Speculative (spec) builders are licensed builders who carry out residential building work on land they own themselves. Spec builders usually sell the property after they finish building it.
Spec builders can also sometimes be companies or partnerships.
They need to have insurance under the Home Building Compensation Fund (HBCF) before they start the building work, for work valued at over $20,000 inclusive of GST.
It is a last resort scheme.
If you suffer a financial loss because a spec builder fails start fix defective work, you are able to make a claim if they've:
- become insolvent
- died or disappeared
- had their licence suspended due to non-compliance with a Tribunal or a Court order (only if your 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.
This means there’s a safety net if some things go wrong.
What you need to do
If you’re buying a property from a spec builder, you need to make sure that they attach the certificate of insurance to the contract for sale. This is your proof that insurance has been taken out.
If the insurance certificate is not attached to the contract for sale:
- They’re breaking the law and could be fined.
- You have the right to cancel the contract before settlement.
What you can claim for
All insurance policies issued from 1 February 2012 provide a cover of $340,000. See current scheme and cover for more information.
Making a claim
Visit making a claim for more information on the full claims process.