The building industry in Australia has grown significantly over the last decade.
To ensure there is an industry standard, each State and Territory have established their own system to govern the operational, administrative and financial policies that are required to be observed by companies or individuals that carry out work in the building industry. In particular for Queensland, this is performed by the Queensland Building and Construction Commission (the ‘QBCC’).
One specific function of the QBCC is to provide certain protections for consumers that engage builders. Despite this function usually being enforced by ensuring builders are meeting set building standards or licensing requirements, it is also enforced by providing insurance cover to consumers that engage licensed builders to carry out residential construction work. This is known as the Queensland Home Warranty Scheme which is a statutory insurance policy managed by the QBCC.
As a general rule, a consumer will usually receive cover under the insurance policy if the consumer is a home owner that has engaged a builder to construct a new residence or to undertake certain alterations, repairs or renovations to an existing home. Although eligibility may vary depending on the type of consumer or work performed, the following requirements must be met:-
- the consumer must enter into a contract with a licenced builder, or builder that purports to be licensed;
- the contract must be for the performance of residential construction work; and
- the type of work performed must not be excluded by legislation.
Once a consumer has entered into a signed contract for the work, the cover will automatically commence. The builder will then be obliged to pay the premiums upon which the consumer will then receive a copy of the insurance policy along with a certificate of insurance. Should any claim be made, it must be made within the period of 6 years and 6 months commencing from the earlier of when:-
- the date premiums were paid by the builder;
- the contract was entered; or
- the work was commenced.
Extent of Cover
Like most insurance policies, the extent of cover is subject to the policy conditions. A successful claim may however cover for loss associated with:
- non-completion of the work;
- vandalism and forcible removal;
- fire, storm and tempest during construction;
- defective construction; or
- subsidence of the residence.
Although these are only examples of potential claims under the insurance scheme, the loss is usually only limited to the repair or completion of the works. If however the residence is such that it is no longer safe, cover may also extend to reimbursement for the reasonable costs of alternative accommodation or storage.
Frankie purchases a block of land and engages builder Billy to build a new home. Frankie then takes a long overseas holiday and expects to return shortly after the home is built. Prior to departing Australia, Frankie paid Billy for the work in full.
Two months after the home is built, Frankie inspects the home and discovers numerous issues. These issues included significant damage to the internal walls, broken windows and automatic roller doors missing from the garage. Upon attempting to contact the builder, Frankie discovers that Billy has left the country. Frankie then decides to contact the QBCC to advise them of the issues and make a claim under the insurance policy.
After investigating the claim, the QBCC engage another builder named Toby to rectify the defective work and install the automatic roller door. These works were paid by the QBCC under the insurance scheme at no additional cost to Frankie.
As the above example illustrates, the purpose of this article is to raise awareness of protections that might be available to individuals that engage builders to perform work on a home or other residence. Despite the insurance scheme existing for a number of years, it appears that it is becoming increasingly relevant as the market becomes depressed and more builders close shop and fail to complete the contracted work.
If you are in a similar situation to Frankie and think you might be able to make a claim under the insurance scheme, you should contact our office to find out or otherwise request further information from the QBCC.