Developers do not take out home building compensation (HBC) cover, but they need to make sure their builders and contractors do.
What is a developer?
A person, partnership or corporation is considered a developer if they will own:
- four or more of the existing or proposed dwellings in an existing or proposed building or residential development
- all of the residential units in an existing or proposed retirement village or accommodation for people with disabilities.
A landowner is a developer if the residential work is done on behalf of another person, such as in a joint venture, when both parties are considered developers.
A full definition of a developer is in section 3A of the Home Building Act 1989.
Who should arrange HBC cover?
There are different categories of licenses for different types work in the residential building industry. Only a contractor that is licensed as a ‘builder’ under the Home Building Act can supervise or coordinate residential home building work to construct a dwelling, and obtain home building compensation (HBC) cover (formerly known as home warranty insurance) for the project.
If you are not a builder, you can arrange for a licensed builder to be the ‘principal contractor’ to manage the entire project. The principal contractor must arrange HBC cover for each dwelling before starting work. More information about the types of licenses and qualifications is available from NSW Fair Trading.
Engaging licensed contractors
It’s against the law for a developer to knowingly employ an unlicensed contractor.
SIRA authorised officers and Fair Trading investigators have powers to enter building sites and demand the names and addresses of contractors working on site.
Before you hire a contractor, you should always check that they are licensed, that they have the right category of licence (as a builder) and that they are eligible to obtain HBC cover for the type of work you want them to do. You can do this by using the NSW Government’s Construction Assist portal. It has information about the licence and HBC eligibility status of current and former licence holders.
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
If building work hasn’t started and you do not have proof of HBC cover from the builder yet, your contract with the buyer must state that:
- there is an exemption from the requirement to provide proof of HBC cover
- HBC cover will be in place before the work starts
- you (the developer) will provide the buyer with the proof of HBC cover within 14 days of the cover being obtained.
The buyer can cancel the contract of sale before settlement if the proof of HBC cover is not provided within 14 days of the cover being obtained.
If building work has started, or you are selling the property within six years of completion of the work, you must give each purchaser of a dwelling:
- an approved brochure about HBC cover and disputes (currently the Consumer Building Guide published by NSW Fair Trading)
- proof of HBC cover, which must be attached to the contract of sale.
If you don’t provide proof of HBC cover:
- 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 in certain circumstances.