Owner Builder Warranty Insurance is a compulsory insurance required by the Home Building Act 1989  for 1st May 1997.  The regulations requires all Homeowners who intend to sell their home within 6 years of completion of any work under an Owner Builder permit to provide an Owner Builders Warranty Insurance policy for the benefit of the purchaser of the property.

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 The Home Warranty Insurance is very important for Owner Builders because it ensures that they are protected for the first 6 years of the life of their new or renovated home, on the major sections of building work (which cost over $12,000), even in the events when a tradesman or contractor that did the work, goes out of business, goes bankrupt or becomes deceased.

Successive Purchasers of Owner Builder properties

The second important facet of Home Warranty Insurance has to do with the Owner Builder and any successive purchaser of the Owner Builder built property. If an Owner Builder decides to sell his property within the first 6 years from its date of completion or major renovation, he's required to take out a separate Home Warranty Insurance Cover. This form of Home Warranty Insurance is a separate form of warranty from that given to Owner Builder by different tradesmen or contractors, and is designed to cover successive purchasers of the property from any building problems or defects, which may arise within the first 6 years from the project completion date.

This protects the purchaser from situations where it would become impossible for the purchaser to make a claim against a tradesman or contractor for any building defects or faults. Again, the reasons include a tradesman or contractor going out of business, becoming bankrupt or deceased, or from any other limitations arising out of the doctrine of privicy of contract.

It is important to note that this type of Home Warranty Insurance will only cover a successive purchaser, for the balance of the 6 year period, from the date of completion of the Owner Building project. So for instance, if an Owner Builder completed the building work on the 1st March 2002, and has sold the property to a purchaser on the 1st March 2006, then the purchaser would only be covered until 1st March 2008 - the balance of the 6 year period, which is 2 years.

Obligations of Owner Builders when selling property

Under S 95 (2) of the Home Building Act 1989, it is strictly illegal for Owner Builders to enter into a contract for the sale of their properties, unless more than 6 years has passed since the date of building or major renovation completion on the property - S 95 (3), without attaching a valid Home Warranty Certificate to the contract.

The contract for the sale of the land must also include disclosure of the fact that an Owner Builder Permit was issued in relation to the work and that the work done under the permit requiring Home Warranty Insurance.

If there is a non-disclosure of the Owner Builder status of the sale, and Home Warranty Insurance is not arranged, not only can the purchaser rescind the contract for sale of the land before settlement, but an Owner Builder may also face penalties.

If the Home Warranty Insurance certificate is not attached but the Owner Builder had arranged the insurance before entering into the sale contract, the contract is not voidable by the purchaser. However, an Owner Builder must provide the Home Warranty Insurance Certificate to the purchaser prior to settlement.

As an Owner Builder you are guaranteeing the work you undertake. If you should decide to sell within the 6 year period, it is advisable that you contact a reputable insurer, (who will provide you with the appropriate cover required under the Home Building Act 1989), well in advance of marketing your property. Another thing to keep in mind as an Owner Builder, is that before issuing any Insurance Certificates, insurance companies will usually require that an inspection of the house be undertaken. This is a risk management issue, designed to make sure that there are no matters that need to be remedied, or work completed before insurance can be issued.