Have you purchased a residential property in NSW within the past 7 years? Have you discovered defects in the building? Do not delay: you may still have rights against the previous owner’s builder or tradesperson responsible for the defective works (Builder Responsible). This includes making a claim under the previous owner’s contract of insurance with Builder Responsible if the Builder Responsible has died, disappeared or become insolvent. However the clock is ticking.

When you purchase residential property in NSW it is a standard requisition in the contract that the owner provides the purchaser with the details of any residential building work carried out in the previous 7 years. This includes a copy of the certificate of insurance in relation to the building works. This is a form of mandatory insurance taken out by the Builder Responsible in respect of any residential building works valued at over $20,000.00 (including GST). It is called Home Building Compensation Fund (HBCF) insurance and it is designed to compensate the owner of the property on which residential building works were carried out (and their successors in title) if the Builder Responsible cannot rectify the defective building works because they have died, disappeared, or become insolvent.

If you discover defective works your first step should always be to immediately contact the Builder Responsible using the details provided. The Builder Responsible may still be under a lawful obligation to rectify the defective works if you have notified them within the timeframe required by law. If they do not do this you can lodge a complaint with the Building Commission NSW which may undertake an investigation. If the dispute is not resolved you may decide to lodge an application with the Tribunal (NCAT).

What if you cannot track down the Builder Responsible because you find out they have died, left the country (or otherwise disappeared), or become insolvent? Then you may be able to make a claim for compensation under the Responsible Builder’s HBCF insurance policy. Even if you have been able to notify the Builder Responsible, you should still nevertheless notify the insurer under the HBCF policy in case you need to make a claim subsequently if the Builder Responsible later dies, disappears or becomes insolvent. There is a formal notification form available on the web.

Be aware: the HBCF insurance policy only covers loss for 6 years from the completion of the defective works in the case of a “major defect” and 2 years from the completion of the defective works in any other case. The definition of a “major defect” changes from time-to-time, so check the definition on the policy brochure you received when you purchased the property. Currently, a “major defect” relates to a defect in the structural, waterproofing or fire safety elements of the building that has or would have the impact of making the building structurally unsound or uninhabitable. If you become aware of the defect in the last six months of either of these two periods, you have another six months to make a claim; this is known as the extended claim period.

There are many other limitations regarding a claim under the Responsible Builder’s HBCF insurance. These include: limits to cover per dwelling (currently $340,000.00) and the extent to which you must have pursued the Builder Responsible to have given them the opportunity to rectify the defects.

If you notice defects in your new home do not delay: contact the Builder Responsible; notify the HBCF insurance provider; lodge a complaint with the Building Commission (if necessary); and if you are unsure contact Hamilton Mott for advice. Building disputes can be tricky to navigate and we are here to assist.