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Consumer Protections Insufficient In Building Sector

Consumer Protections In The Building Industry Must Be Improved

When you plan to build your home or conduct a home renovation, things may not always go to plan. Resolving disputes with builders is crucial to the success of any professional building project because cutting corners can result in sustained damage to the building and pose safety hazards to its occupants. At the moment, there is not enough regulation to protect home buyers from dodgy building work. Consumers can lodge a claim with the ATO about incomplete or defective building work, but building companies may not be liable enough when it comes to:

  • Incomplete or defective building work
  • Damage caused to other structures (include neighbouring properties) by home building work
  • Specialist work, including electrical wiring, plumbing, gasfitting and air conditioning/refrigeration

Home builders must be insured by the Australian Government’s icare HCBF insurance if they are working on a job worth more than $20,000. HCBF insurance protects the home owner in the event of contractor insolvency, death, disappearance or license suspension. Home owners may feel they need to make a claim when:

  • Project delays occur without a request for an extension of time
  • Work drags on outside of the contract period
  • Difficulties arise getting the builder on site
  • The builder demanding progress payments without finishing the work
  • Attempting to carry out defective work or work not agreed under the contract, etc.
  • Asking you to pay subcontractors direct when that was not what was originally agreed.

HBCF premiums are paid by builders and are meant to protect consumers from unprofessional building practice, but this doesn’t always happen so successfully. One example lending its weight to this argument is the fact that apartment buildings greater than four storeys are not included in the HCBS scheme. Both Government and private insurers baulked on including apartments in HCBS regulation in 2003. This means that owners are liable for any defects within their apartment and have little recourse when it comes to making a claim.

Another reason why consumer protection in the building industry is substandard is due to the fact that contractors may easily skip out on liability by closing for business after the construction work has been complete. A “$2” flop company can be set up to facilitate work and then closed after the job is complete to remove any liability over defects or building safety violations. There is little to no regulation preventing this to the detriment of home owners.

Indeed, in 63% of cases where the insolvency of a building company had triggered an insurance claim for defects, the builder simply continued working through another company. Furthermore, only 18% of licenses to build homes in NSW belong to companies, but these accounted for 85% of all insurance claims lodged due to insolvency.

It is evident that the Government’s icare regulation must change. With building collapses happening across Sydney recently, home owners must be taken care of with the proper regulation that affords them sufficient protection when they build or renovate their home. Dodgy builders who are setting up temporary companies to manage defective building work must be brought to justice.

To avoid compensation claims at your property, ensure the building you work in has been inspected thoroughly. A professional inspection report will list defects and other conditions that pose a risk to the health of occupants. SBDIR provides building inspections reports all over Sydney. Contact us today on 0419 416 040 to arrange an inspection at your property.