Buying from a developer or 'spec' builder

Key information

While developers themselves are not required to take out HBC insurance, they must ensure that the builders and contractors they use on their projects are insured.

Buying off the plan

When buying ‘off the plan' in a development of 4 or more homes, you are choosing a home that has not yet been built or completed.

The home building work must be insured and this will be arranged by the developer’s builder. The insurance must be obtained before the work starts.

If you enter a contract of sale before the building work has started, the contract of sale must tell you that:

• the work must be insured, but the developer does not need to give you the HBC insurance certificate until the work starts
• the developer must give you the certificate of insurance within 14 days of the insurance being issued
• you have the right to cancel the contract of sale before settlement if the certificate of insurance is not provided within the 14-day period.

If you enter a contract of sale for a home that is already under construction, the developer must include the certificate of insurance with the contract of sale. You have right to cancel the contract of sale before settlement if the developer fails to give you the certificate of insurance.

If the developer does not give you the certificate of insurance, they are breaking the law and may be subject to fines.

Please be aware that where a contract for sale is completed and settled you lose the legal right to cancel it.

For detailed requirements, refer to Section 61 of the Home Building Regulation 2014.

New apartments over 3 storeys do not need HBC insurance

Developers are not required to provide proof of home building compensation insurance for construction of apartment buildings over 3 storeys, because these buildings are not required to be insured under home building compensation insurance. However, renovation work on existing apartments over 3 storeys must be insured.

Section 56 the Home Building Regulation 2014 provides a comprehensive understanding of what constitutes a 'multi-storey building' (apartment building over 3 storeys) and Section 46 explains how insurance works for apartment buildings.

New apartments over 3 storeys are covered by the Strata Building Bond Inspection Scheme and/or by the Decennial Liability Insurance Scheme. You can find more information about these from the NSW Building Commission.

Buying from 'spec' builders

Speculative ('spec') builders are licensed individuals and businesses, who build homes on land they own themselves, usually to sell upon completion.

Before beginning any construction work valued over $20,000 (including GST), 'spec' builders must obtain home building compensation insurance.

Advice for buyers

If you are buying a property from a 'spec' builder, make sure a certificate of home building compensation insurance is attached to the contract of sale.

You should always verify the validity of insurance by entering the certificate number in the online Home Building Compensation (HBC Check) tool, which is the public register of home building compensation insurance.

If the insurance certificate is not attached to the contract of sale, the 'spec' builder is breaking the law may be subject to fines.

In these circumstances, you have the right to cancel the contract prior to settlement.