Consumer Watch - What everyone building a house should know

With Consumer Protection Geraldton receiving enquiries recently about builders experiencing financial difficulty, the Building Commission has provided the following information to assist anyone whose building work remains unfinished or whose builder becomes insolvent.

We understand the frustration homeowners face when they are confronted with incomplete work and a builder who is no longer able to trade.  It is important to know that all residential building work valued over $20,000 is required to be covered by home indemnity insurance (HII).  

HII protects owners against financial loss if a builder cannot complete residential building work because of death, disappearance or insolvency of the builder. 

Occasionally, there is a period of uncertainty for owners between when a builder begins to experience financial distress and when they actually become insolvent. The following points may be helpful if you find yourself in this situation.

• Before construction or renovation of your home starts it is vitally important that you read and understand the terms and conditions of the contract and what should be agreed as the progress payment points at the various stages of construction. 
• Progress payments should only be made in accordance with the contract terms and when the work has been carried out.
• A builder having trouble meeting its obligations may attempt to make arrangements with another builder to complete the building work. You have a choice as to whether or not you go ahead with this new builder or wait until it is confirmed that your builder is insolvent and lodge a claim with your HII provider.
• Understand what your rights and obligations are if you wish to terminate your contract.  You should get legal advice.
• Contact your home indemnity insurance provider. Details of who you need to contact will be on your certificate of insurance, which can be obtained from your builder or applicable local government.  
• Delays may result in other unplanned expense or stresses including additional rent or storage costs while your home is completed. If you are experiencing any financial difficulties as a result of the delays, you may need to contact your bank or lender.

Once the builder has become insolvent and you haven’t transitioned to a new builder, you are able to make a HII claim against your policy. The claim will be treated in a timely manner as the insurers and their agents are very aware that it can be a frustrating and anxious time for home owners and can represent a significant financial burden.  

If approved, the insurer will work with you to resolve the issues associated with the completion of the building contract.  This may involve seeking quotes to complete the work, appointing a new builder to complete construction of the works and assess the shortfall (if any) of work against the progress payments.  Claims made under HII are capped at $100,000 and the policy may have up to a $500 excess that the home owner has to bear.

Talk to the Building Commission

If you are worried about your builder’s ability to complete your home you should raise these concerns with the Building Commission by phoning 1300 489 099 or email bcinfo@commerce.wa.gov.au.