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Current scheme and cover

NSW builders must take out insurance for each residential building project if the contract price is over $20,000 inclusive of GST, with some exceptions (eg multi-unit buildings that are more than 3 storeys high).

Only licensed builders or tradespeople doing residential building work can take out Home Building Compensation Fund (HBCF) insurance but developers have a legal obligation to make sure insurance is taken out by builders and/or contractors they engage to carry out the work.  See your obligations for more information.

What the scheme covers

It is a last resort scheme.

If a homeowner suffers a financial loss because a builder or tradesperson fails to start or complete the building work, or fails to fix defective work, they are able to make a claim under a contract for HBCF insurance if the builder or tradesperson has

  • become insolvent/bankrupt
  • died or disappeared
  • had their licence suspended due to non-compliance with a Tribunal or a Court order (only if the policy was issued on or after 19 May 2009

The insurance also covers subsequent owners of a property for six years for major defective work and two years for other losses. Time starts from when the work was completed.

Please note that a separate definition of completion applies depending upon the type of residential building (eg single dwelling or a strata building).

This means there’s a safety net for them if some things go wrong.

What a homeowner can claim for:

All insurance policies issued from 1 February 2012 provide a cover of $340,000. An excess fee of $250 applies.

In general terms, homeowners can claim for:

  • loss resulting from incomplete work because of early termination of the contract (conditions apply)
  • loss resulting from the breach of statutory warranty (eg work is not done with due care and skill, or as per the plans, or the materials used are not suitable, or the work does not comply with the law)
  • loss resulting from faulty design provided by the builder
  • the reasonable costs of alternative accommodation, removal and storage
  • the loss of deposits or progress payments (conditions apply)
  • the legal or other reasonable costs incurred in seeking to get compensation
  • the loss resulting from the work done by the subcontractors of the builder
  • the loss resulting from the work done by the builder to rectify the problem after completion of the work