To ensure home building laws reflected current practice and reduced any unnecessary red tape for the building industry, whilst providing consumers with appropriate protection, the Home Building Amendment Bill 2014 was introduced to the NSW Parliament on Tuesday 6 May 2014. The amendments were drafted following extensive consultation with the industry.
Of particular note are the following proposed amendments:
- the maximum deposit a builder can request before commencing works used to be capped at 5% for building work valued at more than $20,000 – this cap has now been increased to 10% (in line with the maximum cap for building work valued at less than $20,000). The reasoning behind this is that the 5% cap was not always sufficient to cover the costs of commencing a larger project.
- contracts for work valued at more than $20,000 must contain a progress payment schedule
- progress payments can be either for completion of specific stages of work (with each stage described in clear and plain language) or for work performed or costs already incurred (in which case there needs to be supporting evidence by way of invoices, receipts or other documents)
- the term “structural defect” (which gave homeowners particular rights) has been replaced by the new concept of a “major defect” (which could be structural OR non-structural, but nevertheless a major defect). A major defect is defined as a defect which is a major element of the building, with severe consequences (such as causing the building to be uninhabitable or unusable).
- for strata buildings undertaking building work, the term “completion of building work” (at which time the statutory warranty period commences) is defined to be the date an occupation certificate is issued that authorises the occupation and use of the whole of the building.
- a home owner who suffers loss arising from an apparent breach of a statutory warranty has a duty to mitigate that loss (that is, take reasonable steps to minimise the loss or damage) – this clarifies the home owner’s obligations
- a builder has extra protection where they have reasonably relied on instructions given to them by a relevant professional acting for the home owner and the professional is independent of the builder (such as an architect or engineer engaged by the home owner).
- In addition to ordering a builder to rectify defective or incomplete work, Fair Trading inspectors will be able to specify staged dates for different work to be completed.
- imprisonment for up to 12 months will now be a sentencing option for repeat offenders who engage in unlicensed contracting, for seeking work by or on behalf of unlicensed persons, and for home warranty insurance offences.
It is hoped that the amendments will result in consumers being better informed before signing a contract, and assisting both parties with understanding their respective rights and obligations under the contract (which of course would help reduce disputes).
The amendments will only apply to new residential building contracts entered into after the commencement of the legislation.
Please note that the amendments are still subject to parliamentary debate, which we expect will take place within the next week or so. We will update the blog accordingly.