Builders Home Warranty Insurance for reno?!?!?

From: Owen .


I'm just finishing a cosmetic renovation on an apartment a-la Michael Croft/Geoff Doidge/Peter Spann with the intention of selling it.

I've just called my conveyancer to organise a contract and he asked if I had spent more than $4000 on the reno and done the work myself. If I had then I need to take out Home Builders Warranty Insurance and provide proof of the policy to the buyer so they are covered for the next 7 years.

Has anyone heard of this before? What if I haven't made any structural changes? Does a new kitchen or bathroom constitute structural changes? What if a builder does the work? Does the liability change to him or stay with the owner?

I have spent more than $4000 but have not made any structural changes to the property (it is an apartment after all) just paint, carpet, benchtops etc. so I wouldn't think I would need it but this is a big issue for buy/renovate/sell deals.

I haven't searched elsewhere for an answer either but I thought I would ask you lot first. Any comments?

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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Reply: 1
From: Glenn Mott


Owen,

I would seek clarification from the conveyancer as to what type of work they see as fitting into the $4000 and ask to see the exact laws/rules that require this insurance.

There are obvious differences between a home owner performing $4000 worth of painting, gardening and cleaning and one who buys $4000 worth of bricks to build a new room, does all the electrical wiring himself and just for good measure puts in a new toilet!

Try not to stress out too much yet and don't sign anything until you feel comfortable doing so.

Glenn
 
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Reply: 1.1
From: Ross V


Owen,

The bad news is if an owner does a reno and sells with-in 7 yrs he must obtain consumer warranty insurance!
However the good news is that the limit now stands at $12,000.
Personally I would regard carpets as furnishings and not include them and perhaps there are a few other items that were there when you purchased...:)

good luck

ross-v
 
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Reply: 1.1.1
From: Glenn Mott


Ahhhh, Ross,

Sounds like words from a wise one!!

Glenn
 
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Reply: 1.1.2
From: Owen .


Thanks Ross. Where did you get your information from? Any website link handy?

As I said before the reno is cosmetic. Paint, carpet, kitchen benchtops, appliances, vanities and light fittings. My interpretation of what I was told is like yours - carpet etc and the things I listed are really furnishings. I think I should be OK as I did not make and structural changes. The only builder things were a cupboard in the hall and a wardrobe in the bedroom. If anything was to happen to them then I guess the liability would be the with the builders.

I keep investigating and post what I find out.

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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Reply: 1.1.2.1.1
From: Kristine .


For Victoria:

It's going to be easier to cut & paste this url


http://www.consumer.vic.gov.au/cbav/fairsite.nsf/pages/of_homesrent_changesbldginsurance?OpenDocument


and if that doesn't work, go to www.vic.gov.au select the Business channel, and follow the prompts through Consumer and Business Affairs Building and Renovating Changes to Domestic Building Insurance


To the best of my knowledge, the insurance is a one off fee, with the benefit of the policy made out to the owner of the dwelling which, I guess, is you, as you are not a registered builder which is another situation. The benefit of the policy is transferable from owner to owner, with the owner at the time a claim is made contributing a higher percentage of the claim, until eventually there is no more insurance cover remaining.

Leastways, that's how it worked the last time I had a major renovation done for me by a Master Builder.

It is just another charge to be factored into the buy-reno-sell equation, just like adjusting rates and paying stamp duty. It's been around for years in one form or another, and is not really a big deal.

Cheers

Kristine
 
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Reply: 1.1.2.1.2
From: Owen .


Ross,

I checked out the link and all the other info on the Fair Trading site and then gave the hotline number a call. There were two statements on the site that I clarified with them

1) All builders are required to take out home warranty insurance from an approved insurer for any residential building work or kit home where the work requires a licence and the value of the work is over $12,000.

I asked about the "requiring a licence" bit and it means that if a builder is hired then his insurance will provide the warranty. If it is done by the owner (me) then I would need to get an owner/builder licence and the corresponding insurance cover which will then pass to the new owner at sale time. basically anything that requires council approval and is more than $12,000 will require me to get a licence and insurance.

2) Effective 2 April 2002, a certificate of home warranty insurance is only required when the contract price of the home building (including owner-builder) work exceeds $12,000.

Again, this confirms that a contract to build is required in order to need insurance.

All of this means that any non-structural renovations do not require insurance cover regardless of cost. Anything that requires council approval over $12,000 must require a licenced builder with insurance or a licenced owner/builder with insurance.

Thanks for everyone's help. I'm free and clear.

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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