QBBC Home Warranty Insurance – part 1

Part 5 of the Queensland Building and Construction Commission Act 1991 (Act) establishes a statutory insurance scheme, the purpose of which is in certain situations to provide assistance to consumers of residential construction work.   As part of the building process, the builder pays a premium to the QBCC to insure the construction work, the amount of the premium being included as part of the contract price and paid to the QBCC before the residential construction work commences.

However, many consumers of residential construction work are uncertain about what is actually covered by, and when they may be entitled to make a claim under, the QBCC Home Warranty Insurance scheme.

What kind of building is and is not covered by the QBCC Home Warranty Insurance scheme?

Under section 67WC of the Act, primary insurable work is defined as building work valued at more than $3,300.00 (as at the time of writing) carried out by a licensed contractor, that building work, including for example:

  • construction of a residence or related roofed building;
  • work for anything attached or connected to a residence or related roofed building that requires building or plumbing approval;
  • the erection, construction or installation of a swimming pool;
  • associated insurable work such as fencing, landscaping, electrical work, air-conditioning, driveways or paths, solar power units and the like.

67WD of the Act defines associated insurable work as any additional work that may be carried out under a contract for primary insurable work and is carried out on the site of the residence or related roofed building.  In other words, if the associated insurable work is not carried out under a contract for primary insurable work then the associated insurable work is not eligible for assistance under the QBCC Home Warranty Insurance scheme (see section 67WB(3) of the Act).  However, the exclusions under the QBCC Home Warranty Insurance scheme do not end there.

67WE of the Act defines residence as a structure fixed to land and used for residential purposes as follows:

  • a single detached dwelling;
  • one or more attached dwellings that are separated by a common wall, such as a townhouse;
  • a building of not more than three storeys containing two or more separate residential units.

For example, while a unit in a six-pack walk up may be covered under the QBCC Home Warranty Insurance scheme, a unit in a high-rise building is not covered, even though all the units in the building are used for residential purposes.

As the QBCC Home Warranty Insurance scheme is intended to assist homeowners, those involved in commercial ventures are not covered.

For example, no assistance is provided to a person who enters into one or more contracts, in force at the same time, to construct three or more dwellings or living units.

When does coverage under the QBCC Home Warranty Insurance scheme commence and end? 

Under section 68H(1) of the Act, cover under the QBCC Home Warranty Insurance scheme only comes into force if a consumer enters into a written contract for the carrying out of residential construction work and the contract bears the licence number of a QBCC licensed contractor.

If the building contractor does not hold a QBCC licence, a consumer will not be covered under the QBCC Home Warranty Insurance scheme unless, among other things, prior to entering into the contract the building contractor made a representation that would cause a reasonable person to believe the residential construction work was covered by the statutory scheme or there was a fraudulent representation about being licensed.

Pursuant to section 68H(2) of the Act, cover applies whether or not the insurance premium has been paid or a notice of cover issued, but if the premium has not been paid then the QBCC may recover the amount of the premium as a debt from the consumer.

Coverage under the QBCC Home Warranty Insurance scheme can only be cancelled if:

  • the residential construction work has not started; and the residential construction contract has been terminated; and less than one year has elapsed since when the residential construction contract was signed; and the deposit has been refunded.

Coverage under the QBCC Home Warranty Insurance scheme is for a period of six years and six months from the earliest of when the:

  • premium is paid; contract is entered into; residential construction work commenced.

The period of coverage is extended where the residential construction work takes longer than six months to complete.  respect of defects, strict time limits apply for making a claim depending on whether the defect complained of is structural or non-structural.

What is the monetary value of the cover under the QBCC Home Warranty Insurance scheme? 

The type of claims that can be made for loss associated with work that is defective or not completed are not just the costs for completing the residential building work or rectification of defects, but can also include:

  • pre-completion damage caused by fire, storm theft or vandalism;
  • reimbursement for accommodation, removal and storage costs.

A sliding scale is used to calculate the premium to be paid for coverage under the QBCC Home Warranty Insurance scheme, based on the insurable value of the residential construction work to be performed.

For example, as at the time of writing and by reference to the 1 August 2019 New Home Construction Insurance Premium table, the standard premium payable for an insurable value up to $300,000.00 under a new residence construction contract was $2,073.10.

The standard premium payable for an insurable value up to $2,000,000.00 under a new residence construction contract was $17,204.35.  That said, a monetary cap applies to the value of a claim made upon the QBCC Home Warranty Insurance scheme, regardless of the insurable value of the residential construction work.

For example, the maximum value of a claim for non-completion under a new residence construction contract where a standard premium has been paid is $200,000.00, or $300,000.00 if optional additional coverage has been taken out pursuant to the terms of section 67Z of the Act.

The aforementioned amounts include alternative accommodation, removal and storage costs.  The same amounts apply in relation to a claim made pursuant to unremedied defects.

When can a claim be made under the QBCC Home Warranty Insurance scheme?

Under section 67X of the Act, the purpose of the QBCC Home Warranty Insurance scheme is to provide assistance to consumers of residential construction work for loss associated with work that is defective or not completed.

Non-completion

To make a claim for incomplete residential construction work, the contract must first have been validly terminated, either under the provisions of the contract or in reliance upon common-law entitlements.

For example, the builder abandons the works or unreasonably fails to complete the work.

Other grounds for a non-completion claim under the QBCC Home Warranty Insurance scheme include the contract terminating because of the death of a licensed contractor, the licensed contractor company being deregistered or the licensed contractor individual having his or her licensed cancelled.

A non-completion claim must be lodged within three months after the contract comes to an end.

Defects

A claim under the QBCC Home Warranty Insurance scheme can be made for un-remedied defective work.  Notice of the alleged defective work must first be provided to both the builder and the QBCC and the builder must be given a reasonable opportunity to comply with a notice to rectify issued by the QBCC.

Only if the builder fails to rectify the defects will a claim made in reliance upon the QBCC Home Warranty Insurance scheme be accepted.

Strict time limits apply regarding defective building work in that a complaint form must be lodged within three months of noticing a structural defect or within seven months of the completion date of the residential building work for non-structural defects.

Takeaways

QBCC Home Warranty Insurance is a statutory scheme providing basic protections to consumers of residential construction work. Given the monetary cap on the value of a claim under the QBCC Home Warranty Insurance scheme, consumers need to be vigilant in monitoring the residential construction work as it is performed and to act promptly to protect their legal rights.

Further references

Legislation

Queensland Building and Construction Commission Act 1991

Related articles by Dundas Lawyers Gold Coast

Top ways to avoid a building dispute in Queensland

Implications of non-compliance with the Queensland Building and Construction Commission Act (Qld) 1991

Why you should not engage an unlicensed building contractor

Termination for incomplete construction work

Further information

If you need assistance regarding the QBCC Home Warranty Insurance scheme, please telephone me for an obligation free and confidential discussion.

  mitch brown lawyer
Mitch Brown
Dip.T.,BA.,LL.B.,MQLS.
Legal Practice Director
Telephone: (07) 5646 9174
Mobile: 0420 205 105
e: mbrown@dundaslawyersgc.com.au

 

 

Disclaimer

This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

 

Dundas Lawyers
Street Address Suite 12, Level 9, 320 Adelaide Street Brisbane QLD 4001

Tel: 07 3221 0013

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