Home warranty insurance needs to be provided by:
- a builder or tradesperson before taking any money (including a deposit) from a home owner (including an owner-builder) under a residential building contract and before starting any work under that contract
- a ‘spec’ builder before starting any residential building work on a property owned by the builder
- a developer before entering into a contract for the sale of a property on which a builder is doing or has done residential building work for the developer
- an owner-builder (ie. a home owner who did owner-builder work under an owner-builder permit) before entering into a contract for sale of the property on which residential building work was done within the previous 6 years.
From 1 February 2012, home warranty insurance is required to be obtained where the contract price is over $20,000 or, if the contract price is not known, the reasonable market cost of the labour and materials involved is over $20,000. Prior to 1 February 2012, the threshold was $12,000.
Where the contract price or the reasonable market cost of the labour and materials involved does not exceed $20,000, there is no legal requirement for home warranty insurance to be obtained.
Contractors who carry out residential building work must still hold an appropriate licence with Fair Trading where the labour and materials involved are valued at over $1,000.
Persons who contract and/or carry out specialist work (ie. electrical wiring, plumbing, gas-fitting, air-conditioning and refrigeration) require a licence regardless of the value of the work.
Home owners should be wary of any builder or tradesperson who says they do not need insurance if the value of work exceeds $20,000, or who suggests you obtain an owner-builder permit while they carry out the work for you.