Triggering Events for a Claim on the Home Building Compensation Fund (HBCF) Policy


Usually (but not always) a Builder is required to provide a Home Building Compensation Fund Policy in relation to home building work. 

Such a policy covers the home owner and others (as set out in the Home Building Act) in relation to various claims and in particular in relation to:

  1. Cost of rectification of defective work; and
  2. A contribution to costs to complete incomplete building works.

When a homeowner or other person has the benefit of a Home Building Compensation Fund (HBCF) Policy there are certain obligations including the obligations to notify of a possible claim and also the occurrence of event to such a claim.

A home owner of residential building in New South Wales wishing to claim on the HBCF Policy is usually required to have taken action to enforce the statutory warranties under the Home Building Act 1989 (the HB Act).  This often is by instituting legal proceedings against the Builder in the NSW Civil and Administrative Tribunal (NCAT) or in the event that the claim is in excess of $500,000 in an appropriate Court within NSW.

For each party a dispute relating to the building defects can be expensive.  In such a case NCAT or a relevant Court needs to consider the claims relating to the alleged breaches of Statutory Warranty mostly relating defects.  The issue relating to defects is dealt with by way of Expert evidence from an appropriate Building Consultant.  Unfortunately there is most often competing evidence from the competing Expert evidence. 

It is up to the Tribunal or Court to resolve the issue and make findings based on appropriate evidence and determine the claim based on the evidence.  The proceedings have the potential to become protracted and costly for each of the home owner and/or builder.

If the home owner succeeds in his or her claim and obtains a Judgment against the Builder there are restrictions as to whether the successful party can claim on the HBCF.  Usually the Policy is triggered upon the Builder’s insolvency, death or disappearance. The Insurer is not bound by the decision in the case of the Owner agent, the Builder or other entity for breach of Statutory Warranty.  The Insurer would consider the claim.

If an Owner is contemplating making a claim and the Builder is declared insolvent, dies or disappears in accordance with the provisions of the law that of itself would allow other claimants against the same Builder to make a claim on the HBCF Policy without their case against the Builder. 

The insurer is not bound by.  In the event that there is a successful claim against the Builder and the Builder fails to make payment of the appropriate sum payable pursuant to a building claim order then the Builder’s Contractor’s Licence is automatically suspended 28 days after the due date for payment of the building claim order.  There are some issues as to the meaning of the building claim order and the date of payment.  This is what is a triggering event because of “deemed insolvency”.

The HB Act also provides that if the Builder has surrendered its licence or it has been suspended prior to the building claim order that of itself will not defeat the possible trigger event based on the deemed insolvency provisions

An issue arises for example whether a building claim order includes a costs order made in relation to proceedings between the Builder and the Owner.  One would need to have a determination of the quantum of the costs and to obtain registration of any Certificate of Determination of the quantum of costs as a Court Judgment to enable to costs to become due and payable. 

One needs to consider the particular circumstances of your case to determine whether there is a triggering event to enable you to make a claim on the Home Building Compensation Fund (which was previously known as Home Owners Warranty).

If you are involved in a dispute with a Builder of a residential building or if you have obtained a Judgment against a Builder and are proposing to make a claim under the HBCF Policy or enforce the Judgment against the Builder please seek the advice of Watson & Watson’s experienced Building and Construction Solicitors.  Please contact Richard Watson Accredited Specialist in the stream of Building and Construction or his Personal Assistant Shereen DaGloria to discuss your position and obtain the appropriate advice.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.

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