Builder's licensing requirements | Contract formalities | Statutory warranties | Home warranty insurance | Remedies

In New South Wales, the legislation dealing with the regulation and licensing of the residential building industry is the Home Building Act 1989 (NSW) (HB Act). It applies to residential building work and specialist work entered into on or after 1 May 1997.

Residential building work is work involved in, or involved in coordinating or suspending any work in, the construction of a 'dwelling' (as defined in the Regulation), making of alterations or additions to a dwelling, and repairing, renovation, decoration or protective treatment of a dwelling. It also includes specialist work done in connection with a dwelling.

Specialist work includes plumbing work (other than roof plumbing work), gas fitting work, electrical wiring work, and installation or maintenance of certain refrigeration systems and air-conditioning systems. It is not restricted to such work being done in a residential context.

Builder's licensing requirements

Who requires a licence?

  • Individuals, partnerships or corporations contracting to do residential building work, where the labour and materials are worth more than $1,000, or specialist work (irrespective of whether it is residential building work), must hold a contractor licence under the HB Act.

  • Individuals must hold a contractor licence or must be an employee of a partnership or corporation or a partner or officer of a partnership or corporation that holds a contractor licence.

Where an individual is the employee, partner or officer of a partnership or corporation that holds a contractor licence, and is not the holder of a licence in his or her own capacity, then the individual must be supervised by someone who is licensed.

What types of licences can be obtained?

The HB Act provides for the following licences and certificates (licence) to be granted:

  • contractor licence;
  • supervisor certificate;
  • tradesperson certificate; and
  • endorsed contractor licence (equivalent to a supervisor certificate).

What criteria apply to the grant of a licence?

  • The applicant's fitness, ability and capacity to carry out contracts for which the licence is required; and
  • the arrangements made or proposed to ensure that all work done under those contracts will be done or supervised by appropriately qualified individuals.

Who needs to be supervised?

Individuals who are not licensed and are carrying out residential building work and specialist work need to be supervised. Individuals holding relevant tradesperson certificates can carry out residential building work, refrigeration work or air-conditioning work without supervision but must be supervised when carrying out plumbing work, gasfitting work or electrical wiring work.

What is an appropriate level of supervision?

The HB Act does not contain a definition of 'supervision'. Compliance with the supervision requirements of the HB Act is to be determined on the facts of each case. However, the level of supervision must be sufficient so as to ensure that the requirements applicable to the work under the HB Act are complied with.

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Contract formalities

The HB Act sets out a number of mandatory contract formalities for residential building work contracts. The requirements vary depending on the contract price of the contract.

A contract for residential building work must contain the following information:

Contract price


Contract price
> $20,000

Names of the parties and licence details (holder and licence number)
Description of the work
Plans and specifications attached and a clause stating they form part of the contract, together with any variations to the plans and specifications
Contract price if known
Clause requiring the contractor to ensure that all building work will comply with the Building Code of Australia (BCA), all other relevant standards and specifications that the work is required to comply with under any law and the conditions of any relevant development consent or complying development certificates
Clause requiring all variations to the contract to be in writing signed by the parties
Expressly set out the statutory warranties
If the contract price is not known or can be varied, the contract must contain a warning and explanation of how it can be varied
Checklist for consumers to consider
Statement setting out the cooling off period for the contract
Provide a signed copy of the contract within five business days of execution
Insurance required

What are the consequences if contract formalities are not observed?

If a contract is not in writing or does not have a sufficient description of the work to which it relates:

  • it is not enforceable by the holder of the licence against the other party to the contract and the contractor will not be entitled to any damages or to enforce any remedy for breach of contract;
  • the holder of the licence is liable for damages and is subject to any other remedy for a breach of the contract committed by the holder of the licence; and
  • fines may also apply.

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Statutory warranties

The HB Act implies various statutory warranties into every contract to do residential building work.

They include:

  • work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract;
  • all materials supplied by the licence holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, materials will be new;
  • that the work will be done in accordance with, and comply with, the HB Act or any other laws;
  • that the work will be done with due diligence and within the time stipulated by the contract;
  • if the work is for the construction or alteration of a dwelling that it will result in a dwelling that is reasonably fit for occupation as a dwelling; and
  • that the work and any materials used in doing the work will be reasonably fit for the purpose or result, if the person for whom the work is done expressly lets the contractor know the particular result that the principal desires the work to achieve.

The statutory warranties cannot be excluded. They are enforceable for a period of six years after completion of the work to which the warranty relates for a breach that results in a structural defect, or two years after completion in any other case. If the work is not completed, the starting date for the warranty periods is either the date the relevant construction contract was terminated, the date on which the work under the contract ceased to be performed (if the contract was never terminated), or the date of the contract (if the contract was never terminated and work was never commenced). The warranties extend to benefit non-contracting owners and any successors in title. However, if a statutory warranty has already been enforced in relation to a deficiency in work/materials, a non-contracting owner or successor in title will not be able to enforce the warranty for that particular deficiency.

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Home warranty insurance

The HB Act requires the builder to have insurance provided by the Self Insurance Corporation in place if the contract for residential building work is valued at over $20,000.

From 1 March 2007, home insurance policies must provide cover of at least $340,000. Consumers (including non-contracting owners and any successors in title) are entitled to claim on the insurance:

  • where the contractor is insolvent, dead or has disappeared; or
  • the contractor's licence is suspended because the contractor failed to comply with a money order in favour of the home owner made by a court or the Civil and Administrative Tribunal (Tribunal).

A general exemption from the insurance requirements applies to multi-storey buildings (more than three storeys and containing two or more separate dwellings). In addition, relevant developers or subcontractors do not need to obtain insurance, but a developer must not enter into a contract for the sale of land on which residential building work has been done, or is to be done, unless a certificate of insurance is attached to the contract for sale.

What are the insurance policy requirements?

Type of loss which the insurance policy must cover
Compulsory period of cover
Loss from non-completion of the work
At least 12 months after the failure to commence, or cessation of, the work the subject of the cover.
Loss from structural defects
At least six years from the completion of the work or the end of the contract relating to the work, whichever is the later.
Loss from non-structural defects
At least two years from the completion of the work or the end of the contract relating to the work, whichever is the later.

When must an insurance claim be made?

From 2 April 2002, a home warranty insurance policy will only cover a loss:

  • arising from non-completion of work if the loss 'becomes apparent' [meaning when a beneficiary first becomes aware (or ought reasonably have become aware) of the loss] and is notified to the insurer within the period of insurance; and
  • in all other cases, if the loss becomes apparent and is notified to the insurer within the period of insurance, or if the loss becomes apparent during the last six months of the period of insurance and is notified to the insurer within six months after the loss becomes apparent.

What are the consequences for breach of the insurance requirements?

Where a contractor fails to comply with the insurance requirements, the contractor is not entitled to:

  • damages or to enforce any other remedy for the breach of the contract committed by any other party to the contract; and
  • recover money for that work under any other right of action (including a quantum meruit), unless a court or tribunal considers it just and equitable.

Residential building work that is uninsured at the time the work is done ceases to be uninsured work if the required contract of insurance for the work is subsequently obtained.

A contractor who fails to comply with the insurance requirements may face a fine. The contractor will remain subject to any other remedy for a breach of the contract committed by the contractor under the relevant contract.

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What do I do if I have complaints about a builder?

Generally, complaints about building contractors must be made to the NSW Department of Fair Trading. The complaint will be investigated and, if appropriate, a rectification order will be issued requiring the builder to remedy defective or incomplete works. If the builder fails to comply, a claim may be made to the Tribunal.

The Tribunal

Disputes relating to certain claims do not need to be investigated before proceeding to the Tribunal.

These include:

  • the payment of a specified sum of money;
  • the supply of specified services;
  • relief from payment of a specified sum of money; and
  • the delivery, return or replacement of specified goods or goods of a specified description.

The Tribunal has power to hear and determine any building claim up to $500,000 arising from residential building work. Claims over $500,000 are dealt with by the District Court of NSW, or if above $750,000, the Supreme Court of NSW.

Where a licence holder fails to comply with an order of the Tribunal or a court to pay an amount of money in respect of a building claim, its licence is automatically suspended until the Director-General is satisfied that the order has been complied with.

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Updated 10 July 2014