Home Owners Warranty Insurance

Home Owners Warranty Insurance or now known as Domestic Building Insurance is taken out by a builder for you on works that are valued more than $16,000.

Domestic building insurance covers you if your builder:

Dies;
Is insolvent; or
Disappears.

Domestic building insurance also covers costs up to $300,000 to fix:

Structural defects, for six years; and
Non-structural defects, for two years.

However, if your policy was issued on or after 1 July 2015, it also provides cover if the builder fails to comply with a final order made by the Victorian Civil and Administrative Tribunal (VCAT) or a court.

It is important to note that in all other cases that are not abovementioned, it is up to your builder to fix or complete works.

Your first port of call is to ask the builder to remember the defects. If you claim on the policy for work that was not completed:

You may find your claim limited to only 20% of the contract price; and
The policy will not cover your advance payments.

Your builder must provide you with a copy of the policy and a certificate of currency covering the property before you pay a deposit or any other money.

Therefore, we suggest that you do not pay your deposit until:

The builder gives you the domestic building insurance policy and certificate of insurance that applies to your property. (certificates issued on or after 1 July 2015 are required to show the cost of the insurance premium); and
You contact the insurer to check the policy number is correct and applies to your build contract.

If you cannot find the certificate of insurance, contact the builder, building surveyor or local council to find out the name of the insurer and the policy number. This is usually listed on the building permit.

Who can issue Domestic Builders Insurance?

If your policy was issued on or after 31 May 2010, the Victoria Managed Insurance Authority (VMIA) will most likely be the insurer. There are also now other companies that can issue this type of insurance.

How to check to a builder is eligible for insurance?

Domestic building insurance providers will only issue domestic building insurance to eligible builders.

To check if a builder is eligible:

search the Victorian Building Authority; or
contact the relevant provider (e.g. the insurer); or
for VMIA insurance policies visit the VMIA website to conduct a ‘Builder Search’.

How to check domestic building insurance details?

You can request information about a particular property from the domestic building insurance providers. Search online or contact the relevant provider.

If you have a VMIA-issued Domestic Building Insurance Certificate you can use the VMIA’s policy verification search. This search is only available for certificates issued by VMIA after 1 July 2015.

What happens if a builder becomes insolvent?

A builder cannot operate when insolvent. To find out if your builder is insolvent:

if the builder is a company, contact Australian Securities and Investments Commission (ASIC); or
if the builder is a sole trader or partnership, contact Australian Financial Security Authority (AFSA); or
if you are not sure whether the builder is a company, sole trader or partnership, contact both.

If you suspect your builder is insolvent we suggest you seek legal advice and contact the Building Information Line on 1300 55 75 59.

What happens if a builder enters voluntary administration?

Builders who go into voluntary administration, but not liquidation, may continue to provide services to clients. You should contact the administrators and deal with them as if they were the builder.

Summary

The cost of legal advice is much less than the cost of an uninformed decision, or paying a deposit before you are required to do so.

It is recommended that you seek legal advice before:

entering into a building contract;
ending the contract with your builder and employing another builder; or
paying and subcontractors.

If you would like any assistance in regard to Home Owner Warranty Insurance or your build contract, contact us at Wollerman Shacklock via admin@wslegal.com.au or give us a call on 03 9707 1155.