Picture1

HOME WARRANTY INSURANCE – PART 1: NON-COMPLETION CLAIMS

April 29, 2024

Residential building work in Queensland (i.e., building a new home or renovating an existing residential property), that is valued at more than $3,300 (including cost of materials, labour and GST), must have insurance under the Queensland Home Warranty Scheme (‘the Scheme’). This insurance is a premium which the contractor collects from the homeowner, then paid to QBCC, to insure residential construction work for fixed-price and cost-plus residential contracts is in place.

The Scheme may cover homeowners for loss during the building process. The Scheme may also allow claims for non-completion or defective works.

The first article of this series will explore non-completion claims, specifically, the eligibility criteria, the two different types of non-completion claims, time limits, and the lodgment process.

ELIGIBITY CRITERIA FOR NON-COMPLETION CLAIMS

A non-completion claim can be made if the builder cannot, or fails to, complete contracted work because:

  1. they become bankrupt or the company falls into liquidation;
  2. the builder’s licence is suspended or cancelled;
  3. they are injured;
  4. they die; or
  5. you validly terminate the contract.

However, non-completion claims cannot be lodged where practical completion of the contract has been achieved but individual pieces of work are improperly completed. Further, only fixed-price residential contracts can be covered for non-completion claims rather than cost-plus contracts. Additionally, non-completion claims cannot be made if you are a:

  • developer;
  • person building 3 or more residences (residences meaning either standalone houses or residential units);
  • a licensed contractor building on land that they own; or
  • a consumer claiming for non-completion of a construction management contract.

NON-COMPLETION CLAIM: WORK HAS STARTED

This is where the claimant has entered into a contract with the licensed contractor and work on-site has commenced, but the contract ends before work has been completed. To proceed with a non-completion claim where work has started, the contract must end within 2 years from when works first began, and the claim must be lodged with QBCC within 3 months from the date the contract ends.[1]

The loss is calculated to be the extra amount in addition to the original contract price that the claimant needs to pay to engage a new contractor to complete works. What this means is that QBCC will pay the difference between the funds that the claimant still holds, and the amount that QBCC determines will be necessary for another licensed contractor to complete works. There are caps to amounts that can be claimed. To determine this, an outsourced panel of licensed contractors will provide quotes to the QBCC.

Where work has started, the Scheme may allow for an owner to claim accommodation expenses and will also provide ongoing cover for a variety of weather events and vandalism or theft.  

NON-COMPLETION CLAIM: WORK HAS NOT STARTED

Non-completion claims under the Scheme for work (not commenced) is where:

  1. deposit is paid but no work commenced; and
  2. contract is terminated (or at an end) within 2 years from the contract date; and
  3. the claim is made within 3 months from the end of the contract.

If the above is satisfied, the owner may recover amounts or deposits paid to the builder (under the Scheme).  

THE LODGMENT PROCESS

Prior to lodging a claim, documents will need to be supplied to the QBCC, including:

  1. a copy of the contract (including terms and conditions);
  2. specifications (if referred to in the contract);
  3. variation documents;
  4. approved building plans (if work requires approval);
  5. council development or building approval (if work requires approval);
  6. evidence of all payments made to contractor; and
  7. evidence that the contract has come to an end.

Importantly, the claimant must act in good faith during the lodgment process. This means that anything that may be relevant to QBCC’s decision on the claim must be disclosed, and responses to any of QBCC’s questions must be answered honestly. Failure to act in good faith may invalidate the claim.

Once a submission has been made, it will be registered with QBCC and a Resolution Services officer will assess the claim. If satisfied, QBCC will progress it as a home warranty insurance non-completion claim, and an email will be sent to confirm its receipt. Alternatively, if the submission fails to meet the home warranty claim criteria, QBCC will provide the claimant with a letter permitting application to the Queensland Civil and Administrative Tribunal (‘QCAT’).

Stay tuned for part 2 of this series, which will explore the alternative claim that can be made under home warranty insurance – defective work claims.

Lamont Project & Construction Lawyers

The Lamont Project & Construction Lawyers team has extensive knowledge dealing with the QBCC Act and with the Scheme lodgment process. With this knowledge and expertise, Lamont Project & Construction Lawyers can provide the required support and advice during the claim cycle.

If you would like to discuss any matters raised in this article as it relates to your specific circumstances, please contact Lamont Project & Construction Lawyers.

The content of this article is for information purposes only and does not discuss every important topic or matter of law, and it is not to be relied upon as legal advice. Specialist advice should be sought regarding your specific circumstances.

Contact: Peter Lamont or Cliff Mei

Email: [email protected] or [email protected]

Phone: (07) 3248 8500

Address: Level 2, 349 Coronation Drive, Milton Qld 4064

Postal Address: PO Box 1133, Milton Qld 4064

 

[1] ‘Home Warranty for Non-Completion Claims’, QBCC (Web Page, 25 October 2021) <https://www.qbcc.qld.gov.au/complaints-disputes/building-work-issue/non-completion-building-work/home-warranty-non-completion#examples>.