Russell Kelly & Associates · Norwest NSW
Home Warranty
Home Building Compensation Cover in NSW
Home Building Compensation cover, commonly referred to as HBC cover and formerly known as home warranty insurance, provides an important safety net for homeowners undertaking residential building work in New South Wales.
For residential building work valued at more than $20,000 including GST, the principal contractor will generally be required to obtain HBC cover before commencing the work or accepting any payment, including a deposit, unless an exemption applies.
What is Home Building Compensation Cover?
HBC cover is designed to protect homeowners and certain subsequent owners where a builder or tradesperson cannot complete residential building work or rectify defects because of specified circumstances.
These circumstances can include the contractor’s insolvency, death or disappearance, as well as certain licence suspensions arising from failure to comply with a court or tribunal money order.
HBC cover operates as a last-resort protection and is different from the statutory warranties that apply to residential building work.
When is HBC Cover Required?
HBC cover is generally required where the value of residential building work exceeds $20,000 including GST, unless the work falls within an applicable exemption.
The value of the work includes labour and materials. Where the contract price is not known, the reasonable market cost of the labour and materials can be relevant in determining whether cover is required.
Different requirements and exemptions can apply to particular types of work and developments.
When Must the Builder Obtain the Cover?
Where HBC cover is required, the builder or tradesperson must generally obtain the appropriate cover before commencing the residential building work or requesting or receiving any payment under the contract, including a deposit.
The homeowner should be provided with evidence of the HBC cover applying to the project.
Homeowners should check that the certificate relates to the correct property, contractor and building work before making payments or allowing work to commence.
Residential Building Contracts
NSW also has requirements concerning written residential building contracts.
Residential building work valued between $5,000 and $20,000 generally requires a written small jobs contract.
Work valued at more than $20,000 requires a more comprehensive written contract containing additional prescribed information.
The building contract should clearly describe the work, price or method for determining the price, relevant plans and specifications and other contractual obligations.
Statutory Warranties
Residential building work in NSW is also subject to statutory warranties under the Home Building Act 1989.
These warranties apply even if they are not expressly written into the building contract.
They include requirements concerning matters such as due care and skill, compliance with relevant laws, conformity with plans and specifications and the suitability of materials.
How Long Do Statutory Warranties Apply?
For contracts to which the current statutory warranty periods apply, proceedings for breach of statutory warranty generally need to be commenced within:
- 6 years for a major defect; and
- 2 years for other defects.
An additional six-month period can apply where the loss becomes apparent during the final six months of the applicable warranty period.
Time limits are important in building disputes, and homeowners should obtain advice promptly where defects or incomplete work are identified.
HBC Cover and Statutory Warranties Are Different
HBC cover and statutory warranties should not be confused.
Statutory warranties impose obligations concerning the residential building work itself. HBC cover provides a separate last-resort form of protection where the contractor cannot complete the work or rectify defects because of circumstances covered by the scheme.
The existence of HBC cover does not replace the rights and obligations arising under the building contract or statutory warranties.
Buying a Property with Recent Building Work
HBC cover can also be relevant when purchasing a property on which residential building work has recently been carried out.
Depending upon the property and work involved, purchasers should consider available building contracts, certificates, insurance documentation and information concerning defects or incomplete work as part of their due diligence.
Building Defects and Disputes
If a dispute arises concerning defective or incomplete residential building work, the applicable contract, statutory warranties, HBC cover and relevant time limits should be considered.
Depending upon the circumstances, a dispute may involve negotiation, Building Commission NSW processes, the NSW Civil and Administrative Tribunal or court proceedings.
Learn more about Alternative Dispute Resolution.
Property and Building Contract Advice
Russell Kelly & Associates can advise on legal issues arising from property transactions, building contracts and disputes where residential building work is involved.
Learn more about our Property Law services.
For current scheme information, see the NSW Government guidance on Home Building Compensation cover.
This information is general in nature. HBC cover, statutory warranty requirements and applicable time limits depend upon the particular work and circumstances. Legal advice should be obtained concerning individual matters.