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lucky you had a building lawyer check it out. totally agree with you on this. they only can pay up to the stage completed. i have build numerous times before. i normally used the HIA standard building contract that is compliant in terms of base, frame, lockup, fixing, completion stage...

What was the issue regarding the invalidation of the warranty insurance. As for public liability, The insurance would normally be issued prior to the building permit so they would be unable to start anyway.