Recent Changes in Law for Small Businesses in the Home Building Industry

Legal

If you are in the home building industry, or building or renovating your home, be aware of the changes resulting from new laws which commence on January 15, 2015. In addition, further amendments concerning contract requirements will commence on March 1, 2015.

Major changes from 15 January 2015

Licensing

The threshold for requiring a license for building and general trade work is being raised from over $1,000 of work to over $5,000 (including labour and materials). Specialist work (such as plumbing, electrical and air conditioning) will still need a license regardless of the cost of work.

  • Stand-alone contracts for internal paint work, as well as, work related to tennis courts, ponds and water features no longer need a license, unless done as part of other home building work
  • Up to 12 months of imprisonment will be the new sentencing option for a second or subsequent offense for unlicensed contracting or not having the required statutory insurance
  • License eligibility is being tightened to stamp out `phoenixing´ -- where a company closes down leaving large unpaid debts, only to re-emerge as a new company trading under a different name
  • Fair Trading will need to be notified within 7 days if a licensed builder is "wound up"

Owner-builders

Owner-builders will be required to name all other owners of the land on an application for an owner-builder permit. This will be recorded on the permit to prevent people using this system to carry out commercial unlicensed building work. Any owners named cannot apply for another owner-builder permit for a different property for 5 years.

  • Owner-builders will be prohibited from getting a permit for a dual occupancy except in special circumstances.
  • Owner-builders will not be able to get statutory insurance although contractors working for the owner-builder will still need to provide certificates for work over $20,000. If the property is sold within the warranty period, the contract for sale must clearly state that there is no statutory insurance on the property.
  • The threshold for requiring an owner-builder permit has increased to work valued over $10,000. All owner-builders must provide evidence of having done basic work health and safety training, and for work over $20,000 they will need to do an owner-builder course.

Home Building Compensation Fund

  • The Home Warranty Insurance Scheme will be renamed as the Home Building Compensation Fund.
  • Consumers will be able to check their builder's or tradesperson´s insurance and previous claims on a property through a new public register on www.hbcf.nsw.gov.au.

Disputes, defects and statutory warranties

The new laws help to clarify what is a major defect which is covered by a 6-year warranty. General defects that don't meet the 'major defect test' will continue to be covered by the standard 2-year warranty. 

Major defects are defects that:

  • are in a `major element´ of the building AND
  • prevent all or part of the building from being lived in or used for its intended purpose OR threaten the collapse or destruction of the building or part of it.

For disputes relating to defects, tribunals and courts, will need to consider rectification as the preferred outcome. Builders who seek to fix defects can't be unreasonably refused access to a property by the home owner.

To prevent rectification work being stalled, Fair Trading Inspectors, through a Rectification Order, can oblige consumers to pay the builder any money owed under the contract.

The definition of completion for strata buildings will change so that completion occurs on the issue of an occupation certificate allowing the whole building to be used and occupied.

Licensees will have a legal defense in proceedings for a breach of the statutory warranties if they reasonably relied on the written specialist advice of an independent professional engaged by the owner.

Major changes from 1 March 2015 Contracts

  • The threshold is being raised for the more detailed contract requirements from $5,000 to $20,000. Home building work under $20,000 will still need a written `minor works´ contract.
  • A cap on deposits for work over $20,000 will be increased from 5% to 10%. Builders will only be able to request a maximum of 10% for a deposit for all projects, regardless of the value.
  • Contracts over $20,000 will need a progress payment schedule (only authorised payments are allowed) and a termination clause.
  • The mandatory consumer building guide, to be provided to consumers before entering a contract, is being streamlined to provide essential information on both parties´ rights and responsibilities.

 


Katherine Hawes

Director of Education and Training at Digital Age Lawyers (formerly New Age Legal Solutions)

I am the founder of New Age Legal Solutions and Aquarius Education. This is a different type of law firm as we believe everyone should have access to quality legal services with no hidden costs or expensive 'charging by the minute' for a reassuring chat. Small Business Owner? Find out more about our Small Business Packages to gain access to legal expertise on a routine basis for a fixed affordable rate.


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Yee Trinh

Yee Trinh , Cofounder at SavvySME

Thanks for the heads up Katherine! This will come in handy.