Building or renovating your family home is the biggest investment most people will make in their lives. Domestic building insurance provides cover for homeowners who are building or renovating in Victoria, but what is covered and when will it apply? Below we answer a few frequently asked questions.
If you have any questions about Domestic Building Disputes, your Building Contract or Domestic Building Insurance or you are having issues with your builder regarding incomplete or defective works, our Property & Disputes Lawyers can help. Contact us today on + 61 3 9822 8588.
What building projects are covered by domestic building insurance?
The Ministerial Orders for Domestic Building Insurance made under section 135 of the Building Act 1993 (Vic) (‘the Act’) requires a builder who carries out or manages or arranges the carrying out of domestic building work under a domestic building contract in which the contract price is more than $16,000 (including labour and materials) is required to be covered by domestic building insurance.
It is an offence to carry out work as a building practitioner without the required insurance or claim to be insured when uninsured.
What does domestic building insurance cover?
Domestic building insurance generally covers defective or incomplete works.
Upon practical completion of the construction, domestic building insurance provides cover for the construction defects and incomplete works which is limited to:
- 20 per cent of the building contract price up to a maximum of $200,000 (for policies issued before 1 July 2014) to fix structural defects for six years;
- 20 percent of the building contract price up to a maximum of $300,000 (for policies issued on or after 1 July 2014) to fix structural defects for six years; and
- non-structural defects for two years.
What happens if the project is not completed and does not reach practical completion?
If construction is incomplete, the domestic building insurance policy will provide cover to continue and complete the construction, which will be subject to the monetary limits above.
Can a builder enter into a domestic building contract before a policy is issued?
A builder may enter into an insurable domestic building contract before a policy is issued, if the contract contains a written condition stating that:
- a policy that complies with the relevant Act is required and covers the building work carried out under the contract to be issued before the builder may enforce any provision of the contract;
- requires the policy to be issued before any domestic building work is carried out under the contract;
- no money (including deposit money) is payable under the contract before that policy is issued; and
- requires the builder to ensure that a copy of the policy is provided to the building owner within 7 days after it is issued.
How do I know if my project is covered by domestic building insurance?
The Builder should provide you with a copy of the Certificate of Currency and insurance policy covering the property before commencing work or accepting payment from you, (including any deposit).
Works should not commence and no deposit should be paid to the Builder until these documents are provided. It is particularly important that as an owner you don’t pay the deposit until such evidence of insurance is provided to ensure that you are covered where the Builder may, for example, go into liquidation.
When can I make a claim under the domestic building insurance?
A claim against the domestic building insurance can only be made where:
- If the builder is an individual, the builder dies, disappears or becomes insolvent;
- If the builder is an organisation and that organisation ceases to exist or becomes insolvent;
- For policies issued on or after 1 July 2015, the builder has failed to comply with a Tribunal or Court Order.
Therefore, the builder is required to honour their workmanship and rectify building defects except in exceptional circumstances.
To claim under the domestic building insurance, you will need to make a claim directly through the insurer.
How do I find out who the insurer is if my builder (individual or company) has become insolvent so there is no one I can contact?
Victorian Managed Insurance Authority (VMIA) is the Victorian Government’s designated insurer and risk adviser, that provides cover for domestic building insurance in Victoria.
What do I do if the builder does not rectify the defects or incomplete works?
If the Builder is still in business, homeowners generally do not have access to insurance to fix or complete the building works. There are remedies available to you if the works are defective or incomplete and they will vary depending on your circumstances, the building contract you have entered into and the severity of the incomplete or defective works.
If you have any questions about Domestic Building Disputes, your Building Contract or Domestic Building Insurance or you are having issues with your builder regarding incomplete or defective works, our Property & Disputes Lawyers can help.
Our Property & Disputes lawyers have extensive experience in dealing with all aspects of domestic building matters including disputes with builders, claiming on a domestic building insurance policy or otherwise advising on your rights as an owner in relation to a domestic building contract.