The Home Building Amendment Act 2014

The Home Building Amendment Act 2014 received assent on 5 June 2014 and is now waiting proclamation and commencement.

Key Amendments

References in the Act to “home warranty insurance” are to now be referred to as “insurance under the Home Building Compensation Fund”.

A new Clause 3C defines the date of completion of new building work in a Strata scheme as the date of issue of an occupation certificate. This new provision appears to apply retrospectively unless proceedings have commenced in a Court or Tribunal.

Section 7 now requires contracts to set out details of progress payments payable under the contract and a statement that the contract may be terminated in the circumstances provided by the general law. A contract must also include (and is taken to include) each of the terms set out in Part 1 of Schedule 2 of the Act.

The maximum deposit under a contract for residential building work will now be 10%, regardless of the price of the contract. There is no longer a distinction of 10% deposit for contracts under $20,000, and 5% deposit for contracts more than $20,000.

A new section 8A has been inserted setting out the requirements for maximum progress payments other than for “small jobs” (the prescribed amount for small jobs is $1,000)

Section 18B(a) has been amended with the term “performed in a proper and workmanlike manner” to be replaced with “done with due care and skill.”

The statutory warranties are also now expressly extended to apply to contracts between a principal contractor and a subcontractor in the performance of residential building work.

Obligations have now been placed on homeowners to mitigate loss in relation to a breach of a statutory warranty (section 18BA) and requires the homeowner to give notice in writing to the builder of the breach within 6 months after the breach becomes apparent (section 18BA(3)(a)). The owner must not unreasonably refuse access to the work concerned to the builder for the purpose of or in connection with rectifying the breach (duty to allow reasonable access) (section 18BA(3)(b)). These new obligations and duties will only apply to contracts entered into on or after the commencement of the amendments.

References in section 18E to the term “structural defect” are to be replaced with the term “major defect in residential building work.”

Section 18F has been amended to include a defence for contractors where the contractor can prove that the deficiencies complained of arise from instructions given by the person for whom the work was contracted to be done contrary to the advice of the defendant, being advice given in writing before the work was done; or there was reasonable reliance by the contractor on instructions given by a person who is a relevant professional (eg architect, engineer or surveyor) acting for the person for whom the work was contracted to be done and who is independent from the defendant, being instructions given in writing before the work was done or confirmed in writing after the work was done.

A new section 48MA is to be inserted which expressly states that a court or tribunal determining a building claim involving an allegation of defective residential building work is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.

Section 92(5) now states that a contract of insurance that is in force in compliance with section 92 in relation to residential building work (the original work) extends to rectification of the original work. This ensures that the rectification work of the original work carried out by the same builder is covered by the HOW insurance relating to the original work.

Section 95 has been amended so that an owner-builder is not required to obtain HOW insurance. However a contractor who contracts to do residential building work with an owner builder must obtain HOW insurance. There are also requirements with respect to contracts for the sale of land on which owner-builder work was carried out to provide a consumer warning in relation to the exclusion of HOW (section 95(2)).

There is also a consumer warning requirement with respect to sellers of excluded dwellings under a new section 96B with respect to requirements of Contracts for Sale of Land. This will cover the sale of residential dwellings which are (or were) used as overnight accommodation. At the time that the dwelling was constructed it would have been excluded from the requirements from the requirements of the Home Building Act and a subsequent purchaser must be placed on notice that the protections afforded by the Home Building Act, including the statutory warranties and HOW insurance may not apply to that dwelling.

Section 102A creates a new insurance register which records all insurance certificates issued on or after 1 July 2010 and details claims made successfully under such contracts of insurance.

Schedule 1 of the Act will now contain the definitions of various terms under the Act

Schedule 2 will contain terms to be included in certain contracts pertaining to sections 7E and 16DE of the Act

Schedule 3 contains the conditions of authorities in relation to licenses issued by the Office of Fair Trading

Schedule 4 contains the savings and transitional provisions. The general operation of the amendments is that they are retrospective and will apply to contracts entered into before the commencement of the amendments and for work carried out before the commencement. However they do not apply to proceedings commenced in a Court or Tribunal before the commencement of the amendment. Further, the amendments relating to the following matters will not affect contracts entered into before the commencement of the amendments:

  • Form of contract – the new provisions set out in section 7
  • Deposits and progress payments – the change to the maximum deposit and requirement for progress claims
  • Statutory warranties – the obligations of a homeowner under section 18BA and the defences set out in section 18F
  • Owner builder permits
  • Owner builder obligations regarding HOW insurance – set out in section 95
  • Contracts for sale of exempt dwellings – the provisions set out in section 96B