Home Building Compensation Fund (HBCF) – Home Owner Saves $thousands

15/11/2021

Watson & Watson Lawyers have for many years acted on behalf of Home Owners, Builders, Subcontractors and Building Professionals in relation to many claims relating to residential building work.

In a recent case, we received instructions on behalf of the Home Owners of a residential property in Sydney.

Briefly:

1. The Home Owners engaged an Architect who prepared the drawings and obtained a Development Consent.
2. The Home Owners entered into a Building Contract with a Builder. 
3. The HBCF Insurer issued a policy of insurance as required by the Home Building Act to cover claims in circumstances relating to the Builder’s Insolvency.  We refer to our article 9 April 2018.
4. In May 2017 a Construction Certificate was issued by an Accredited Private Certifier.
5. In early 2019 issues arose in relation to the building works.  The Builder had not completed the works and the Architect was of the opinion that there were significant defects.

In the first half of 2019 the Home Owners instructed Watson & Watson. 

We initially:

1. Discussed the circumstances of the dispute with the Home Owners and obtained and received documentation relevant to the dispute.
2. Engaged a Building Consultant to have an initial inspection (at a fixed fee) so that we could ascertain the position of the works in particular, having regard to our concerns as to the status of the works and the Home Owner’s desire to have the works completed.
3. Undertook a search in relation to the Builder and ascertained that the Builder was not insolvent which would allow a claim against the Builder in accordance with the Home Building Act and the HBCF Insurance Policy.
4. Advised the Home Owners who served a Loss Notification Claim on HBCF and as expected, HBCF acknowledged notification of the claim however indicated as no “triggering event” had occurred at that stage, no claim on HBCF could be made.

With our advice the Home Owners took the appropriate steps and thereafter terminated the Contract with the original Builder. 

The Home Owners thereafter entered into a new Contract with a new Builder (rectifying Builder) to complete the works.  The works as completed were the same as the original works, without variations.  This was important so that one could ascertain the actual cost of completing the works which were originally contracted.

In those circumstances, the appropriate and usual course was to consider issuing proceedings against Builder.

Proceedings were commenced at NCAT for a sum close to the $500,000 limitation of the jurisdiction of NCAT.

Following the completion of the works by the rectifying Builder, further enquiries were made and the Builder was not insolvent in accordance with the provisions of the Home Building Act although as far as one could ascertain, the Builder was not undertaking other works and the Builder was the subject of a claim by another Owner. 

The Owner of the other property had commenced a claim against the Builder and a third party.  NCAT ordered that the Builder pay the other Owner.  At that time, it was ascertained that the third party had paid to the Owner the amount ordered, however the Builder had not paid the balance owing by the Builder.  After discussions with the representative of the other Owner, the other Owner took action and eventually a Liquidator was appointed to the Builder.  This was a triggering event giving rise to a claim by our clients against the Builder. 

Having regard to the information available to our clients and further enquiries as to the likely insolvency position of the Builder on behalf of our clients, we sought adjournments of the proceedings commenced by our clients (which were granted) as we had ascertained the other Owner was seeking to appoint a Liquidator to the Builder.

During this period, our clients did not expend significant costs in relation to pursuing the Builder at NCAT.

As a result of the enquiries and discussions with the other Owner, our clients preserved their costs as it was ascertained that it was likely that the Builder would be insolvent in accordance with the provisions of the Home Building Act.  A Liquidator has now been appointed to the Builder.

The situation is now that the Home Owners have saved substantial costs that are usually incurred at NCAT or Court proceedings including detailed statements on behalf of the Home Owners as to factual matters and expert evidence as to the state of the works. 

In those circumstances, the Home Owners have saved a considerable sum and we anticipate that the Home Owners will receive the maximum claim from the Home Building Compensation Fund for relatively modest legal and expert evidence costs compared with the cost of conducting the original trial and thereafter making a claim under the Home Building Compensation Fund.

Particularly important in this case, is that the Home Owner’s losses were in excess of the maximum claim (currently $340,000) on the HBFC.

If you are building your first home, undertaking major renovations to your property or building a granny flat, our highly experienced Building and Construction Solicitors at Watson & Watson Lawyers can assist you from the outset and provide advice not only in relation to your rights and obligations but also those of the Contractor including in relation to Building Warranty Insurance.  The obligations of both the Homeowner and Contractor are equally important and if not adhered to, can lead to conflict. Please Richard Watson, Accredited Specialist in the stream of building and construction or his Personal Assistant Shereen Da Gloria to discuss your matter and seek appropriate timely 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.