Australia: Home building law reforms in NSW imminent

Last Updated: 28 December 2014
Article by Julian Mellick

In brief - Most home building reforms to take effect by 15 January 2015

The NSW Home Building Amendment Act 2014 has been proclaimed and will commence in three stages, with most of the changes taking effect by 15 January 2015. The changes will affect developers, builders, contractors, subcontractors, tradespeople, owners, owners corporations, strata-managers, property investors and owner-builders.

Regulations and consumer building guide to be amended also

In addition, the Home Building Regulation and Consumer building guide will be amended by that date and the new online insurance register will go live. More can be read about these in the latest government announcements Major changes to home building laws and Comparison of home building laws.

First stage reform: check that relevant insurance is in the correct name

From 31 December 2014, one minor change will take effect. Insurance under the Home Building Act 1989 will only cover work performed where the insurance is in the name of the person who contracts to do the work. Although the Act currently contains a provision that states that coverage extends to work at an address irrespective of who is named as the contractor, the provision was only operative for a month in 2003 before being repeatedly suspended.

Owners, owners corporations, strata managers and builders should check that relevant insurance is in the correct name, otherwise work is not insured and builders are not able to claim payment under their building contracts.

Second stage home building reforms from 15 January 2015

From 15 January 2015, most of the other changes commence and include:

  • Licensing requirements: New multiple-offence prison-term penalties will apply if you hire unlicensed persons, do any unlicensed work, or offer to do any unlicensed work.
  • Statutory warranties: Under the revised "major defect" test, some six year defects will become two year defects and vice-versa.
  • Disputes: A new defence will apply where there has been reliance upon written instructions of a relevant independent professional.
  • Defects: There will be a shift towards defect rectification in preference to compensation.
  • Owner-builder permits: New mandatory warnings will be required on certain sales contracts.
  • Insurance: Home Owners Warranty insurance will be known as Home Building Compensation Fund (HBCF) insurance.

Third stage home building reforms from 1 March 2015

From 1 March 2015, the few remaining changes take effect:

  • Deposits: The maximum deposit will increase to 10% (up from 5% for contracts over $20,000).
  • Payments: Only two types of progress payments will be allowed and they need to be clearly specified in your contract.
  • Termination: Your contracts will need to include a particular statement about termination.

Update your systems, processes and contracts

Accordingly, there isn't much time left to check that all of your systems, processes and contracts have been updated and are ready for the changes. For a guide on the key tips and traps, see our earlier article Changes to NSW Home Building Act to affect all participants in building industry.

Be aware of coinciding changes to home building regulations

Amendments in the public consultation draft of the Home Building Regulation 2014 will also be finalised and implemented by 15 January 2015.

Among other things, this will mean that contracts for works exceeding $5,000 will need to comply with the "small jobs" requirements (up from $1,000), and contracts for works exceeding $20,000 will need to comply with the "other than small jobs" requirements (up from $5,000).

As a result, the requirements for mandatory contract price warnings, cooling-off statements, checklists and conditions may be less likely to apply to smaller jobs.

New consumer building guide to be released in March

A new draft of the consumer building guide will be out by 1 March 2015. It will be cut down to two pages (currently 24). Since it is a mandatory inclusion in prescribed contracts, be sure to update your precedents once it is released.

Use the home building compensation fund insurance register

The new public HBCF register, set to go live on 15 January 2015, will allow interested persons (primarily owners, owners corporations and strata managers) to check their builder's or tradesperson's HBCF insurance and whether there have been previous claims on that insurance.

Watch this space for how to access the register once the NSW Self Insurance Corporation releases details.

Julian Mellick
Property acquisition, development and sale
CBP Lawyers

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Julian Mellick
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