Common Insurance Mistakes in Home Construction Warranty Obligations

Most registered builders and property developers now know that they require Home Warranty Insurance basically for any work over $12,000. It is enforced by local government Council or Private Certifiers, and the general rule is that they won’t release authority of works before being presented with a Certificate for Home Warranty.

However if you are a Trade it is common to go unnoticed and uninsured for Home Warranty Insurance. SHC’s research shows that up to 90% of the Trades market does not insure this aspect and therefore is in breach of legislation. The legislation is housed under the State’s Home Building Act. The basic rule here is if you’re a Tradie operating under the principle contractor and the principle contractor has supplied the home owner (client) with a Home Warranty Certificate, you do not have to supply a the same insurance. However if you’re a Tradie and are dealing with the client directly, you have to supply a Certificate of Home Warranty Insurance for any work over $12,000. Similarly if you are dealing directly with an ‘Owner Builder’, you have to supply a Certificate of Home Warranty Insurance for any work over $12,000.

A classic example of this is as follows; a builder signs a contract with a client for a new home worth $500,000. The Builder provides a Certificate of Home Warranty Insurance to the client for $500,000. However because the owner knows or has a special deal with a Kitchen Manufacturer/Installer – this is not part of the original contract. The Kitchen Manufacturer/Installer, because they are dealing with the client directly, is required to supply the client with a Certificate of Home Warranty Insurance, if works are over $12,000.

As most Trades may not be aware of this fact, or choose to ignore it, if uncovered by the policing government departments (normally The Office of Fair Trading), the fines and penalties are large. More damaging is their power to cancel any license to operate, hence eliminating your ability to work and provide an income.

Unfortunately most of the States have different wordings and different legislation on how all of this works. We have included here in this article general advice concerning this issue. For a more in-depth technical view concerning this product, please contact us on 1300 730073 or visit www.savillhickscorp.com.au and download the article under our ‘Home Warranty’ section.