The 2015 Home Building Changes and Builders Insurance

What’s changed and how will it affect your business?

If you are a builder or tradesperson in NSW, the recent changes in the home building laws may impact your compliance obligations as a business operator. These include licence requirements, insurance coverage and even the contract terms and conditions you use each day in your business with clients.

The changes were introduced in two phases, January 2015, and March 2015.  That means all the new laws are now fully in force and must be followed.

To help assess the level of impact this may have on your business, we have summarised some of the key changes below.

Tradesperson Licensing Changes in NSW

The threshold has changed for builders and general tradesmen when it comes to needing a licence.

Previous to January 2015, most tradesmen needed a licence for jobs over $1,000. This has now increased to jobs over $5,000 including materials and labour.

So what does this mean?

For some tradesmen whom previously were restricted in the types of jobs they could do based on the $1,000 limit (e.g. handyman), they can now do a lot more, say like painting a house, a small deck or tiling – so long as the job value is below $5,000.

Specialty trades like air conditioning, plumbing, and electrical continue to require a licence regardless of the value of the job.

The laws for operating without a licence have also toughened. Unlicensed contracting work or failure to carry statutory insurance cover comes with consequences of up to 12 months in prison for second and subsequent offences.

 The Home Warranty Insurance Scheme

  • The Home Warranty Insurance Scheme has also been changed. It is now referred to as the Home Building Compensation Fund.
  • This insurance must be obtained where the contract price for work is over $20,000 or, if the contract price is not known, the reasonable market cost of the labour and materials involved is over $20,000. There is no legal requirement to obtain this insurance for jobs below this amount.
  • Consumers can now check on tradies and builders to make sure they have proper insurance cover and if they have any claims on them through a new public register on www.hbcf.nsw.gov.au.

Whilst the contract value for when this insurance must be obtained has not changed, as you can see with the new public register in place, it will be much riskier to undertake these larger jobs without obtaining insurance under the Home Building Compensation Fund.

Major Contractual Changes

  • The threshold for more detailed contracts has been raised from $5,000 to $20,000. Home building under $20,000 must still be written under a minor works contract.
  • The cap on deposits for work that goes over $20,000 has increased from 5% to 10%. This means as a builder or tradesperson the maximum amount deposit you can ask a customer to pay is 10%, no matter what the job value.
  • Contracts of over $20,000 require a progress payment schedule and a termination clause.
  • Before entering into a contract with consumers, a mandatory consumer building guide must be given to them.

What should you do now?

Get compliant! Now is certainly a good time to be consulting with the right business professionals to understand if and how these changes impact you. Failure to do so may be extremely risky and costly to your business.

The key professionals you may need to speak with include accountants, lawyer or terms and conditions specialists to ensure your contracts are updated in accordance with the new laws. Also a tradesmen insurance broker to assess what insurance cover changes you may need as a result.

If you don’t have these contacts or are not sure where to start, you can try the business service providers listed here on the Tradebusters Academy.  They all have a specialty in dealing with tradies and helping those in the trade and construction industry succeed.

For more detailed information on the recent building law changes, please also visit the NSW Fair Trading website or contact them on 13 32 20.

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