NSW Owner built house with no insurance

[Sanjaya Shrestha]

I am a new owner of a property which was built by an owner builder. We are having the dispute with the vendor for claim of defects according to warranties provided by Home Building Act 1989 for the defects on the house.

The property does not have insurance because of the note in the contract of Sale document of the property which states that
"The Parties agree that the following warning set out in 95(2) of the Home Building Act 1989 (NSW) applies to this sale:
b) The work done under the owner-builder permit is not required to be insured under Home Building Act 1989 (NSW) unless the work was done by a contractor of the owner-builder is worth more than $20,000."

During the dispute with defects on the house, the vendor defended the case on defects in writing that she was just owner-builder but she did not have any role during the construction of the house as she hired Project Manager who was in charge of hiring the tradesmen, private certifier and to oversee the building work. She also stated that she paid $35,000 to the Project Manager.

Please advise if payment of $35,000 will void warning notice on the basis that the vendor makes a false statement where work done by a contractor is more than $20,000.

 

[Tripe]

Approach council and find the planning application
It will list the planned $$$$ value of works.

 

[Sanjaya Shrestha]

Thanks for your reply.
The Value of Work is $250,000 in the Construction Certificate document which we collected from the council after purchase. During the purchase, the vendor solicitor confirmed that none of the works with each contractor is above $20,000. Could it be possible if the owner-builder engaged any work with multiple contractors so as not to exceed $20,000? As the owner-builder said after the purchase that she hired Project Manager by paying $35,0000, I would like to know if warning notice will be false. I am really surprised how the owner-builder can build the house worth around 500K (for house only based on the market value during the purchase) without insurance stating that insurance is not required for work below $20,000.

 

[Rob Legat - SBPL]

There's a few factors here, reading as an outside (I don't practise in NSW):

1. The wording in the contract, as you've provided, may possibly not be sufficient for s95(2) of the Act. The contract requires a "conspicuous note" stating that an owner-builder permit was issued, the date it was issued, and that insurance is required under the Act unless the work was done by a contractor to the owner-builder.

2. The threshold (as you say, $20,000) is labour and materials at reasonable market value - not just the labour cost.

3. Paying a project manager who co-ordinates sub-contractors is considered residential building work, and the $35,000 would appear to trigger the requirement.

4. However, from what I can see, it's not a requirement on the owner-builder to be insured (it appears they simply cannot), but rather that the relevant contractor must be insured.

5. Further, you've stated the owner claimed she had 'no part' in the construction. Does that mean she took no part in the paying of the individual contractors their 'less than $20,000' each? If so, I think it may be safe to say she paid the project manager, and the project manager paid the contractors - and by extension, her contract was with the project manager for the whole cost and the it was the project manager who held the contracts with the tradespersons. In actuality, that would appear to me not to be an owner-builder situation but rather more along the lines of engaging a builder to do the work. At an absolute guess, I would think she's engaged a friend/family member to do the work and tried to get around the requirements by claiming it was an owner-builder situation.

 

[Sanjaya Shrestha]

Thank you for your valuable feedback, Rob. I really appreciate it.

1. My apology. I had reported briefly in the above note. There is a conspicuous note. However, no insurance cover through HBCF was provided as it was stated in the contract that none of the works was above $20,000.

2. True. Could it be possible that the work is divided into smaller contracts so that each contract does not cost $20,000? For example, Kitchen cabinet to one contractor/tradesperson, Kitchen island to another contractor/tradesperson and accordingly build a whole house.

3. True. We were unknown of the hiring of Project Manager during the purchase of the house. It was disclosed by the vendor when submitting the defence document to NCAT to avoid warranty claims against the defects on the house.

4. True.

5. On the development application and certification, the Vendor is referred to as Owner-Builder. No documents were signed by Project Manager. I am not sure if it is against Special exemptions where it is mentioned that "Owner builders cannot apply for an exemption on behalf of contractors that they engage to do work on their behalf." Please refer the link HBC exemptions

 

[Rob Legat - SBPL]

My take on the arrangements (which could be wrong, I'm just going off a logical approach at face value) is that the home builder scheme is designed so that owner-builders aren't covered - accepted that they may get a some specialist in from time to time do a particular aspect of the building work. For example, some specialty finishing aspect that is best done by a craftsperson.

This doesn't appear to be what has happened in your instance. Rather, it appears the 'owner-builder' wasn't actually an 'owner-builder', they were an owner who contracted someone else to arrange the building. In other words, it appears the 'owner-builder' status was a sham.

 

[Sanjaya Shrestha]

Thanks again Rob for your reply. As I said above, the owner-builder had assigned a Project Manager (for me, it should be Tbuilder for building works irrespective of terminology) to whom $35,000 was paid which was claimed in the defence document for NCAT matter whereas it was notified that none of the works was above $20,000. Now, I am really surprised to find that the Project Manager had neither builder or any tradesman license. The Manager himself had owner-builder permit where he built his house at 2011 and the property in a dispute was built in the gap of 3 years at 2014. I am not sure if Home Building Act 1989 states that any building work above $20,000 requires a valid license.