New exemptions to mandatory home building insurance
18 July 2023
The NSW Home Building Act 1989 includes a mandatory insurance to help homeowners in the event of the insolvency, deemed insolvency, death or disappearance of a building business that contracted to work on their home. The foundation of the insurance scheme is a duty on principal contractors to take out insurance for residential building work for each project over $20,000 (unless exempt) before requiring or accepting a deposit or commencing building work.
The State Insurance Regulatory Authority (SIRA) has a responsibility to promote compliance with home building laws and works closely with NSW Fair Trading on enforcement. It is important to understand when you must have insurance and the circumstances for when an exemption applies. Failing to take out insurance is an offence and may result in licence sanctions, financial penalties and / or imprisonment.
Recent changes to home building laws mean that builders and some housing providers can now agree to contract out of home building compensation insurance requirements for certain residential building work, including:
- on behalf of some charitable housing providers (such as some community housing providers, specialist disability accommodation providers, or Local Aboriginal Land Councils)
- to buildings in some build-to-rent schemes, and
- on behalf of a developer that is a council.
There are requirements that the contract must reflect for these exemptions to apply.