Last updated 18 March 2022

Insurance

Part 5 of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act) provides for a statutory insurance scheme referred to as the Queensland Home Warranty Scheme. The Home Warranty Scheme provides homeowners with insurance cover where a licensed building contractor fails to complete residential building work or fails to rectify defective work. Assistance is also available in specific circumstances for loss associated with incomplete work due to damage by fire or storm, theft or vandalism.

Following a Parliamentary Committee inquiry into the former Building Services Authority, the coverage of the statutory insurance scheme was broadened. As per the Queensland Building and Construction Commission (QBCC) website, the expanded scheme includes the following work (where the work is for a value over $3300): 

  • construction of a single detached dwelling
  • construction of a duplex, townhouse or multilevel units to three storeys
  • construction of a related roofed building (e.g. shed, carport)
  • the erection, construction or installation of a residential swimming pool
  • the installation of a manufactured home fixed to land in a residential park, even where the residential park is located within a caravan park.

In relation to a residence or related roofed building (e.g. shed), the scheme includes:

  • all building work performed within the building envelope (outermost sides of the building, which separate the internal from the external environment) (e.g. painting, tiling, plastering, roof restoration and repair work, rendering of walls, floor restoration, glazing work)
  • anything attached to the building if it requires building approval or plumbing approval
  • any structure attached to the external part of the building where there is no other supporting structure (e.g. awning or handrail)
  • stairs or an access ramp that are permanently attached to the building. 

In relation to plumbing and drainage for a residence or related roofed building the scheme includes:

  • building work for the primary water supply (e.g. installation of a water tank for primary water supply)
  • building work for sewerage or drainage (e.g. work on a sanitary drain connecting a residence to the sewerage main)
  • stormwater drainage (e.g. repair of down pipe or gutter).

All licensed contractors carrying out building work worth more than $3300 on a residential dwelling are required to take out an insurance policy with the QBCC for this work. The licensed contractor is required to collect the appropriate premium from the consumer and pay it direct to the QBCC, on behalf of the consumer. The relevant premium payable to the QBCC is based on the insurable value of the work being the reasonable cost of having the work performed by a licensed contractor on the basis that the contractor will supply all materials (regardless of whether the work is performed on this basis).

Where a consumer has signed a contract for residential construction work, the QBCC will send a notice of cover to the consumer. The notice of cover provides details of the work, the builder and the premium paid. The consumer should receive this notice of cover before work begins. If a notice of cover is not received by a consumer, the consumer should check with the QBCC as it may indicate that the builder has failed to take out the required policy.

In relation to pre-practical completion, the scheme provides financial assistance  to consumers for non-completion and defects, if a licensed contractor fails to complete a contract for residential construction work and a contract is terminated by the insured (owner) for reasons that are not the owner’s fault. Such circumstances will include cancellation of the contractor’s QBCC licence, liquidation or deregistration (in the case of a corporate contractor), bankruptcy or death of the contractor.

If the dispute resolution process (as described below) fails to resolve disputes about defects, or the contractor is incapable of rectifying defects (e.g. due to liquidation or death), the scheme will cover consumers for the reasonable cost to rectify the defects up to the maximum insurance entitlement (as discussed below).

The standard cover provided under the Queensland Home Warranty Scheme is for a maximum of $200 000 which may be increased to $300 000 if a consumer elects to pay an additional premium to the QBCC. To obtain this additional cover, after the standard premium is paid by the licensed contractor, the consumer must pay the additional premium prior to the work starting or within 30 business days of the contract date (whichever first occurs).

The Queensland Home Warranty Scheme includes coverage of up to $5000 for accommodation, removal and storage costs. This coverage increases to up to $10 000 if a consumer elects to obtain additional cover.

The full terms of cover provided under the Queensland Home Warranty Scheme are to be found in pt 5 of the QBCC Act and sch 6 of the Queensland Building and Construction Commission Regulation 2018 (Qld).

The insurance policy covers a period of six years and six months from the date the contract is entered into by the consumer, from the date of payment of the insurance premium or when the work is commenced, whichever is the earliest. The period of cover is extended where the work takes longer than six months to complete.

Payment under the policy

Non-completion claims usually require termination of the contract due to circumstances outlined in the terms of cover. The only exceptions to this requirement are cases where the contractor’s licence is cancelled or the contractor is deceased, insolvent, bankrupt or in liquidation, or deregistered. The cover granted is the extra cost to complete the residence up to the maximum insurance entitlement. If the home is not commenced, the benefit is restricted to a refund of the deposit paid to the licensed contractor. There is also the possibility of a limited claim for rectification of incomplete work damaged by fire or storm, or where damage arises from vandalism or theft. Where the QBCC approves a consumer’s claim for non-completion, a claim for accommodation expenses may also be made.

Cover is also provided for rectification of defects in residential work. There are two types of defects being structural defects and non-structural defects.  Before a claim is lodged with the QBCC, the consumer must notify the licensed contractor of the defects and provide a reasonable opportunity for the licensed contractor to remedy the defects (unless the contractor’s licence is cancelled, or the contractor is deceased, insolvent, bankrupt or in liquidation, or deregistered). If the defects are not then remedied, a complaint may be lodged with the QBCC who will determine if the licensed contractor should be formally requested to remedy the defects. Structural defects are covered for a period of six years and six months whereas non-structural defects are covered where the consumer becomes aware, or should reasonably have become aware, of the defect within six months after the date the work is completed. Where the QBCC accepts a consumer’s claim for defects, a claim for accommodation expenses may also be made in circumstances where a home cannot be inhabited due to the defective work or while rectification works are undertaken.