# Forum More Stuff Owner Builders Forum  Sale of an OB built house... warranty? insurance?

## Prados

Hi guys, 
Some one recently mentioned here that when you sell your OB-built house you are automatically responsible for something like "builder warranty" which is XX years from date when you are actually completed (not started) your build. Which is somewhat a State Law or like. 
I have made some research about it, I spoke to my conveyancer and he said once you sold it - that's it. You can't provide any warranty as  you are not building a new home from scratch and you can't take responsibility for an existing structure... something like that.  
Any way, could you please share your thoughts and opinions, your knowledge about it....  
PS: I am in SA, but I would like to know about other states as well. Thanks!

----------


## OBBob

Hi Prados ... I think that was me.  
In Victoria (not sure about SA) if you are an OB you are essentially considered as a Builder and you have to provide the minimum warranty (it's around 6.5 or 7 years but keep changing a bit). This warranty commences when you receive your occupancy / final certificate. It's no big deal if you live there during that period ... but if you sell within the warranty period then you have to take out warranty insurance. The common misconception is that this insurance then covers the warranty for the new owners, which is actually not the case. The OB still remains the first point of recourse with the insurance purely to cover the new owner if the OB dies or is bankrupt. It's likely that you would also need to provide some sort of statement of compliance to the new owners in relation to the works undertaken.  
QLD seems to be quite different but I'm not sure about SA.

----------


## OBBob

On a quick read ... perhaps in SA it's a Statutory Warranty of five years and indemnity insurance is required??

----------


## sol381

In qld you have zero warranty through the qbcc.. better check your state laws regarding this..Up here You have to advise prospective owners that the house or renovation was done under an owner builder number and there is no warranty..

----------


## ringtail

Well, sort of. If an OB in Qld the warranty period is exactly the same as a builder. 6.5 yrs from completion. However, as Sol said, there is no support from the QBCC. if a new owner wants to claim warranty on a structural defect within the 6.5 yr period it basically turns into a civil law suit. On another note though, since the introduction of form 15's and 16's I wonder if an OB could deflect the burden onto the guilty contractor ? That's how it works now with registered builders up here now. The contractor carries the can for any defects whereas previously the builder would have to rectify and then chase the contractor.

----------


## Skinah

I was also told when you sell your house you must inform the purchaser that it was an owner builder, otherwise they have the ability to pull out of the sale at any time with no loss of deposit. Your surveyor when you sell will take care of it but you will need to ensure they are aware you did an owner builder. 
Source of this info was my private builder surveyor in Vic.

----------


## ringtail

I'm pretty sure that if the building is out of the 6.5 yr warranty period one doesn't have to tell the prospective purchaser anything. In Qld anyway. Not 100% sure either but if it's out of the warranty period it doesn't matter who built it.

----------


## OBBob

I  think that's almost right, although I have a feeling the warranty period and the declaration period may be different in Vic. The declaration period being a bit longer. The rules keep changing so best get your solicitor to confirm.

----------


## Marc

If you are inside the warranty period of 7 years more or less according to state, you have to have a warranty paid for to cover defects. Basically you pay an insurance company to chase you at the buyer's whim. So what you do is take no "insurance" whatsoever and sell after the warranty period without disclosing a thing.  :Smilie:

----------


## ringtail

> If you are inside the warranty period of 7 years more or less according to state, you have to have a warranty paid for to cover defects. Basically you pay an insurance company to chase you at the buyer's whim. So what you do is take no "insurance" whatsoever and sell after the warranty period without disclosing a thing.

  
Certainly nothing like that exists in Qld.

----------


## Marc

http://www.aobis.com.au/ 
There is owner builder insurance in all states, it just takes different meanings in each state. 
Qld ... it seems that when you sell you must disclose as if the house had been housing lepers.http://www.qbcc.qld.gov.au/buying-ex...built-property 
This is better http://allrisk.com.au/insurance/obwarranty.php

----------


## ringtail

Yep so if outside the warranty period it matters not

----------


## Bros

> The contractor carries the can for any defects whereas previously the builder would have to rectify and then chase the contractor.

   Bit rough how does the buyer know who the sub contractor is the builder used?

----------


## ringtail

Warranty still has to go through the builder. How the builder deals with it it a different story. He can fix it and seek dollars from the subbie responsible or call the subbie back to rectify. The builder should give the subbie the opportunity to rectify though. Of course, if it all turns pear shaped the QBCC steps in a gives a direction order

----------


## Prados

> As an owner builder you are responsible for the building
> work that you have undertaken. If you sell the building,
> legal action may be taken against you for economic
> loss or rectification costs resulting from defective
> work* for a period of up to ten years from the date of* *completion of the building work.* The Statement of
> Compliance establishes the date from which the tenyear
> liability period commences.

  But does it mean for the building work you have undertaken or for the whole structure?  
So, let's say a timber framed wall of your existing house (which you are extending) has been taken away by termites. Termites came 1 year after the date of the sale of your OB-extended/built house. As it was existing wall, which you didn't touch, it was sitting on an existing foundation which has existing termite protection which is say 40 years old.... and you were not able to install a new protection system as to do it you need to pull apart a whole structure or a significant part of it. Are you responsible here or not? And what if termites came from that old (existing) part of your house  and chew up your new extension?

----------


## Prados

Another thing... 
Your roof and walls are designed to hold a certain load. New owner decided to install solar panels... or to install a massive aircon... causing roof trusses to sag or even worth - collapse. Then they asked you to rectify and of course you said "not my problem", but they are pointing finger and saying "panels and aircon were up on the roof before we bought this place". Would be nice to have an idiot-proof protection plan in place. Maybe to do photo-video before sale or make an attachment to your sale contract where you are describing each nail, it's position, lengths and condition? :Confused:

----------


## OBBob

You get a permit for a certain scope of work... the builder or the owner builder is responsible for the work they did under that permit.  
Same with the solar panels, if they weren't on the permitted design then you aren't responsible.

----------


## Marc

Insurance companies do not deal in what ifs, and speculating on what ifs, makes for entertaining conversation but is rather useless in real life. 
Claims just like court cases are assessed case by case.

----------


## paddyjoy

Can you put a clause in the contract of sale removing this warranty requirement?

----------


## OBBob

> Can you put a clause in the contract of sale removing this warranty requirement?

  I wouldn't think so. What if the person subsequently sold the house but still within the warranty period.  
Best thing you can do is get to the 'basic' completion stage, get your certificate and start the clock ticking whilst you finish off the decorative bits.

----------


## paddyjoy

> What if the person subsequently sold the house but still within the warranty period.

  I imagine this could be a problem regardless as there would be no legal requirement for subsequent owners to warrant the work of the original owner?

----------


## Marc

_October 21, 2015_ This article concerning Home Warranty Insurance has been provided by Pierrette Khoury from Turnbull Bowles Lawyers.
If you are carrying out renovation work to your property, the _Home Building Act 1989_ (“the Act”) requires that you obtain Home Warranty Insurance in respect of any residential building work where the value of that work exceeds the prescribed amount of $20,000.00.
Relevantly, residential building work is defined in the Act as “_any work involved in, or involved in coordinating or supervising any work involved in:_  __the construction of a dwelling; orthe making of alterations or additions to a dwelling; or_the repairing, renovation, decoration or protective treatment of a dwelling.”_
The Act makes it clear that it is an offence to offer a property for sale within 6 years of the work being completed if a Home Warranty Insurance Certificate is not included in the Contract of Sale of Land.
There are exceptions to the above stipulated in Section 95 of the Act, which relevantly provides as follows:  __A Contract of Insurance under this part cannot be entered into in relation to Owner-Builder work carried out or to be carried out by a person as an Owner-Builder.A person who is the Owner of land in relation to which an Owner-Builder permit was issued must not enter into a Contract for the Sale of Land unless the contract includes a conspicuous note (“a consumer warning”) stating: That an Owner-Builder permit was issued in relation to the land (specifying the date on which it was issued); andWork done under an Owner-Builder permit is not required to be insured under this Act unless the work was done by a Contractor to the Owner-Builder. The requirement for a Contract of Sale to include a consumer warning does not apply: To a sale of land more than 7 years and 6 months after the Owner-Builder permit was issued; or If the reasonably market cost in labour and materials involved does not exceed the amount prescribed by the regulation for the practice of this section; orIf the Owner-Builder carried out under the Owner-Builder permit is of a class prescribed by the regulations.The requirement for a Contract of Sale to include a consumer warning applies to a person as the Owner of land whether the person is the person to who the Owner-Builder permit was issued or a successor in title to that person.If a person contravenes this section in respect of a contract, the contract is voidable at the option of the purchaser before completion of the contract. _Note : Prior to its amendment by the Home Building Amendment Act 2014 , section 95 required an owner-builder to obtain insurance under this Part before selling the land concerned. Schedule 4 provides for the continued application of the previous requirements of section 95 to sales of land before the amendment to that section._ _If you have enjoyed this content and would like to be kept informed about strata matters, click here to subscribe to our weekly newsletter._
Accordingly, if Home Owners Warranty Insurance is not obtained or the above warning is not included, a prospective purchaser can take steps to rescind the contract which ultimately renders the contract void.
The Act also provides that even if residential building work is not carried out pursuant to a contract, insurance is still required for a property and/or properties intended to be sold. This is made clear in Section 96 of the Act, which provides as follows:  __A person must not do residential building work otherwise than under a contract unless a Contract of Insurance that complies with the Act is enforced in relation to that work.A person who does residential building work otherwise and under a contract must not enter into a Contract for the Sale of Land on which the residential building work has been done, or is to be done, unless a Certificate of Insurance evidencing the Contract of Insurance required under this part for that work in a form prescribed by the regulations, is attached to the Contract of Sale.
In working out the completion date having regard to Owner-Builder work carried out, Section 3B of the Act relevantly defines the completion date as follows:   __The completion of residential building work occurs on the date that the work is complete within the meaning of the contract under which the work was done.If the contract does not provide for when work is complete (or there is no contract), the completion of residential building work occurs on practical completion of the work which is when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose.It is to be presumed (unless an earlier date of practical completion can be established) that practical completion of residential building work occurred on the earliest of whichever of the following dates can be established for that work: The date on which the contractor handed over possession of the work to the owner;The date on which the contractor last attended the site to carry out work (other than work to remedy any defect that does not affect practical completion);The date of issue of an Occupation Certificate pursuant to the Environmental Planning and Assessment Act; In the case of Owner-Builder work, the date that is 18 months after the issue of the Owner-Builder permit for the work.  
Accordingly, the date that applies for Owner-Builder work is 18 months after the issue of the Owner-Builder permit.
The Act imposes a 7 year warranty period for pre 1 February 2012 work carried out by an Owner-Builder and 6 year major defect/2 year non-major defect warranty period for post 1 February 2012 work carried out by an Owner-Builder.
This means that should defective work be claimed by subsequent proprietors, you have a statutory obligation to rectify those defects brought to your attention which may involve retaining a contractor to rectify those defects.
This warranty period commences from the completion date of the work.
It is imperative that you seek legal advice to ensure your Contract for Sale of Land contains the appropriate disclosure and certificates.  There are implications in the _Home Building Act_ if there is non-compliance with these requirements.
If you have any queries in relation to this article, please contact our Ms Pierrette Khoury, Senior Lawyer ofTurnbull Bowles Lawyers on (02) 8272 1999.

----------


## phild01

So glancing through that, is it that the 'owner built property' practical completion date is considered to be 18 months after the date of the OB permit unless a completion certificate is available that may indicate a much later date.  So, maybe don't bother obtaining an occupation certificate!

----------


## Marc

I think that the only worrying part of all that is where it states it is an offence to offer a property for sale within 6 years without including a home warranty in the contract. 
I am pretty sure this can be waived legally. After all it is illegal to make an extension without council approval yet this illegal works are sold every day with a disclaimer.
No much point speculating... case by case... talk to an experienced solicitor

----------


## OBBob

> I imagine this could be a problem regardless as there would be no legal requirement for subsequent owners to warrant the work of the original owner?

  No, the subsequent owner just passes through the warranty provided by the original owner. If the owner can't be found, is bankrupt etc. then the insurance kicks in.    

> No much point speculating... case by case... talk to an experienced solicitor

  Yep ... but there are obligations of disclosure for a whole array of things and it's a combination of carefully understanding these from your solicitor and buyer beware.

----------


## Prados

> You get a permit for a certain scope of work... the builder or the owner builder is responsible for the work they did under that permit.  
> Same with the solar panels, if they weren't on the permitted design then you aren't responsible.

  What I am saying is that the whole thing is very unclear.
You can't provide warranty to your existing structure, but that structure can affect your new built, like I said before as an example - termites. 
Every case is different. I suppose building from scratch is easiest way to avoid any problems with the warranty down th track.

----------


## OBBob

Yep, well those are the what if scenarios that Marc referred to.

----------

