks, removes references to development consent, and allows head contracting of any specialist work that is part of landscaping, provided it is sub-contracted to licensed specialists.

The Regulation allows apprentice and trainee electricians to do work without direct supervision in some circumstances. The Regulation clarifies these requirements and ensures that the same exemption extends to the supervisor of the apprentice or trainee.
Electrical mechanics licensed under the former Electricity Safety Act 1945 before 21 March 1990 are exempt from fees when applying for a supervisor certificate. The fee exemption has been omitted.
If an application for restoration of a licence or certificate is rejected, there is a 30-day grace period during which the licence or certificate is taken to continue in force while the applicant decides to lodge an appeal. During the time that the appeal is being considered, the applicant may continue to work and contract with consumers despite their application having been rejected. The 30-day grace period will be removed. If a licensee has failed to renew their licence, and NSW Fair Trading has determined that they are not eligible to have their licence restored, then they will not be able to continue contracting and doing work while an appeal is being heard.
An individual who contracts to do any residential building or specialist work without a contractor licence may be subject to a penalty of up to $110,000 or $220,000 for a corporation. An individual who is convicted of a second or subsequent conviction for unlicensed building work or not having insurance in place may be subject to a penalty of $55,000 or 12 months prison or both.
There are various provisions within the Act and Regulation which set out whether a licence will have restrictions imposed on an application, or renewal or termination of an application. Licensing decisions in regards to applications, renewals and restrictions will be based on a standard set of conditions and requirements. Among the factors considered will be a licensee’s past behaviour and involvement in insolvent entities.
The holder of a contractor licence must notify the Chief Executive within 7 days of certain circumstances prescribed by the legislation (e.g. if a contractor’s nominated supervisor ceases to be an employee). Notification requirements have been extended so that licence holders must notify NSW Fair Trading when a licensee becomes bankrupt or insolvent, or compounds with their creditors. If the licence is held by a corporation, it must notify NSW Fair Trading if it is wound up or de-registered. If there is a failure to comply, executive liability offences can apply to directors and those involved in managing the corporation.
The scope of work for most categories of licences and certificates was set by administrative policies. The scope of work for all categories of licence or certificate is published in the Regulation.

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Owner-builders 

The following new laws started on 15 January 2015.

Current laws

New laws

Completion of an owner-builder course is required for building work valued over $12,000 for an owner-builder permit to be issued. The building work threshold requiring the completion of an owner-builder course has increased to $20,000.
A valid construction induction card is required when carrying out any construction work. A valid construction induction card is required and must be provided as part of the application for an owner-builder permit.
An owner-builder permit is required for home building work over $5,000 in value and that requires development consent or is consenting development. An owner-builder permit will be required for home building work over $10,000 in value and that requires development consent or is consenting development.
An owner-builder must not enter into a contract for the sale of land on which owner-builder work has been done unless a certificate of insurance for home warranty is in force. An owner-builder will no longer be required or able to obtain a certificate of insurance from the Home Building Compensation Fund. However, an owner-builder must not enter into a contract for the sale of land on which owner-builder work has been done unless the contract includes a consumer warning stating that an owner-builder permit was issued in relation to the land (with the date of issue specified) and that work done under an owner-builder permit is not required to be insured under the Act.
Licensed contractors working for an owner-builder will still need to provide insurance to owner-builders for all work over $20,000.
An owner-builder permit may be issued for a dwelling comprising a dual occupancy, when one of the dwellings will be occupied as the principal residence of the applicant after the work is done. Owner-builder permits will not be issued for work on dual occupancies except under exceptional circumstances. Such circumstances could include hardship or where a family member is disabled and unable to live independently. Owner-builder permits will be available for work on ‘secondary dwellings’ under the Standard Instrument (Local Environmental Plans) Order 2006 (secondary dwellings cannot normally be subdivided)
Owner-builders are only allowed one owner-builder permit on a different property every 5 years unless special circumstances exist. Owner-builders are still limited to one permit every 5 years. In addition permits will now be required to include all owners on a permit application and this limitation to one permit every 5 years will also apply to all those joint-owners of the land on which an owner-builder permit has been issued. Joint-ownership also includes any prescribed interest in the land.

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Home Building Compensation Fund (formerly home warranty insurance) 

The following new laws started on 15 January 2015.

Current laws

New laws

The statutory scheme established by the Home Building Act 1989 to provide compensation for some losses if the builder dies, becomes insolvent or disappears or doesn’t comply with a money order from a Court or Tribunal is called the home warranty insurance scheme. The statutory scheme remains the same, however, ‘home warranty insurance’ is now referred to as ‘insurance under the Home Building Compensation Fund.
There is no Public Register for insurance certificates issued to consumers. A Public Register of insurance certificates will be created by the NSW Self Insurance Corporation (SICorp). This will help consumers check that their certificate is genuine and let home purchasers know if there have been previous claims on the property.
There is no clarification on the indemnification of a beneficiary for losses or damage in respect of residential building work covered by the insurance contract, for policies issued on or after 19 May 2009. An insurance contract must indemnify a beneficiary for losses or damage in respect of residential building work covered by the insurance contract, for loss or damage resulting from the suspension of a contractor licence due to non-compliance with an order.
Home warranty insurance certificates do not specifically exclude work that is not required to be insured under the Act. New contracts under the Home Building Compensation Fund will only cover residential building work that is required to be covered by a certificate of insurance.
The home warranty insurance scheme only exempts certain works from its operation. Built-in furniture and cabinetry (including kitchen cabinetry) work is now exempt from mandatory insurance when that work is done as a standalone contract.
Definitions of ‘storey’ and ‘rise in storeys’ are slightly different to the definitions in the National Construction Code. Definitions of ‘storey’ and ‘rise in storeys’ are now entirely consistent with the National Construction Code.
Definition of a person that has ‘disappeared’ for the purposes of a home warranty insurance claim is not clear. Definition of a person that has ‘disappeared’ for the purposes of a home warranty insurance claim is defined as ‘a person that cannot be found in Australia.’
Definition of ‘commencement’ for the purpose of a non-completion claim on home warranty insurance is unclear. ‘Commencement’ is defined as ‘residential building work done on the land to which the contract relates.’ Other work such as site preparation work (not residential building work) would not be the commencement of work.

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Disputes, defects and statutory warranties 

The following new laws started on 15 January 2015.

Current laws

New laws

Builders must warrant their work for 2 years after completion and for 6 years for ‘structural defects’, being defects to structural elements of the building that have severe or significant effect on the building. The same warranty periods apply.
The definition of what is a ‘structural defect’ and therefore what is covered by the six year warranty period is replaced by a definition for ‘major defect’. A ‘major’ defect is a defect occurring in a ‘major element’ of the building that causes or may cause the building or part of it to be uninhabitable, to be unable to be used for its intended purpose or the partial or total collapse or destruction of the building. A major element includes an internal or external loadbearing component and, for the first time, fire safety systems and waterproofing. 
NSW Fair Trading Inspectors may issue a rectification order if they are satisfied that work is incomplete or defective, or that the contracted builder caused damage to any structure or work. NSW Fair Trading Inspectors are specifically allowed to issue rectification orders which specify stages and a number of dates, by which the requirements of the order must be complied with. They are also able to make an order for the payment of money due under the contract.
The completion of residential building work occurs on the date that the work is complete within the meaning of the contract under which the work was done. A separate date of completion for building work will be provided for the construction of strata buildings, allowing owners corporations a more easily discernible date from which to calculate the warranty periods.
Courts and Tribunals are provided with no direction about the preferred outcome of a Court or Tribunal hearing. Rectification of defective work is now the preferred outcome in proceedings within a Court or Tribunal for building claims.
The Tribunal was limited to specific types of orders it could make. The Tribunal can make an order even if it is not the order that the applicant asked for.
If a consumer claims a breach of a statutory warranty, the builder or tradesperson may defend the claim on the basis that the defective work was the result of what the consumer instructed them to do and which was contrary to the builder or tradesperson’s written advice to the consumer. The existing defence remains and a new defence is provided.
If a consumer claims a breach of a statutory warranty, the builder or tradesperson may defend the claim if defective work resulted from reasonable reliance on the written instructions of a professional acting for and engaged by the consumer before the work commenced. The professional may be an architect, engineer, surveyor or someone else with specialist or expert knowledge relevant to residential building work, and must be independent of the builder or tradesperson.
Service of notices and other documents do not take into account newer forms of technology. NSW Fair Trading may serve notices and other documents to an email address or fax number provided by the person for that purpose.

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Contracts 

The following new laws will take effect on 1 March 2015.

Current laws

New laws

The threshold for when a ‘small works’ written contract is required is for work valued over $1,000 (labour and materials). The threshold for when a ‘small works’ written contract is required has been raised to work with a market value over $5,000 (labour and materials).
Residential building work valued at $5,000 or more is required to use a contract that contains the detailed ‘general works’ requirements. The threshold for when the more extensive ‘general’ contract requirements apply has increased from $5,000 to $20,000.
There are no provisions for progress payments.

Contracts for work valued at over $20,000 must now include a progress payment schedule. A progress payment may be payable either:


a) following the completion of specified stage of the work, as provided for in the contract; or

b) for labour and materials already performed or costs already incurred, at intervals fixed by the contract or on an ‘as invoiced’ basis and can include a margin. These claims for progress payments must be supported by invoices, receipts or other documentation.

A maximum 5% deposit is allowed for work valued at over $20,000 and a maximum deposit of 10% for work valued below $20,000. A maximum 10% deposit is allowed for all work regardless of the value of the work.
There is no requirement that contracts must include a termination clause. A termination clause must be included in contracts for work over $20,000.
Contracts for residential building work include the implied warranty that the work will be performed in a ‘proper and workman-like manner.’ Contracts for residential building work now include warranties that use language consistent with the Australian Consumer Law.  They now include the implied warranty that the work will be ‘done with due care and skill’.

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Disciplinary Action 

The following new laws will take effect on 1 March 2015.

Current laws

New laws

A holder of a contractor licence, supervisor or tradesperson certificate is guilty of improper conduct if the holder, in the case of specialist work, does not work in ‘a good and workmanlike manner.’ A holder of a contractor licence, supervisor or tradesperson certificate is guilty of improper conduct if the holder, in the case of specialist work, does not deliver work ‘with due care and skill.’
A holder of an endorsed contractor licence or supervisor certificate is guilty of improper conduct if the holder, in the case of specialist work, does not deliver work in ‘a good and workmanlike manner.’ A holder of an endorsed contractor licence or supervisor certificate is guilty of improper conduct if the holder, in the case of specialist work, does not deliver work ‘with due care and skill.’

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