On 1 July 2015, the Victorian Managed Insurance Authority (VMIA) introduced changes to domestic building insurance, also commonly known as builder’s ‘home warranty insurance’. This included the introduction of a new online tool which allows individuals to check whether a builder is eligible for domestic building insurance (online builder search). This online builder search may assist building surveyors to meet certain obligations under the Building Act 1993 (Act).
Building surveyors’ obligations under the Building Act
All domestic building work valued at more than $16,000 requires a builder to hold domestic building insurance. In short, this insurance provides cover to homeowners in certain circumstances where, before the work is complete, their builder dies, becomes insolvent or disappears. This requirement is not only significant for homeowners and builders, but also for building surveyors.
Under Part 3 of the Act, building surveyors, as part of the process for issuing building permits, must ensure that a builder is covered by domestic building insurance. To this, section 24A of the Building Act provides:
(2) The relevant building surveyor may consider an application for a building permit for domestic building work that is to be carried out under a major domestic building contract but must not issue the permit unless he or she is satisfied that—
- the work is to be carried out by a builder who is registered under Part 11 in the appropriate class of domestic builder and is covered by the required insurance…
Fulfilling the obligations
Comments made by the Victorian Civil and Administrative Tribunal (VCAT/Tribunal) in Elturan v Unicon Property Group Pty Ltd & Ors (Domestic Building)  VCAT 924 outline what is required of building surveyors under section 24A.
Relevantly, the name of the builder on the certificate of insurance was ‘Mick Cvetkovski, trading as Miva Constructions Pty Ltd’, however the building contract named ‘Unicorn Property Group Pty Ltd’ as the builder. Mr Cvetkovski was a director of both Miva Constructions Pty Ltd (Miva) and Unicorn Property Group Pty Ltd (Unicorn).
In finding that the building surveyor had breached section 24A of the Act, the Tribunal held that the warranty insurance was not obtained by Unicorn, notwithstanding Mr Cvetkovski holding the position of Miva’s director.
The Tribunal rejected the surveyor’s contention that when issuing a building permit, a surveyor need not concern himself with the building contract between the builder and the owners. The Tribunal observed that for a surveyor to be satisfied that the requisite warranty insurance has been obtained, the surveyor must at the very least confirm that the builder named in the building contract is the builder named in the certificate of insurance.
Interestingly, although not expressly concerned with a building surveyor’s obligations, the facts of Elturan were distinguished from those in the more recent VCAT decision of Palachanda v Carreras trading as Carreras Construction Group (Building and Property)  VCAT 748.
In that case, the home warranty insurers applied to strike out the applicant owners’ claim on the basis that the building contract named ‘Primary Building Group Pty Ltd’ (PBG) as the builder, however, the certificate of insurance named the relevant builder as:
JOHN PETER & JACQUI CARRERAS
ABN: 70 586 490 090
The owners asserted that the policy of insurance extended to work undertaken by PBG, despite the fact that the certificate of insurance did not specifically state PBG. The owners contended that the word ‘BUILDER’ in the certificate of insurance was a reference to PBG, such that the policy of insurance expressly names not only the registered building practitioner but also PBG.
In dismissing the insurers’ application to strike out the owners’ claim, the Tribunal held that this case was different to Elturan as it was not argued that the policy of insurance responds merely because the director of PBG is the same person on the certificate of insurance. In this regard, Senior Member Riegler relevantly observed:
… question arises why the section of the certificate of insurance which states: Carried out by the builder is answered by both the word BUILDER and the words John Peter & Jacqui Carreras. It is arguable that to give the word BUILDER no separate and distinct meaning would make its inclusion in the certificate of insurance otiose.
The above decisions not only highlight the importance of comparing the named builders in the certificate of insurance and building contract but further affirm the need for building surveyors to carefully consider and develop their process for issuing building permits to account for their obligations imposed by section 24A of the Act.
While the online building search will not dispense building surveyors of their obligations, it will provide a useful practical tool that encourages surveyors to ask the important question of – who is the builder engaged to carry out these works and therefore must obtain the relevant insurance? If the results of the search indicate that the builder may not be eligible for domestic building insurance, the surveyor will be conscious of this issue at an early stage prior to the issue of a building permit.