Formerly known as the Home Warranty Insurance Scheme, the Home Building Compensation Fund (HBCF) is a consumer protection regime designed to act as a safety net for homeowners, and subsequent purchasers of a property, to protect against losses from defective and incomplete works resulting from a builder not honouring their contract due to:
- Disappearance; or
- Their builder’s licence being suspended for failing to comply with a money order made in favour of a homeowner by a Court or Tribunal.
A homeowner may lodge a claim under this scheme where they suffer a loss, such as financial loss or damage, as a result of a builder, tradesperson, owner-builder or developer, failing to complete work, failing to start work, or failing to fix defective work. The scheme will only apply where the homeowner cannot recover their losses, or the damage cannot be rectified.
In New South Wales, compliance with the HBCF regime is compulsory where the contract for building on a residential property exceeds $20,000.00, and requires builders to have insurance to protect against risk to the homeowner. This amount differs between jurisdictions, so it is important to check the threshold in the state in which you are building. The associated premium is added to the homeowner’s costs, and the cover lasts for up to six (6) years for structural defects, and two (2) years for non-structural defects.
A homeowner should ensure that a builder, who they are proposing to contract with, holds a valid Certificate of insurance in relation to the specific building project. Under the regime, it is important to distinguish between a certificate of insurance, and a certificate of eligibility. A certificate of eligibility merely shows that a builder has the entitlement to apply for a certificate of insurance. It is vital for homeowners to ensure that the builder has a project-specific certificate of insurance, showing the name of the builder and homeowner, the value of the contract and the address of the property. A homeowner can check their builder’s insurance, and any previous claims against that builder, on the Certificates Register on the HBCF website (www.hbcf.nsw.gov.au).
Residential building works that are exempt from the HBCF regime are:
- New multi-storey residential buildings that have a rise of more than three storeys and contain at least two separate dwellings;
- Stand-alone contracts for internal painting, installation of built-in furniture, work on tennis courts and work relating to water features or ponds; and
- Contracts carried out by certain Government departments.
The HBCF is in place to help protect homeowners. It is vital that homeowners show the initiative to check the Certificates Register, and confirm that their builder has the necessary certificate of insurance prior to contracting with them, to ensure they obtain the intended benefit of this regime.
Should you require any particular advice on this scheme in New South Wales, then please contact Etheringtons Solicitors on (02) 9963 9800.
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