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ESSENTIAL INFORMATION FOR HOME OWNERS AND HOME BUYERS

Five essential points to keep in mind

  1. If you are about to sign a home building contract, always have it checked by a specialist building and property lawyer before signing it. Our experience has been that 50% of clients who seek a home building contract review from us before signing it, decline to contract with the builder when they are made aware of unforseen problems with the legal documents.
  2. Read the building contract documents. This takes time. You should carefully read; the building contract booklet, specification, inclusions lists and special conditions of contract, local council development consent documents and criteria, examine the architectural, structural engineering and hydraulic engineering plans, and have a proper understanding of these legal documents. A specialist lawyer can explain these documents to you.
  3. Who are you contracting with? What is the builder’s past and present financial status. Has the builder been involved in a building dispute before? Information can be obtained from the NSW Office Of Fair Trading.
  4. Is the builder properly licenced? Unlicenced contracting is very common. Again, the NSW Office Of Fair Trading can be requested to provide information and advice.
  5. Many people involved in disputes say, ‘if only I had known there were solicitors who specialised in this area of law. I would have asked for advice prior to signing the documents’. Protect yourself by obtaining legal information and advice before conducting business with a building contractor.

Legislation and Regulations – Important Disclaimer
*The following are extracts from the Home Building Act (NSW) 1989 and Home Building Regulation 2004 as at 6 July 2012. Always check for any changes or updates to the following. It is provided as an example only for further investigation as to the current law. Before relying upon the following. We recommend using the Australasian Legal Information Institute website http://www.austlii.edu.au/ to check for any recent amendments to legislative Acts and Regulations.

 

HOME BUILDING ACT (NSW) 1989

As at 6 July 2012

Selected parts of the Home Building Act (NSW) 1989 that apply to home building disputes.

 

4 Unlicensed contracting
(1) A person must not contract to do:

(a) any residential building work, or
(b) any specialist work, except as or on behalf of an individual, partnership or corporation that is the holder of a contractor licence authorising its holder to contract to do that work. Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.

(2) The holder of a contractor licence who has contracted to do any residential building work must not contract with another person for the other person to do the work (or any part of the work) for the holder unless the other person is the holder of a contractor licence to do work of that kind. Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.

(3) The holder of a contractor licence must not contract with another person for the other person to do any work (or part of any work) for the holder for which insurance is required under this Act unless the other person is the holder of a contractor licence to do work of that kind. Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.

(4) A developer in relation to residential building work must not contract with another person for the other person to do that residential building work on behalf of the developer unless the other person is the holder of a contractor licence authorising the other person to do work of that kind. Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.

(5) A person is not guilty of an offence against subsection (2), (3) or (4) if the person establishes that the person did all that could reasonably be required to prevent the contravention of the subsection.

7 Form of contracts
(1A) This section applies to a contract only if the contract price exceeds the prescribed amount or (if the contract price is not known) the reasonable market cost of the labour and materials involved exceeds the prescribed amount. The
"prescribed amount" is the amount prescribed by the regulations for the purposes of this section and is inclusive of GST.

(1) A contract must be in writing and be dated and signed by or on behalf of each of the parties to it.

(2) A contract must contain:
(a) the names of the parties, including the name of the holder of the contractor licence shown on the contractor licence, and
(b) the number of the contractor licence, and
(c) a sufficient description of the work to which the contract relates, and
(d) any plans and specifications for the work, and
(e) the contract price if known, and
(f) any statutory warranties applicable to the work, and
(g) in the case of a contract to do residential building work—a conspicuous statement setting out the cooling-off period that applies to the contract because of section 7BA.

(3) The contract must comply with any requirements of the regulations.

(4) If the contract price is known, it must be stated in a prominent position on the first page of the contract.

(5) If the contract price is not known or may be varied under the contract, the contract must contain a warning to that effect and an explanation of the effect of the provision allowing variation of the price. The warning and explanation must be placed next to the price if the price is known.

(6) A contract must not include in the contract the name of any person other than the holder of a contractor licence as, or so it may reasonably be mistaken to be, the holder’s name.

(7) This section does not prevent the holder of a contractor licence with a business name registered under the Business Names Registration Act 2011 of the Commonwealth from also referring in such a contract to the business name.

8 Maximum deposits

(1) A person must not:
(a) demand or receive a payment on account before work is commenced under a contract to do residential building work, or
(b) enter into a contract under which the person is entitled to demand or receive a payment on account before residential building work is commenced,
if the amount of the payment is prohibited by this section. Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.

(2) The amount of the payment is prohibited if:
(a) the contract price is more than $20,000 and the payment is more than 5% of the contract price (or, where another percentage is prescribed by the regulations in respect of a particular kind of work, the percentage so prescribed), or
(b) the contract price is $20,000 or less and the payment is more than 10% of the contract price (or, where another percentage is prescribed by the regulations in respect of a particular kind of work, the percentage so prescribed).

(3) The regulations may make provision concerning how a contract price is to be determined for the purposes of this section.

12 Unlicensed work
An individual must not do any residential building work, or specialist work, except:

(a) as, or as a member of a partnership or an officer of a corporation that is, the holder of a contractor licence authorising its holder to contract to do that work, or

(b) as the holder of an owner-builder permit authorising its holder to do that work, or

(c) as an employee of the holder of such a contractor licence or permit.

Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.
 

13 Unqualified residential building work

(1) An individual must not do any residential building work, except:
(a) as the holder of an endorsed contractor licence, a supervisor or tradesperson certificate or an owner-builder permit, authorising its holder to do that work, or
(b) under the supervision, and subject to the direction, of the holder of an endorsed contractor licence or supervisor certificate authorising its holder to supervise that work.

Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.

(2) If the same facts establish an offence under this section and an offence under another provision of this Act or under any other Act or law, an individual is not liable to be convicted of both offences.

18B Warranties as to residential building work

The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work:

(a) a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract,

(b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new,

(c) a warranty that the work will be done in accordance with, and will comply with, this or any other law,

(d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time,

(e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that

is reasonably fit for occupation as a dwelling,

(f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder’s or person’s skill and judgment.

20 Issue of contractor licences

(1) The Director-General must refuse an application for a contractor licence if:
(a) the Director-General is not satisfied that the applicant is a fit and proper person to hold a contractor licence, or
(b) the applicant is a mentally incapacitated person, or
(c) the applicant is disqualified by this Act or the regulations from holding a contractor licence.

Under section 6 of the applied Act (within the meaning of section 19) an application for the grant of a contractor licence may be made by any individual aged 18 years or more, by any partnership or other association whose members are all individuals aged 18 years or more or by any corporation.

(1A) Without limiting subsection (1) (a), in determining whether an applicant is a fit and proper person to hold a licence the Director-General is to consider whether the applicant is of good repute, having regard to character, honesty and integrity.

(2) The regulations may fix or provide for the Director-General to determine additional standards or other requirements that must be met before any contractor licence is issued or before a contractor licence of a particular kind is issued.

(3) The Director-General must refuse an application for a contractor licence if:
(a) the Director-General is not satisfied that any such requirement would be met were the contractor licence to be issued, or
(b) the Director-General is not satisfied with the applicant’s proposed arrangements for supervision of the work which the contractor licence will authorise the applicant to contract to do, or
(c) the Director-General is not satisfied that the applicant has complied or is able to comply with any requirements of Part 6 or any requirements of the regulations relating to insurance applicable to the doing of work of a kind proposed to be authorised by the contractor licence.

(4) (Repealed)

(5) A decision of the Director-General relating to determining standards or other requirements under subsection (2) cannot be reviewed by the Administrative Decisions Tribunal in an application for review made under this or any other Act.

(6) Without limiting this section, the Director-General may refuse an application for a contractor licence if the Director-General is of the opinion that it is in the public interest to do so on any of the following grounds:
(a) an employee or proposed employee of the applicant is disqualified from holding a contractor licence, has had an application for an authority refused on a ground relating to his or her character, honesty or integrity or has had an authority cancelled or suspended on any disciplinary ground,
(b) there are reasonable grounds to believe that the application has been made with the intention of avoiding disclosure of any relevant past misconduct of the applicant or a close associate of the applicant,
(c) the Director-General considers that a close associate of the applicant who would not be a fit and proper person to hold a contractor licence exercises a significant influence over the applicant or the operation and management of the applicant’s business.

48D Investigation of dispute

(1) The Director-General may appoint a member of staff of the Department of Fair Trading to investigate any matter that has given rise to a building dispute.

(2) After completing an investigation, an inspector must cause a written report to be prepared on the results of the investigation and cause copies of the report to be given to the complainant and the person with whom the complainant is in dispute.

(3) For the purposes of making an investigation in relation to common property in a strata scheme (within the meaning of the Strata Schemes Management Act 1996 ), an inspector may enter and inspect the common property at the request of the owner of a lot in the scheme concerned.

(4) The owners corporation, any person who has exclusive use of the common property concerned and any caretaker or manager of the common property are to provide such assistance as is reasonable to enable an inspection of that common property to be carried out by an inspector under this section.

(5) For the purposes of making an investigation in relation to association property in a scheme (within the meaning of the Community Land Management Act 1989 ), an inspector may enter and inspect the association property at the request of the proprietor of a lot in the scheme concerned.

(6) The relevant association that has the use of the association property concerned and, if the use of that association property has been restricted to a particular proprietor or proprietors, any such proprietor, and any caretaker or manager of the association property are to provide such assistance as is reasonable to enable an inspection of that association property to be carried out by an inspector under this section.

(7) For the avoidance of doubt, a person may be authorised under section 126 by the Director-General for the purposes of this section.

48I Application for determination of building claim

(1) Any person may apply to the Tribunal for the determination of a building claim.

(2) A building claim may be withdrawn by the claimant at any time.

(3) If, immediately before a building claim was made, the claimant was subject to the requirements of a rectification order under Division 2, the building claim may not be withdrawn except with the leave of the Tribunal.

(4) When granting leave to the withdrawal of a building claim referred to in subsection (3), the Tribunal may restore the rectification order referred to in that subsection.

48K Jurisdiction of Tribunal in relation to building claims

(1) The Tribunal has jurisdiction to hear and determine any building claim brought before it in accordance with this Part in which the amount claimed does not exceed $500,000 (or any other higher or lower figure prescribed by the regulations).

(2) The Tribunal has jurisdiction to hear and determine any building claim whether or not the matter to which the claim relates arose before or after the commencement of this Division, except as provided by this section.

(3) The Tribunal does not have jurisdiction in respect of a building claim relating to building goods or services that have been supplied to or for the claimant if the date on which the claim was lodged is more than 3 years after the date on which the supply was made (or, if made in installments, the date on which the supply was last made).

(4) The Tribunal does not have jurisdiction in respect of a building claim relating to building goods or services that are required under a contract to be supplied to or for the claimant on or by a specified date or within a specified period but which have not been so supplied if the date on which the claim was lodged is more than 3 years after the date on or by which the supply was required under the contract to be made or, if required to be made in installments, the last date on which the supply was required to be made.

(5) The fact that a building claim arises out of a contract that also involves the sale of land does not prevent the Tribunal from hearing that building claim.

(6) The Tribunal does not have jurisdiction in respect of a building claim arising out of a contract of insurance required to be entered into under this Act if the date on which the claim was lodged is more than 10 years after the date on which the residential building work the subject of the claim was completed.

(7) The Tribunal does not have jurisdiction in respect of a building claim arising from a breach of a statutory warranty implied under Part 2C if the date on which the claim is lodged is after the end of the period within which proceedings for a breach of the statutory warranty must be commenced (as provided by section 18E).

(8) The Tribunal does not have jurisdiction in respect of a building claim relating to:
(a) a contract for the supply of goods or services to which none of subsections (3), (4), (6) and (7) applies, or
(b) a collateral contract, if the date on which the claim was lodged is more than 3 years after the date on which the contract was entered into.

(9) This section has effect despite section 22 of the Consumer, Trader and Tenancy Tribunal Act 2001 .

92 Contract work must be insured

(1) A person must not do residential building work under a contract unless:
(a) a contract of insurance that complies with this Act is in force in relation to that work in the name of the person who contracted to do the work, and
(b) a certificate of insurance evidencing the contract of insurance, in a form prescribed by the regulations, has been provided to the other party (or one of the other parties) to the contract.

Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.

(2) A person must not demand or receive a payment under a contract for residential building work (whether as a deposit or other payment and whether or not work under the contract has commenced) from any other party to the contract unless:
(a) a contract of insurance that complies with this Act is in force in relation to that work in the name of the person who contracted to do the work, and
(b) a certificate of insurance evidencing the contract of insurance, in a form prescribed by the regulations, has been provided to the other party (or one of the other parties) to the contract.

Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.

(3) This section does not apply if the contract price does not exceed the amount prescribed by the regulations for the purposes of this section or (if the contract price is not known) the reasonable market cost of the labour and materials involved does not exceed that amount.

(4) If the same parties enter into two or more contracts to carry out work in stages, the contract price for the purposes of subsection (3) is taken to be the sum of the contract prices under each of the contracts.

(5) (Repealed)

(6) To avoid doubt, this section extends to residential building work that is also owner-builder work.

95 Owner-builder insurance

(1) An owner-builder must not enter into a contract for the sale of land on which owner-builder work is to be or has been done by or on behalf of the owner-builder unless a contract of insurance that complies with this Act is in force in relation to the work or proposed work.

Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.

(2) An owner-builder must not enter into a contract for the sale of land on which owner-builder work is to be or has been done by or on behalf of the owner-builder unless a certificate of insurance evidencing the contract of insurance, in a form prescribed by the regulations, is attached to the contract. Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.

(2A) A person who is the owner of land, and to whom an owner-builder permit was issued under Division 3 of Part 3 after the commencement of this subsection and not more than 6 years previously must not enter into a contract for the sale of the land in relation to which the permit was issued unless the contract includes a conspicuous note:
(a) that an owner-builder permit was issued under Division 3 of Part 3 to the person in relation to the land, and
(b) that the work done under that permit was required to be insured under this Act.

Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.

(3) This section does not apply:
(a) to a sale of the land more than 6 years after the completion of the work, or
(b) if the reasonable market cost of the labour and materials involved does not exceed the amount prescribed by the regulations for the purposes of this section, or
(c) if the owner-builder work is of a class prescribed by the regulations.

(4) Subject to subsection (4A), if an owner-builder contravenes subsection (1) or (2A) in respect of a contract, the contract is voidable at the option of the purchaser before the completion of the contract.

(4A) A contract is not voidable as referred to in subsection (4) if:
(a) the owner-builder obtained a certificate of insurance evidencing a contract of insurance that complies with this Act in relation to the work or proposed work before entering the contract concerned, and
(b) before completion of the contract, the owner-builder served on the purchaser (or an Australian legal practitioner acting on the purchaser’s behalf) a certificate of insurance, in the form prescribed by the regulations, evidencing that contract of insurance.

(5) (Repealed)

 

HOME BUILDING REGULATION 2004

Definition of “dwelling”-certain structures and improvements included

5 Definition of “dwelling”-certain structures and improvements included

For the purposes of the definition of "dwelling" in section 3 (1) of the Act, the following structures and improvements are declared to form part of a dwelling when constructed for use in conjunction with a dwelling:

(a) parts of a building containing more than one dwelling (whether or not the building is also used for non-residential purposes), being stairways, passageways, rooms, and the like, that are used in common by the occupants of those dwellings, together with any pipes, wires, cables or ducts that are not for the exclusive enjoyment of any one dwelling,

(b) parts of a building containing one dwelling only (where the building is also used for non-residential purposes), being stairways, passageways and the like which provide access to that dwelling,

(c) if non-residential parts of a building containing one or more dwellings give support or access to the residential part-the structural elements of the non-residential parts giving such support or access,

(d) cupboards, vanity units and the like fixed to a dwelling,

(e) detached garages and carports,

(f) detached decks, porches, verandahs, pergolas and the like,

(g) cabanas and non-habitable shelters,

(h) detached workshops, sheds and other outbuildings (but not jetties, slipways, pontoons or boat ramps and any structures ancillary to these exceptions),

(i) concrete tennis courts and the like,

(j) driveways, paths and other paving,

(k) retaining walls,

(l) agricultural drainage designed or constructed to divert water away from the footings of a dwelling or a retaining wall,

(m) fences and gates,

(n) ornamental ponds and water features, and other structural ornamentation, the construction or installation of which requires development consent.

 

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