Embarking on a career as a builder is an aspiration for many, driven by the desire to contribute to the creation of dream homes, renovation projects, or extensions that enhance the lives of clients. However, the journey to becoming a builder entails more than craftsmanship—it involves navigating regulatory frameworks, obtaining licenses, and securing insurance coverage, all of which are essential components of operating within the construction industry.
Two very important names you will need to know as a builder in Victoria are:
· VMIA – Victorian Managed Insurance Authority - Eligibility and Domestic Building Insurance (DBI) provider.
· VBA – Victorian Building Authority – Regulates the building industry in Victoria and registers building practitioners for work.
Achieving and maintaining eligibility with VMIA is a prerequisite for obtaining and retaining a VBA license. This symbiotic relationship underscores the interconnectedness of insurance coverage and professional licensing within the building sector.
In order to obtain and keep your VBA licence, you need to obtain and maintain eligibility with the VMIA, and to finalise your eligibility application with the VMIA, you need to be approved for a VBA licence.
While the application procedures for both entities demand attention to detail and adherence to specific timelines, seeking guidance from experienced insurance brokers or distributors can streamline the process and ensure compliance with regulatory requirements. It is advisable to commence the VMIA eligibility process first.
Eligibility is the term VMIA uses to describe a builder’s pre-approval to apply to purchase DBI for specific building projects. It sets out the specific building projects the builder has approval to apply to purchase DBI for. Each builder is given a Total/Annual Construction limit based on these details, which the builder can use to purchase DBI certificates for projects they do.
The eligibility assessment process evaluates an applicant’s asset profile including properties and cash held, and financial standing in the form of Tax returns, and any previous relevant experience they have obtained. VMIA also considers builder/ applicants credit rating, insolvency history and any other adverse history as part of the application process. Once a builder has been approved by the VMIA they receive a Pending Letter of Eligibility.
DBI provides protection to homeowners, in accordance with policy limitations, if their building project cannot be completed or has defective works which cannot be rectified as their builder has died, disappeared, become insolvent, or failed to comply with a Tribunal or Court Order where DBI was issued by VMIA on or after 1 July 2015.
Builders in Victoria are required by law to take out domestic building insurance, also known as builder’s warranty insurance, for work valued at more than $16,000.
DBI Certificates are taken out by the builder on behalf of the Homeowner for each project they do. Each project uses some of the construction limit the builder has, so builders need to stay within the limits allowed as they sign up and close off projects. These construction limits can be increased as the builder grows in the following years.
The VBA will require you to provide a technical reference confirming your experience – you may need to provide more than one technical reference. Your referees must be Domestic Builders registered in the same class or a class higher than the one you’re applying for. Your experience must show that you can carry out work competently and to a professional standard.
Your experience should be:
· Supervised by a registered building practitioner.
· Gained in an official paid capacity such employment or as a contractor.
· Across all aspects of work including technical,supervision, contractual.
· For at least the minimum number of required years.
· Gained in the last seven years.
You may also want to gain some knowledge by undertaking a building course. Your local Tafe and/or University will be able to introduce you the courses you can take to build up your knowledge to pass your VBA Licencing Exam and/or Interview with the VBA.
What happens once the application for both entities has been approved?
1. The builder receives a Pending Letter of Eligibility which has been approved by the VMIA.
2. This VMIA letter is then given to the VBA aspart of the licence application.
3. Once a licence has been approved, a builder can provide evidence of this to the VMIA.
4. The VMIA then update the Pending Letter of Eligibility (LOE) to a full letter.
5. The Builder obtains access to the VMIA Buildvic Portal in order to maintain their eligibility profile and in order to take out DBI Policies for projects they are going to do.
While the regulatory landscape and procedural requirements may initially appear daunting, access to helpful information and professional guidance can mitigate complexity and foster a smoother transition into the building profession.
Feel free to contact the BRIC team at www.bric.com.au for support. BRIC is an insurance brokerage specialising in builders' warranty insurance, committed to providing expert advice and tailored solutions to help clients safeguard their investments.
The information in this article is current as at the date of first publication and has been prepared without taking into account your objectives, financial situation or needs. Any advice provided in this article is of a general nature only. Any statements concerning tax, accounting or legal matters are based solely on BRIC’s experience as an insurance broker and are not to be relied upon as accounting, tax or legal advice. Before making a decision to purchase an insurance policy, please read the relevant Product Disclosure Statement to make sure the policy is right for you. Insurance cover is subject to policy terms and conditions, including policy limits and exclusions.
