Building a house or undertaking renovations is a daunting task for most people: it is a big financial commitment and we have all heard the horror stories of sinking slabs, cracking walls, and defective workmanship.
Ensuring that your builder has home warranty insurance is one important step that you can take to try and protect yourself. Unfortunately, many people have a fundamental misunderstanding of what home warranty insurance is actually for and what can be claimed. Most importantly, home warranty insurance is not accessible for owners who wish to claim in order to fix defective work if their builder is still alive, contactable and solvent.
This is an important read for anyone looking at appointing a builder to undertake residential building work in the ACT.
Requirement for insurance
In the ACT, builders are required to obtain complying residential warranty insurance (home warranty insurance) before commencing insurable residential building work with a value of over $12,000.00 and that is structural in nature. 
Home warranty insurance schemes are provided in an effort to protect consumers who undertake domestic building work.
What is insurable residential building work anyway?
‘Insurable residential building work’ means residential building work:
- the residential parts of which (other than a part of the building that is a structurally integral adjunct to the building) are classified as a class 1 or class 2 residential building and
- that has no more than 3 storeys at any point, excluding any storey used exclusively for parking. 
Home warranty insurance is not required for ‘class 10 – basic work.’ Class 10 building work includes non-habitable building structures such as garages, carports, fences or swimming pools. 
What is covered by home warranty insurance?
Home warranty insurance insures the current and future owners of the home against the risk of being unable to sue the builder under the building contract because of the insolvency, disappearance or death, of the builder.  The insurance is usually also limited to the following two key risks:
- risk of loss resulting from a breach of a statutory warranty or 
- risk of loss resulting from the subsidence of the land due to the builder’s negligence. 
What is not covered by home warranty insurance? A common misconception
Contrary to what many people think, home warranty insurance policies cannot be claimed upon by an owner in an attempt to fix defective work. It is not a get out gaol free card which enables an owner to appoint another professional to fix the original builder’s defective work. This means that you will need to continue to work with the builder in order to get the defective work fixed or you may have to sue them for breach of contract.
How can you protect yourself?
Consumers are able to take steps to protect themselves when engaging a builder to undertake residential work. Simple steps include:
- Ask around about your prospective builder. Oftentimes a simple google search will unearth useful information.
- If possible, look at previous projects which have been completed by the builder. Ask for references and building licence details.
- Find out if the builder is accredited with an industry body, such as the MBA or HIA.
- Be aware that it is the owner that can appoint the certifier for building work. Do not just accept the certifier suggested by the builder. Take this right seriously and make enquiries regarding well-regarded certifiers.
- Check the disciplinary register maintained by the Construction Industry Registrar. The register contains specific information which is made public when disciplinary action has been taken against a builder or tradesperson.
- Once you have picked your builder, ensure that the scope of works is clear and that the agreement is properly documented with a building contract that protects you.
- Communicate openly with the builder.
- Get your building contract reviewed by a lawyer! For such a big investment, getting legal advice tailored to your situation is money well spent. We can help.