Builders and other building contractors need to understand their obligations under the Home Building Compensation Fund insurance laws. The RMB Compensation Division explains:
The current surge in residential home building has resulted in a spike in work for many trades. For these busy tradespeople, staying on top of administrative work often falls back in the list of priorities.
However, the Home Building Act includes a very important obligation that contractors operating in the residential building space need to keep front of mind - obtaining a Home Building Compensation Fund (HBCF) insurance policy.
The HBCF was established to provide a safety net for home owners in NSW faced with incomplete and defective building work carried out by a builder or tradesperson.
The HBCF insurance policy certificate must be given to the homeowner/client before any work starts or money changes hands, including a deposit being taken.
This obligation is in place for any work valued at $20,000 or greater. And the law is one step ahead of anyone considering breaking down the job into smaller parts to avoid the insurance obligations. The total value of the work you provide is taken to be the value of the work for the purposes of the insurance requirements.
Failure to comply with the insurance requirements of the Home Building Act renders you liable to fines of up to $22,000 for individuals or $110,000 for companies.
A further consequence of not obtaining HBCF insurance and providing a copy of the certificate to your clients is that you are prevented from asking for any money for work actually performed by you. If you do make request payments, you will also be liable to fines of $22,000 or $110,000.
To avoid the consequences of fines and being unable to issue invoices we strongly advise you to have a contract of HBCF insurance in place before any work is performed. It is critical that you provide the insurance certificate to your clients before any work is done or money taken because a failure to provide the certificate is treated by the law to be the same as not having any insurance at all.
It is also important to note that a failure to have insurance and provide the certificate does not entitle a homeowner to a refund for the money paid for work performed.
The Home Building Act simply imposes a punishment for the contractor for their failure to comply with the Act.
If you have any questions about Home Building Compensation Fund (HBCF) or need assistance, your first step should be to contact our office to arrange a free consultation. You can contact us by by phone or our 'Ask a Question' tool on our website.