Statutory warranties and insurance


Statutory warranty

The Building Act provides a statutory warranty for building work on a residential building that requires a building approval and has a cost of $12,000 or more. This does not include structures you can’t live in such as swimming pools, driveways and fences.

The statutory warranty also doesn’t apply to work carried out by of for the Territory or the Commonwealth, or by a licensed owner–builder.

Provisions

Every contract for the sale of a residential building covered by the warranty, and every contract to carry out residential building work to which the builder is a party (excluding owner–builder licence holders) is taken to contain a warranty. It does not need to be written into the contract for the warranty to be valid. Any provision in a contract that limits the statutory warranty is void.

Under these provisions the builder warrants:

The statutory warranty operates for:

The completion day is taken to be the day the work is completed or the day the contract relating to the work ends, whichever is the later.

The statutory warranties apply in addition to any warranty that the seller or builder may have provided.

You do not have to be the original purchaser for the warranty to apply. If you purchase the building within the warranty period, you are entitled to the remainder of the warranty period. For example, if you buy a building four years after it is completed, you will have the remaining two years on the statutory warranty for structural elements.

Residential building insurance

Building work on residential apartment buildings and houses three storeys and below, excluding any storey used exclusively for carparking, must also be covered by complying residential building insurance.

This is sometimes referred to as warranty insurance or builder’s warranty insurance, but it includes coverage for more than the statutory warranty, including subsidence and other matters.

A complying policy is either:

It is the responsibility of the builder to obtain the appropriate insurance and to provide the land owner with evidence of the insurance. If you are engaging a builder, you should check that all details on the insurance policy, insurance certificate or fidelity certificate are complete and accurate, including the cost of the work and the name of the builder.

If the work requires residential building insurance, the building certifier must be satisfied there is a complying residential building insurance policy for the work before the certifier can issue a commencement notice to the builder.

If you need to make a claim against the insurance, the person who issued the policy is not entitled to avoid liability under a complying residential building insurance policy only because the policy was obtained by misrepresentation or nondisclosure by the builder.

Like the statutory warranties, the insurance granted insures the owner and the owner’s successors in title should the building be sold or transferred to another party.

If things go wrong

In the unfortunate situation where there is a dispute between you and your builder or other practitioner, there are options for you to resolve your dispute or make a complaint.

More information

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