As there are increased sales and purchases of new homes, house and land or owner-builder homes, as well as substantially renovated homes, it is important to understand what is Home Warranty Insurance - now known as Home Building Compensation Fund (HBCF) insurance.
Many purchasers assume that this is a blanket insurance policy for all new property, however this is not the case. There are a few conditions and scenarios where this policy may or may not apply.
Some common assumptions are below:
- HBCF covers all new property - FALSE.
It is not applicable for property more than 3 storeys (see Home Building Regulation 2014, Clause 56) or work under $20,000 including GST.
- Owner builders can also obtain this insurance - FALSE.
Owner builders are required to obtain a permit to do works but are unable to be covered under HBCF insurance. Contract for sales for the property must include a conspicuous consumer warning regarding this (see Home Building Act 1989, Section 95). Owner builders must obtain a copy of the insurance for individual contractors.
- The HBCF covers all defects for up to 6 years - FALSE.
Claims can be made for loss as a result of major defects for up to 6 years from the date of completion, and for general defects, up to 2 years. It covers for 12 months for losses resulting from incomplete works, running from the date of the cessation of the work or failure to commence.
- The new homeowner can automatically claim on the HBCF insurance when the defect is discovered - FALSE.
You may be able to claim on the HBCF insurance in the event of a builder’s or contractor’s insolvency, death, disappearance or licence suspension where the builder or contractor has failed to comply with a NSW Civil and Administrative Tribunal (NCAT) or Court money order obtained by the homeowner. We recommend that you first contact the NSW Fair Trading who can provide assistance with your claim.
If you do receive any home warranty insurance or HBCF certificates, please make sure you check that they are valid through the following link:
The above information has been sourced from the Home Building Act 1989 and the "icare" website, see https://www.icare.nsw.gov.au/builders-and-homeowners/homeowners/what-we-do/ for more information.