COMPULSORY DEFECTIVE WORKS INSURANCE

Done any building work since 1 May 1997? If so, then read on. 1.The Home Building Act, 1989 ("the Act") requires all residential building work to have a certificate of insurance ("CI") to cover against defective work. 2.The CI must be disclosed in the Contract for Sale of Land. Failure to disclose the CI in the Contract renders the Purchaser with a right to rescind contracts any time up to settlement! Vendors selling their property without the CI are in breach of the Act! 3.The Act applies to building contracts dated after 1 May 1997. The Act will also apply in situations where no contract exists but residential building work has been carried out. What does the Act define "Residential Building Work" as? *labour and materials costing more than $5,000.00 *renovations / extensions (including garage, carport, pool), plumbing / electrical work to existing houses as well as building new houses. How does it apply to you? (a)developers must always have the CI and it must be attached to the contract. (b)the owner/builder is only required to obtain the CI when the house is sold. What does the insurance policy involve? The CI must state that the work is covered from:- (a)either the date council approved the work/building (certificate of compliance); (b)or from the date when the work was completed NOT from the date which the property is being sold. Where do I obtain one? The 5 companies currently providing the CI are: *Home Owners Warranty *FAI *Zurich *Mercantile Mutual *HIH Insurance Who’s responsibility is it to take out the insurance? It is the builder’s responsibility to obtain the CI, a copy of which should be attached to your copy of the building contract. It is this certificate which is must be included in the Contract for Sale of Land.

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