Is your business undertaking residential building work in NSW? If so, are you compliant with the Home Building Act 1989 (NSW) (HB Act)?
Non-compliance with HB Act can significantly affect your ability to recover unpaid monies from a residential building works client or sue for damages under a contract.
Remember, if the value of the works starts out lower but increases due to variations, the requirements are triggered as soon as the contract value thresholds are hit!
Do Residential Works without a licence
While this may not affect the majority of clients who generally subcontract to builders with licences, it is important that our clients are aware of the potential barrier to recovering unpaid monies from residential building clients where the work was undertaken while unlicensed (or not properly licensed).
The HB Act requires that a contract licence is held for all residential building work or specialist work (such as electrical wiring work). The contractor licence must be either an individual contractor licence (if the business is a sole trader business), a partnership contract licence or a corporation contractor licence. The contractor licence must authorise its holder to be able to contract to do the particular work undertaken (such as an electrical licence to undertake electrical wiring work).
The Building Commission NSW can impose a fine of up to $110,000 for a company or up to $22,000 for an individual/partnership when a company or an individual has contracted to do residential building work or specialist work without the correct contractor licence
The Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) is the most powerful tool available to recover payment quickly and cost efficiently. This Act prohibits contractors from making a payment claim and/or going through the process of adjudication to recovery unpaid monies when there is a failure to hold the proper contractor licence.
The HB Act also states that a business or an individual may have their rights affected if unlicenced work is undertaken. This means rights such as the ability to sue for damages under a contract or seeking to recover unpaid monies may be affected.
THE RULE: A company cannot undertake residential building work or specialist work when it does not hold a company contractor licence, but the director holds an individual contractor licence. The company itself must hold a contractor licence. Rights under SOPA are not available to company’s not holding a licence.
Don’t have a written Contract in place
The HB Act requires that a written contract is provided for any “small job” (a job that is between $5,000 and $20,000).
The HB Act also requires that a written contract is provided for a job that is “other than a small job” (a job that is between that exceeds $20,000).
These contracts have different requirements as to the format and terms that must be included. It is important that a written contract is provided to clients when undertaking residential building work. Template written contracts are available free of charge by NSW Fair Trading. For major projects, consider legal assistance.
The HB Act will severely affect your business’ rights in recovering monies owed by a homeowner client if no written contract is provided. This may also include your company’s right to utilise SOPA.
Clients should also be aware that not having a written contract in place is an offence under the HB Act and your company may be fined up to $8,800 or up to $4,400 for an individual contractor.
THE RULE: For any residential works over the value of $5,000,a written contract must be in place. Note that it does not have to be provided where your business is being subcontracted by a principal contractor (such as a builder), only when your business is being contracted directly by the homeowner (including if the homeowner is an owner builder).
Don’t have Home Building Compensation (HBC) Insurance
The HB Act requires a HBC Insurance policy is held for all residential building work that is above $20,000 (Including GST).
Failure to hold HBC Insurance can affect your business’ rights to recover monies owed for the work undertaken, including affecting your business’ rights under the Building and Construction Industry Security of Payment Act 1999 (NSW).
The Building and Construction Industry Security of Payment Act 1999 (NSW) also specifically prohibits contractors from making a payment claim and/or going through the process of adjudication to recovery unpaid monies when there is no HBC Insurance policy in place.
Failure to hold a HBC Insurance policy can also mean that the Building Commission NSW may take disciplinary action against your business (or you individually) and may issue penalties of up to $110,000 for a company or up to $22,000 for an individual.
A HBC Insurance policy can be obtained through iCare in NSW.
THE RULE: An HBC insurance policy is required when doing residential works beyond $20,000.A HBC Insurance policy is not required where your business is being subcontracted by a principal contractor (such as a builder), only when your business is being contracted directly by the homeowner (including if the homeowner is an owner builder).
Advice and Support
As specialised construction lawyers, CTI Lawyers helps navigate the complex minefields of payment recovery, contracting, legislative requirements and more. We assist with all construction contract and dispute related matters, from contract review and drafting to debt recovery through adjudication and court. They also frequently assists their clients with defending claims brought against them in tribunals or the Local, District and Supreme Courts.
If unsure, don’t get caught out. Reach out to CTI Lawyers for any questions they may have with regards to residential building works.