Any development (including construction work, demolition and changes of use), whether residential or commercial, generally requires a development approval from the local council under the Local Government Act (also known as planning approval) to allow the council to ensure that the works proposed are suitable to the area and not detrimental to the amenity of neighbours.

A development approval can be obtained by way of a formal application completed by the land owner submitted to the local council using the relevant forms provided, supported by title searches, plans and photographs sufficient to describe the work and by paying the fees required. Development approval must be obtained prior to applying for a building permit.

Building permit

In addition to development approvals administered and authorised by the local council, the Local Government Act requires local councils to administer the quality and safety of building work through the issue of, what is now called, a building permit. After approval but before any demolition, alteration or construction work, an application must be made for, and a building licence granted, to carry out the work required.

To apply for a building permit, the person carrying out the work must first be a licensed building services contractor or a licensed owner builder under the Building Services (Registration) Act, with qualifications to ensure the work is carried out properly.

Exemptions from a 'building permit' apply for low risk or low value work (less than $20,000) and for owner-builders.

Contract formalities

The HBC Act applies to everyone entering into a contract for home building and associated work valued between $7,500 and $500,000.

Home building work and associated work includes (among other things) constructing, altering, improving or repairing a dwelling and any associated site works, pergolas, carports etc.

Both the builder and the contracting home owner must comply with the HBC Act. The HBC Act cannot be contracted out of and any waiver of a right given by the HBC Act is void.

The HBC Act requires that:

contracts for home building work must be in writing;
all variations to contracts must be in writing;

unless the variation arises from a written direction, then the builder must provide notice detailing the reasons and costs in respect of the variation;

the builder must not include in the contract any provisions that are unconscionable, harsh or oppressive;
the builder must provide the principal with a 'notice to the home owner' before signing for home building work;

rise and fall clauses are not permitted except in certain circumstances – all contracts under the HBC Act must be fixed price contracts;

where rise and fall is permitted, the owner may terminate where the price rise is more than 5%;

the limit for deposits is 6.5 per cent of the total contract price;

progress payments must only be paid for work that has actually been completed, or materials that have been purchased;

builders must quote the minimum reasonable amount for provisional sums and prime works;

the defects liability period is a minimum of four months from practical completion;

a builder must not prevent a principal from inspecting the building work;
a home building contract is conditional on the issue of a building licence and the Water Corporation's approval within 45 working days from the date of the contract; and
the responsibilities of both the builder and the homeowner in obtaining the necessary approvals are an implied term in every contract.

Home owners or builders may draw up their own contracts for home building work as long as the contract fulfils the minimum requirements as set out in the HBC Act.

A party may terminate the contract if there has been non-compliance with requirements under the HBC Act. To effectively terminate, the terminating party must give a signed written notice to the other party before the building work is completed.

The HBC Act contains special rules applying to costs plus contracts. A costs plus contract must be headed 'costs plus contract' and contain a statement acknowledging that it is a 'costs plus contract' and that the HBC Act does not apply to it except in relation to the requirement for a builder to take out home indemnity insurance as explained below.

Insurance

Home indemnity insurance is required where the building work is valued at over the prescribed amount (currently $20,000) or relates to the placement of a transportable dwelling on land. The minimum cover required is the larger of $100,000 or the cost of the building work.

The policy covers the home owner, and future title holders, for a period of six years from the date of practical completion. Home indemnity insurance ensures that residential building work will be finished at no additional cost to the home owner if the builder dies, disappears or becomes insolvent.

Home indemnity insurance is not required:

for residential building work for which a building licence was issued before 1 February 1997;
for owner-builders obtaining a building licence, although a policy will be required if the dwelling is sold within the period of seven years from taking out a building licence;
for 'associated work' such as erecting a pergola or installing a swimming pool (even if the value of the work exceeds $20,000) unless these works are included as part of the home building contract; or
where exemptions exist in respect of multi-storey multi-unit developments and leased retirement villages.

It is an offence under the HBC Act for builders not to obtain this cover, or to request payment before a home indemnity insurance is in place.

Claims under a home insurance policy must be made within a period of six years from the day of practical completion of the contract.

Complaints

A new regime has been introduced under the Building Services (Complaint Resolution and Administration) Act 2011 (WA) to deal with complaints about building services and home building work contract matters.

Any person (owner, neighbour, builder or sub-contractor) can make a complaint to the Building Commissioner about a regulated building service not being carried out properly or a breach of a home building work contract or the HBC Act.

Complaints are received and investigated by the Building Commissioner. The Commissioner must arrange for an investigation and a report that may include recommendations on how the complaint should be dealt with.

The Building Commissioner can then:

dismiss the complaint;
order the parties attend conciliation if it appears to the commissioner worthwhile to do so;
make a building remedy order or home building work contract order (up to a limit of $100,000 for rectification work or $500,000 of payments); or
if the matter is too complex or outside of the monetary limits above, refer a dispute to the State Administrative Tribunal.

Updated 30 June 2012