5 common misconceptions residential builders and contractors have

Close up of industrial bricklayer installing bricks on construction site

By Kelvin Keane | Nexus Law Group Consulting Principal – Sydney

I come across a number of builders and contractors who operate under a misunderstanding of what their contractual and legal requirements are.

This is not always their fault as the regulation around home building can be quite complex and difficult to understand and it changes regularly.

Here are 5 tips statements I have heard on issues which are misunderstood:

  1. I do not need to provide home warranty insurance (HBCF Certificate) to owner builders.

The law provides that for all residential building contracts over $20,000 a HBCF Certificate of insurance is to be provided by the licenced contractor to the home owner.

There are no longer any exclusions for owner builders. Previously owner builders were required to purchase home warranty insurance cover if they sold the house within the warranty period but that is no longer a requirement so if you are a builder or contractor undertaking residential building work and have a contract with an owner builder over $20,000, you must provide HBCF cover.

  1. I do not need to provide a HBCF Certificate if I undertake the work at one site with several contracts under the $20,000 limit.

The law provides that where two or more contracts for work are undertaken at the one site, the total of all the contracts is the amount used as the calculation as to whether a HBCF certificate is required. This does not apply where there has been a significant time period between contracts.

If you have a dispute and it is found that a HBCF Certificate was required and it was not provided then your rights to recover damages or loss are limited by law.

  1. I can trade as a company using my individual contractor’s licence.

Some builders and contractors trade as a company but use their personal contractor’s licence as the licence covering the work. The company name and ACN number is used on documents such as contracts and invoices but the individuals licence number is also used on those documents. This is illegal and considered to be unlicenced contracting as the party that is entering into the contract must be the one who holds the licence.

If you are trading as a company to undertake residential building work then the company must have a licence. This applies not only to builders but all trades in the industry. If you are found to be an unlicenced contractor then your rights to recover loss or damages are also limited by law.

  1. I can lend a licence to another person to use on their job.

Yes, you can, but the law requires the holder of a licence to perform a number of duties in relation to the use of the licence and for the building work documentation to correctly reflect the parties holding the licence.

Where you have agreed for your licence to cover the work you will also ultimately be liable for any failure by the person using your licence to complete the work or for the cost of rectifying defects.

  1. I only need to issue a variation in writing where I am charging an additional cost.

A variation is any change to the original contract so even where a change to the contract does not incur an additional charge the change must be identified in writing and signed by the owner and builder. By doing this you protect yourself from any false claims down the track that the work is defective because it does not comply with the plans and specifications. If its not in writing it is your word against theirs.

If you have any questions, contact Kelvin Keane at [email protected] or telephone +61 (2) 9016 0141

This publication is © Nexus Law Group and is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.