The definition of a developer is complex. Generally, a person, partnership or corporation is considered a developer if residential building work is done in connection with:
- an existing or proposed dwelling in a building or residential development where four or more of the existing or proposed dwellings are or will be owned by the individual, partnership or corporation, or
- an existing or proposed retirement village or accommodation specially designed for the disabled where all of the residential units are or will be owned by the individual, partnership or corporation
This makes the owner of the land a developer even if the work is actually done on behalf of another person (for example, on behalf of a party to a joint venture agreement with the owner for the development of the land). The other person on whose behalf the work is actually done is also a developer in relation to the work.
See the Home Building Act 1989 to get a full definition of a developer.
Developers usually arrange for a builder to be the ‘principal contractor’ to manage the entire project.
It is the principal contractor’s responsibility to arrange insurance under the Home Building Compensation Fund for each dwelling before the work starts.
If you’re a developer you can’t take out insurance under the Home Building Compensation Fund (HBCF), but you need to ensure your principal contractor has arranged it.
If you don’t have a principal contractor, and employ two or more parties to work on the same building project, you are deemed to be supervising and co-ordinating the work.
This means you become ‘builder’ and must hold a licence issued by NSW Fair Trading in the category of 'builder'.
Engaging licensed contractors
It’s against the law for a developer to knowingly employ an unlicensed contractor.
It’s also against the law to refuse to disclose to a building inspector the names and addresses of people working on site.
In NSW, a builder or tradesperson must be licensed to carry out building work valued at over $5000.
All specialist work, regardless of its cost, must also only be done by a tradesperson licensed in the relevant category of specialist work. Specialist work includes:
- electrical wiring
- disconnection and reconnection of fixed electrical equipment
- air conditioning and refrigeration work (except plug-in appliances)
Penalties of up to $22,000 for individuals and $110,000 for a corporation can apply.
Individuals convicted of a subsequent offence of unlicensed contracting are liable for penalties up to $55,000, or up to 12 months imprisonment, or both.
You should always check your builder or tradesperson is licensed before you hire them. You can do this by using the online licence checker. It will show your background information about your choice of tradesperson, both current and historical.
There are different types of licenses and qualifications for different home building jobs. The NSW Department of Fair Trading has more information on the types of licenses and qualifications.
Selling a property as a developer
When selling the property within six years of completion of the work, you must provide the certificate of insurance with the contract, to each purchaser of a dwelling.
If building work hasn’t yet started when you enter the contract, you’re not required to provide the certificate but your contract with the buyer must state that:
- There is an exemption from the requirement to provide a certificate of insurance.
- Insurance under the Home Building Compensation Fund will be in place before the start of work.
- You (the developer) will provide the buyer with the certificate of insurance within 14 days of the insurance being taken out.
- The buyer can cancel the contract of sale before settlement if the certificate of insurance is not provided within 14 days of the insurance being taken out.
You should also look at clause 61 of the Home Building Regulation 2014 which sets out the requirements in detail.
If building work has started, a copy of their certificate of insurance must be attached to the contract of sale. This is your proof for the buyer that insurance has been taken out.
If you don’t provide the insurance certificate:
- You’re breaking the law and could be fined.
- The buyer has the right to cancel the contract before completion.
A developer and a contractor doing residential building work are entitled to apply for an exemption from insurance under the Home Building Compensation Fund requirements in certain circumstances.
These exemptions can only be granted if the Authority is satisfied that there are exceptional circumstances, or full compliance is impossible or would cause "undue hardship". Accordingly exemptions are dealt with on a case by case basis.
An exemption will not be considered where insurance under the Home Building Compensation Fund cannot be provided because of a contractor’s financial or business circumstances or where building work has already commenced.
Residential building work done by some Government departments is automatically exempted from the insurance provisions (section 103E Home Building Act 1989; clauses 59 and 60 of the Home Building Regulation 2014).
Exemptions from the insurance requirements under the HBCF are currently provided for the following types of work:
- the works under the current HBCF insurance threshold i.e. under $20,000;
- the works for new multi-storey buildings (clause 56 of the Home Building Regulation);
- the works in relation to retirement villages (clause 57);
- built-in furniture and other work (clause 58);
- the community care work funded the state or Commonwealth (clause 59);
- the works funded through Teacher Housing Authority of NSW (clause 60);
- where projects have not commenced at the time the contract for sale is entered into (clause 61);
- Crown exemption (including any statutory body representing the Crown) in respect of a project for the construction of community housing or public housing that is or was the subject of a contract with a body corporate that has become an externally-administered body corporate. (clause 63);
- Bonnyrigg Living Communities Project (clause 64);
- supply of kit homes (clause 65);
- the works are automatically exempt from the HBCF insurance requirement by virtue of section 103E of the Home Building Act 1989
- an exemption for the project has been approved in writing under section 97 of the Home Building Act 1989 prior to the commencement of the works.