Whether you are building your new home or renovating or extending, as an owner-builder you will have some financial advantages, however, it can also be dangerous and costly and can a lead to extended liabilities and great risk.
Before you take the leap of becoming an owner-builder, you need to be aware of the liabilities you will face. While you will have a substantial amount of work to do which will save you the cost of labour, you may be exposing yourself to liability if works don’t go as intended.
Olivia Terziovski of Boutique Lawyers explains.
Before you take the leap
Before you take the courageous leap of becoming an Owner Builder you need to ensure that you are aware of the legal requirements involved in carrying out the works, your contractual requirements and your personal liabilities. When you are an Owner-Builder you also assume the liabilities of a Builder.
When you undertake works as an Owner-Builder you are the Builder, which means that you have the responsibility of a builder and liability of a builder and must ensure that all works comply with all regulations and laws. When entering into a Building Contract with a subcontractor you will also be required to comply with Occupational Health and Safety laws.
Some Owner-Builders have a rewarding experience building or renovating however most are not aware of their legal obligations or liabilities which do not cease once the construction is complete.
In order to become an Owner-Builder, there are certain pre-conditions that need to be satisfied as well as registration requirements:
If you a seeking to register as an Owner-Builder in Victoria you must obtain a Certificate of Consent from the Building Practitioners Board if the value of the works is more than $12,000. You must also provide a statutory declaration stating that you have read and are aware of your legal obligations and responsibilities as set out in the information kit provided by the Board.
If you are seeking to register in New South Wales you will need to apply for an Owner Builder Permit, own the interest in the land where you intend to build and live in the home that you are building as your principal place of residency.
If you are seeking to register in Queensland, you must obtain an Owner-Builder permit if the works are over $11,000 in value and may only be obtained for residential works.
There are many more conditions that must be complied with and depending on how many owner-builder projects have previously been undertaken.
Once you receive your permit, you will then have all the liabilities and responsibilities of a builder registered to undertake such works. Your responsibilities will include obtaining all materials, permits and complying with occupational health and safety laws as well as overseeing all works that are performed on the site. You need to be aware of the subcontractors that you engage to ensure that they are licensed if the works that they are undertaking require such license (such as plumbing or electrical), this will ensure that you avoid being charged with an offence if the works are not undertaken by the proper licensed contractor.
For any works over the value of $5,000 you must enter into a major domestic building contract. The tradesperson that you enter into the major domestic contract with is also required to provide you with warranty insurance for works undertaken over the value of $12,000.
One of the biggest mistakes owner-builders make is failing to enter into a building contract with their tradespeople in order to protect themselves for future liability as well as ensure that warranty is provided. It will leave you exposed to risk, liability and disputes. Unwritten agreements are subject to misinterpretation and misunderstandings. In the instance of defective works, delayed works and incomplete works, you are protected if you have a properly drafted contract in place.
A written contract with your subcontractor does not only allow you to enforce your rights but it avoids misunderstandings, disputes and will assist with your legal rights to recover any loss as well as clarify each party’s obligations. If you don’t have a contract in writing that’s when things usually go wrong and it also exposes you to risks. A contract will protect you if its drafted correctly by an experienced lawyer that deals with building matters.
We receive on a daily basis calls from clients that have purchased homes that have defective works. Let’s face it, no home is built perfectly. However, major defects can really cost you. As an owner builder, you will be required to rectify any defects in building works. You have the obligation of having the defective works rectified by subcontractors that you have engaged to perform the works. This is a time consuming and costly task and can lead you straight to the Tribunal.
You also have the obligation to ensure that all works are completed in a property workmanlike manner with the use of the right materials for the purpose of which it is used. All works must comply with all relevant requirements and laws.
If you decide to sell your home within 10 years ( in Victoria ) from the date of the occupancy permit, you will be liable to rectify any works that are defective and claimed by the purchaser or any subsequent owner in that time period. If you sell within 6 years from the date of the occupancy permit (in Victoria) you cannot sell your home unless you have provided the purchaser with a valid home warranty insurance certificate. You have the obligations of a builder when selling as an owner builder during these time frames.
Most people think that they can make a claim on their home warranty insurance should their home have any defects that need rectification. This is not always the case. As an owner builder you are obligated to provide this to the purchaser of your property which protects the purchaser in the event of you dying, disappearing or becoming insolvent. It provides cover for a period of 6 years, after which the purchaser or subsequent owner may claim against you for a further period of 4 years if you have capacity to be sued.
You may save money building on your own but you are taking a greater risk and exposing yourself to obligations and liability for up to ten years after your occupancy permit has been issued. Remember, you will be responsible for rectify and paying for defective works. To save yourself money, time and stress, make sure you get legal advice early.
Owner Builder Checklist:
- Have all plans and specifications ready to go before you commence and ensure they are the correct plans (working plans) that contain all details and selections
- Obtain all permits, licences and certificates
- Ensure you comply with all regulations
- Have an experienced solicitor check or draft your contracts
- Set yourself a time line for the completion of each stage and a budget
- Ensure each trade you engage is experience and qualified and provides you with the required certificates
- Obtain occupancy permit or certificate of final inspection
- Have a building expert check your home at the completion of each stage not just your building surveyor
CALL BOUTIQUE LAWYERS ON 1300 556 140 to book your fee 30 minute consultation today.