Changes to NSW building laws

The new laws include changes to licensing for builders and changes to the eligibility of building defects for compensation

A range of new laws regarding home building have now officially been introduced in New South Wales.

The Home Building Amendment Act 2014 was passed by the NSW Parliament on May 28, 2014 and contains numerous amendments to the Home Building Act 1989. The new laws include changes to licensing for builders – both professionals and owner-builders – and changes to the eligibility of building defects for compensation.

NSW Fair Trading Minister Matthew Mason-Cox claims changes to home building laws will increase protections for consumers and modernise industry practices

"Builders and traders face up to 12 months in prison if they are repeat offenders of unlicensed contracting work or don't have the required insurance," he said.

Licensing changes also take aim at illegal phoenix schemes, where an indebted business shuts down and resumes operations under a new name.

"At its core, these new home building laws are about ensuring NSW consumers are appropriately protected without creating unnecessary red tape and regulation that will stifle industry growth and investment," said Mr Mason-Cox.

Consumer rights at stake?

Some claim the changes will actually degrade consumer rights; the Owners Corporation Network (OCN) in particular believes the changes will lessen protection for apartment owners.

One of the major aspects of the Home Building Amendment Act includes a change to the warranty period a builder must provide for new works. A six-year warranty now only applies for ‘major’ defects, which means there is a threat of collapse or the building is uninhabitable, while there is now no legal distinction between structural and non-structural defects. All non-major defects will only be covered under the standard two-year warranty, even if they are structural defects.

OCN Australia executive officer Karen Stiles said the changes could see homeowners slugged with bills for repairs that stemmed from builder errors, with no avenue to recoup the money from developers.

"The new rules for major defects make it basically impossible for homeowners to meet the test," she said. "What might be a hairline crack in year two could grow into something far more serious by year five."

But Mr Mason-Cox said the new laws sent a strong message to the industry.

"People have been stung time and time again by building companies that simply haven't performed and have run away from their obligations," he said.

"So this, for the first time, will ensure that those people who hide behind these companies will be held accountable and the warranties that apply will actually continue to apply despite those types of practices.”

The NSW Government said it has clarified the definition of major defects and included for the first time waterproofing and fire safety systems – an area where there's been a lot of litigation and problems.

Owner-builders

In addition to these changes, owner-builders now only require a permit for works valued over $10,000, not $5000. The required threshold for owner-builder courses will also be lifted.

Owner-builders also now need to name all other owners of the land on owner-builder permit applications. Those named in an owner-builder permit won't be able to apply for another owner-builder permit for five years, hindering the ability of owner-occupiers who frequently renovate, redevelop and flip their homes.

Owner-occupiers are also now unable to get permits for dual occupancy projects, barring "special circumstances”.

Simultaneously, licensing rules will be loosened so builders only legally require a license for works valued over $5000. Specialist work including plumbing and electrical jobs still need a licence, no matter what the cost. This change brings NSW into line with Victoria, WA and Tasmania, the government said.

Mr Mason-Cox will also introduce changes to the Home Warranty Insurance Scheme, which will be renamed the Home Building Compensation Fund.

The full details of the original Amendment Bill can be accessed here.