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Know Your Rights – NSW Building Laws in a Nutshell – Sept 2020 Update

NSW Building Laws

Our last article covering NSW building laws has proven to be a popular one, so we are updating it to make sure it covers the changes made by NSW Fair Trading since we first published it.

NSW Fair Trading is the NSW Government agency responsible for protecting consumers under the state’s home building laws.

They regulate residential building work – building or trade work on single dwellings, villas, houses and home units – under the Home Building Act 1989.

NSW homeowners are covered by a range of laws created to ensure that the builders they employ are licensed, insured and competent, and that homeowners are protected in the event of a problem or disagreement.

Before you sign a contract and before any work starts, there are several areas you should be looking at:

Licensing Requirements

  • For residential building work valued at more than $5,000, the tradespeople and builders carrying out that work must be licensed by NSW Fair Trading. You can check their licence on the NSW Fair Trading website here or call NSW Fair Trading on 13 32 20.
  • A licence is always required for specialist work like gas fitting, air conditioning and refrigeration, plumbing and electrical work regardless of the cost of the work.
  • If the work requires more than one tradesperson, you need a builder to manage the building project and co-ordinate the tradespeople, such as plumbers, painters and carpenters.

Home Building Compensation (HBC) Scheme

The NSW State Insurance Regulatory Authority (SIRA) regulates Home Building Compensation cover in NSW, which is required if the work carried out comes to more than $20,000 including labour and materials.

The builder or tradesperson must show you that they have valid HBC cover before you pay them any money, including a deposit, and before they start work on your project.

For those of you who have carried out building work before, it’s worth noting that HBC cover replaced Home Warranty Insurance in January 2015.

If you’d like to read further about the HBC scheme, or for help resolving disputes with a HBC insurer or provider, visit the NSW State Insurance Regulatory Authority website or call 13 10 50. You can also check the validity of your cover with them.

Approvals

NSW Fair Trading advises homeowners to check with their local council or an accredited private
certifier about the approvals any building work might require.

If building work does require approvals, you must employ a building certifier to check that the work has been carried out as per the council’s approval.

This is the homeowner’s responsibility, not the builder’s, but note that if you employ a ‘concept-to-completion’ company like Addbuild, they can manage the DA approval and engage a private certifier on your behalf.

As of 1 July 2020, The Building and Development Certifiers Act and Regulation commenced in NSW, new legislation that was created to regulate the certifier industry. For further information visit the NSW Fair Trading website here.

Contracts and payments

All contracts must be in writing. There are two main types of contract:

  1. Fixed Price or Lump Sum Contract
    • The builder agrees upfront to a fixed amount for the whole job.
    • Note that changes made during construction that aren’t foreseen at the start may change that final cost.
    • A good builder will always tell you the cost of any changes that you request, or the cost of changes needed due to unforeseeable circumstances, before they carry out those changes.
  2. Cost Plus Contract
    • There is no guaranteed final cost for the job
    • The consumer repays the builder for verified direct and indirect costs and fees at regular intervals.
    • It is considered good practice for the builder to give a non-binding estimate before starting, and show you updated tracking of the costs against those estimates.
    • Often this type of contract is used where the nature of the project makes it very difficult to calculate the final cost of the project.

‘Small Jobs’ Contract:

    • Residential building work costing less than $20,000 must be done under a ‘small jobs’ contract.
    • The written contract must be dated and signed by, or on behalf of, each party. It may specify that work be paid for at regular intervals. It must contain:
      • The parties’ names, including the name of the holder of the contractor licence as shown on the contractor licence;
      • The number of the contractor licence;
      • A description of the work;
      • Any plans or specifications for the work;
      • The contract price, if known.

Full Home Building Contract:

  • Residential building work costing more than $20,000 requires a full home building contract.
  • As well as all of the requirements of the ‘small jobs’ contract, it must include other comprehensive information such as:
    • The details of the statutory warranties the builder must provide;
    • The cost of any applicable HBC cover;
    • The contract price or warning that the contract price is not known.

Find a complete list of contract requirements on the NSW Fair Trading website here.

Other things to note about contracts:

  • All contracts over $20,000 in value must have a progress payment schedule.
  • Progress payments must match the work carried out and, for cost plus contracts, be supported by receipts or other verifying documents.
  • Any change you need to make to a contract is called a ‘variation’.
  • Variations must be in writing and be signed by both parties to the contract. Almost all variations will impact the contract price.
  • The maximum deposit you can be asked to pay before work starts is 10%.

Addbuild Additions uses the NSW Fair Trading Home Building contract, a plain English contract that complies with all requirements.

Some common traps and tricks to be aware of

  • An extremely low quote compared to others may indicate the job’s quality is being compromised, or that the builder might not fully understand the work required;
  • Don’t be pushed by a builder who uses a selling strategy that puts you under pressure to sign a contract quickly;
  • Avoid any builder who recommends that you get an owner-builder permit while they organise all the building work. This is a sign that the builder may be trying to avoid responsibility and may not have the right kind of licence or HBC cover.

When things go wrong

Even after taking all the precautions mentioned above, disputes can happen when building work is carried out, and sometimes things go wrong beyond anyone’s control.

When that happens it’s worth knowing your rights and how to resolve any dispute that arises.

Statutory warranties

Builders and tradespeople must guarantee that their work is:

  • Fit-for-purpose;
  • Performed diligently;
  • Delivered in a reasonable timeframe;
  • In line with the contract.

Unless specifically stated otherwise, the materials used should be new. They should also be used appropriately.

However, note that these warranties are time-limited:

  • Legal proceedings to enforce them must be commenced within 6 years for major defects, and 2 years for all other defects.
  • The period for legal proceedings to commence can be extended by another 6 months for both warranty periods if the defect only became apparent after 5 and a half years in the case of major defects, or 18 months in the case of other defects.

You can read more about warranties on the NSW Fair Trading website here.

It is worth noting that some builders may offer additional warranties. In Addbuild’s case, we offer a 10-year Structural and 3-year Non-Structural Warranty (industry insurance requirements are 6 years and 2 years respectively) and a 3-year Maintenance Warranty (industry requirement is 13 weeks).

Resolving a dispute with your builder

  • You must notify your builder and discuss your concerns with their work as soon as you become aware of a problem. Make sure you follow up in writing, by email or letter;
  • To better understand acceptable work standards, download the NSW Fair Trading’s Guide to Standards and Tolerances here;
  • If you and your builder are unable to resolve the dispute, contact NSW Fair Trading here for free dispute resolution;
  • If you remain unsatisfied with the dispute resolution outcome, lodge a claim with the NSW Civil and Administrative Tribunal (NCAT) here;
  • To protect your rights under the HBC Scheme, contact your insurer or provider as soon as you become aware of defective or incomplete work.

This information is based on the NSW Fair Trading Consumer Building Guide as of 28 August 2020. To see the latest version of this guide visit the NSW Fair Trading here.

Thinking about making major renovations to your home in Sydney? The Addbuild team is ready to apply the benefit of our 40 years of experience to help you design and build your dream home. Contact us by calling (02) 8765 1555 or use our online form.

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