NSW builders and tradespeople (including carpenters, electricians, plumbers etc.) must take out insurance for each residential building project if the contract price is over $20,000 inclusive of GST, with some exceptions (eg tradespeople subcontracting to a builder).
It is a last resort scheme.
If you suffer a financial loss because a builder or tradesperson fails to start or complete the building work, or fails to fix defective work, you are able to make a claim under a contract for home building compensation insurance if:
- they’ve become insolvent
- they’ve died or disappeared
- they’ve had their licence suspended because they did not pay you compensation that had been ordered by a tribunal or court (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. 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 if some things go wrong.
What you 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, you can claim for:
- loss resulting from incomplete work because of early termination of the contract (conditions apply)
- loss resulting from a 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
Making a claim
Firstly, notify the insurer in writing as soon as you become aware of the defective or incomplete work. The notification must be within the insured period (with some exceptions).
Visit making a claim for more information on the full claims process.
There are some exemptions for multi-unit constructions above three storeys high and some other special cases.