Changes to Builders Warranty Insurance in Victoria
It has not been long since the last series of changes to the Domestic Builders Warranty scene in Victoria yet the Victorian Government has just announced a series of significant changes to take place over the next two to three years.
 
This follows repeated calls by consumer groups to make access to the insurance backing the warranty provided by Domestic Builders for their work easier. The requirement that a builder be either dead, disappeared or insolvent before the insurance could respond was simply not working to properly protect the consumer.
 
Both building trade associations and the insurance industry recognised that additional claim triggers for the insurance were required.
 
However, the vast array of changes introduced by the Victorian Government in the Building Act (Amendment) Bill currently being debated in the parliament goes far beyond the simple introduction of additional claim triggers.
These proposed changes are summarised as follows:
 
•    Increasing the minimum contract value requiring insurance from more than $12,000 to more than $16,000.
     Only work more than $16,000 requires the compulsory warranty insurance;
•    Increase in the maximum amount of insurance from $200,000 to $300,000.
 
Both of the above took effect 1st July 2014.
 
•    Additional claim triggers, currently subject to Parliament passing the Amendment Bill, are included for:-
     o    Failure to comply with a rectification order issued by an inspector appointed by the new Victorian
           Building Authority;
     o    Full or partial suspension or cancellation of the builder’s registration as a domestic builder;
     o    Permanent incapacitation of the domestic builder to the extent that the builder is unable to complete or
           rectify building work.
 
The introduction of these will require new policy wordings, new certificates for warranty insurance and new premiums to cater for the increased protection. 
 
We have been advised that the Victorian Managed Insurance Authority (VMIA) is working with QBE to prepare the new documentation. They are also working on the calculation of the new premiums that will generate an increase in the cost of this insurance.
 
As soon as we become aware of the new premiums we will let you know. We have been told that plenty of notice is to be provided as to when they will apply.
 
The government was not content to stop with the above changes and has gone further, creating a new fund called the Domestic Consumer Protection Fund. Unfortunately no-one is at present able to tell us what shape it will take or how this fund will operate, only that it will come into effect 1st July 2015 and be administered initially by the VMIA. 
 
Eventually it will be managed by the Victorian Building Authority providing a so called “one stop shop” for your registration, disciplinary matters, consumer disputes and insurance claims. This must occur at the latest 1st July 2016.
For those of you who can remember the Housing Guarantee Fund that was dismantled in 1997 this has the feeling of “déjà vu”.
 
We have written to the Finance Minister, the Honourable Robert Clark MP, seeking clarification of how this new fund will operate and what the impact will be upon our builder clients. We have also stressed the need to balance the system by allowing the continuation of our role in assisting you through this maze of new bureaucratic hurdles and to champion your cause when seeking acceptance for warranty insurance from this new fund.
 
Our concern is that in their quest to reduce the cost of this insurance the government will prohibit insurance brokers from having any involvement in assisting their clients secure this warranty insurance. This means that you will be forced to deal directly with the public servants employed by the Victorian Building Authority to secure your warranty insurance on each and every job over $16,000 without our help in explaining your particular circumstances and understanding your individual time pressures.
An additional important change is the introduction of corporate registration. This allows companies and partnerships to register as a practitioner providing they have a nominated registered practitioner representing the organisation (and presumably accepting liability for the organisation).
 
This was a particular problem affecting building surveyors managing building permits. Once the Relevant Building Surveyor decided to move employers it was nearly impossible to manage the retention of that building permit within the original employer. The introduction of company practitioners means the company can be nominated allowing the continuation of the permit with that company despite the resignation of the particular building surveyor handling that permit.
During a transitional period between 01/07/14 and 01/07/15 all currently registered builders will be ‘grandfathered’ across to this new registration system. 
 
Whilst the introduction of corporate/partnership registration may be seen as an opportunity to minimise your personal liability, be warned! The new legislation makes the Officers of the company or Partners of the partnership personally liable for the offences committed by the corporation/partnership. This broadens the net of liability from just the registered practitioner to include others responsible for running the company or partnership.
 
As we hear more on this issue we will let you know.
 
 

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