Understanding the Home Building Compensation
The Home Building Compensation Fund (HBCF) is a crucial safety net for homeowners in New South Wales, Australia. It provides protection against financial loss due to incomplete or defective building work. This article will delve into when HBCF cover is required, who provides it, and useful tips for homeowners before and after entering into a building contract.
When is HBCF Cover Required and Who Provides It?
HBCF cover is mandatory for residential building works valued over $20,000. This insurance is administered by icare (Insurance and Care NSW) and regulated by the State Insurance Regulatory Authority (SIRA). The responsibility of obtaining HBCF cover lies with the builder, who must secure it on behalf of the homeowner before commencing any work.
When Can HBCF Cover Be Called Upon?
HBCF cover can be called upon in several scenarios:
Non-completion of Work: If the builder fails to complete the work, the homeowner can claim compensation.
Breach of Statutory Warranty: If there is a breach of statutory warranty under section 18 of the Home Building Act (HBA), and the homeowner cannot recover the loss due to the builder's insolvency, death, disappearance, or suspension of their licence.
The cover includes:
Defects Claims: Up to $340,000 for defects.
Incomplete Works: Maximum claim is 20% of the contract value, up to $340,000.
Additional Costs: Costs for alternative accommodation, removal, and storage can also be considered but are included in the $340,000 limit.
Useful HBCF Tips Before Entering into a Building Contract
Licensing Check: You can check here whether the builder or contractor licence is current and verify whether they have any pending or prior HBCF claims. You can also consider the Home Building Compensation Check here which demonstrates all previous works for which the Builder required HBCF cover.
Litigation Check: Search the court lists here or NSW judgment publications here for any mentions of the builder or contractor to understand whether there is any current or prior litigation in which the builder or contractor was involved.
Negotiate Milestones and Progress Claims: Limit milestones or progress claims to less than 20% of the contract value, ideally less than $340,000, especially for any milestones which include payments in advance or for Prime Cost (PC) items.
Ensure Payment in Arrears: Ensure that payment milestones reflect items which have been completed, as well as ensuring the payment milestones do not represent a signifcant portion of the contract sum. Including more milestones can minimize risk for homeowners, ensuring the HBCF can respond adequately, particularly in the case of incomplete works.
Contract Provisions: Ensure the contract allows for licence suspension or cancellation as grounds for default and provides for immediate termination or a short notice and cure period.
Useful HBCF Tips After Entering into a Building Contract
Understanding rights and remedies provided by the Building Commission NSW
The Building Commission can help with complaints relating to:
building, renovation or trade work done on residential buildings;
specialist trade work done on residential and non-residential building.
When the work is:
incomplete or defective;
does not comply with the statutory warranties provided by the HBA.
has caused damage to other structures (including neighbouring properties).
Commence Proceedings Promptly
If issues arise, start proceedings quickly and notify the HBCF claim process as soon as possible noting that the notice requirement varies for differing claims:
Incomplete Works: Within 12 months of cessation.
Minor Defects: Within 2 years.
Major Defects: Within 6 years.
The size and timing of the claim will dictate whether the claim will be brought through the Courts or NSW Civil and Administrative Tribunal (NCAT).
Summary
By understanding the requirements and processes associated with HBCF cover, homeowners can better protect themselves from financial loss due to incomplete or defective building work.
Taking proactive steps before and after entering into a building contract can ensure that the HBCF provides the necessary support when needed.