A number of changes introduced by the Home Building Amendment Act 2014 (NSW), which significantly amends the Home Building Act 1989 (NSW) have now come into effect.

There are three important stages in the implementation of these changes.

Stage 1 – commenced 31 December 2014

Under the Stage 1 amendment owner-builders are no longer required to obtain home warranty insurance but, if they elect not to do so, the amendment requires that any contract for the sale of land on which an owner-builder permit was issued must include a ‘consumer warning’ stating that the work done under the permit was not so insured.

Stage 2 – commenced 15 January 2015

The second, and most significant, set of amendments commenced on Thursday 15 January 2015. These amendments have made substantial changes to key provisions dealing with defective work and much concern has been raised about them in the media. The amendments are as follows:

  • The definition of ‘structural defect’ in section 18E is replaced by the concept of ‘major defect’. A ‘major defect’ is defined in the new section 18E(4) as:
    1. a defect in a major element of a building that is attributable to defective design, defective or faulty workmanship, defective materials, or a failure to comply with the structural performance requirements of the National Construction Code (or any combination of these), and that causes, or is likely to cause:
      1. the inability to inhabit or use the building (or part of the building) for its intended purposes, or
      2. the destruction of the building or any part of the building, or
      3. a threat of collapse of the building or any part of the building, or
    2. a defect of a kind that is prescribed in the regulations as a major defect.
  • The limitation period for commencing proceedings for an alleged breach of a statutory warranty will be 6 years for a ‘major defect’ and 2 years for any defects that do not fall within the definition of ‘major defect’.
  • The date of completion of residential building work for new buildings will now be the date of issue of the occupation certificate.
  • Broadening of defences available under section 18F including the new defence of reasonable reliance on instructions given by a relevant professional.
  • Changes to home warranty insurance (now ‘insurance under the Home Building Compensation Fund’) provisions relating to the insurance of residential building work.
  • A requirement that courts and tribunals have regard to the principle that rectification of defective work by the responsible party is the preferred outcome.
  • A maximum penalty for builders and traders who are convicted of a second or subsequent offence of hiring unlicensed persons, doing any unlicensed work or offering to do any unlicensed work of 500 penalty units (currently $55,000), 12 months imprisonment or both.
  • Establishment of a public register of home warranty insurance certificates.
  • An increase in the threshold for requiring a licence for building and general trade work from $1000 to $5000.

Stage 3 – set to commence on 1 March 2015

Some amendments set to be introduced by the Act will only come into effect on and from 1 March 2015. These include the following further changes:

  • The imposition of new duties on persons who have the benefit of a statutory warranty.
  • A change to the wording of the statutory warranty that requires all work to be performed in a ‘proper workmanlike manner’ so that it now requires that all work be ‘done with due care and skill.’
  • An increase in maximum deposits for work over $20,000 from 5% to 10%.
  • A requirement that residential building contracts incorporate details of any progress payments payable under the contract and a statement of the owner’s termination rights.
  • Changes to progress payments for residential work limiting them to those for a specified amount or percentage payable following completion of a specified stage of work and for labour and materials in respect of work already performed or costs already incurred.