The Home Warranty Scheme
- Feb 17
- 14 min read
In Queensland, there is a statutory insurance scheme, known as the Home Warranty Scheme, the purpose of which is to provide assistance to consumers of residential construction work for loss associated with work that is defective or incomplete (scheme).[1]
Meaning of consumer
The term “consumer” is defined in the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act) at section 67WA and means a person who “contracts with a licensed contractor to carry out the work” and “includes a person who purchases the work, once completed, if the work is primary insurable work”.
Meaning of residential construction work
The term “residential construction work” is defined in the QBCC Act at section 67WA and means “(a) primary insurable work; or (b) associated insurable work”.
The term “primary insurable work” is defined in section 67WA of the QBCC Act as having the meaning in section 67WC, which is “any of the following building work if carried out by a licensed contractor and the insurable value of the work is more than the regulated amount”:
“the erection or construction of a residence or related roofed building”;
“building work within the building envelope of a residence or related roofed building”;
“building work for anything attached or connected to a residence or related roofed building that requires building development approval under the Building Act 1975 or a permit under the Plumbing and Drainage Act 2018”;
“the erection, construction or installation of a swimming pool within the meaning of the Building Act 1975, schedule 2”;
“other building work prescribed by regulation”.
The term “regulated amount” is defined in section 67WC of the QBCC Act as meaning “$3,300 or the higher amount, if any, prescribed by a regulation”. At the time of writing, there is no higher amount prescribed by regulation.
There is, however, “other building work” prescribed by regulation as also being primary insurable work. The relevant regulation is the Queensland Building and Construction Commission Regulation 2018 (Qld) (QBCC Regulation), at section 27, and it provides for six additional categories of building work, which effectively ropes into the definition of “primary insurable work” any building work that at all touches a residence or the building envelope of a residence.
However, certain building work is specifically excluded from the definition of “primary insurable work” by section 67WC of the QBCC Act, and this includes: fencing, landscaping, electrical, air conditioning, driveways or paths, hot water heating, refrigeration, roller shades and shutters, security doors and grills, solar power and water tank work, together with other work prescribed by regulation. The QBCC Regulation at section 28 provides that to also be excluded from this definition are: scaffolding, curtain/ blind/ internal window shutter, earthmoving and excavation, asphalt and bitumen, insulation, insect screen and some other works of a minor nature.
The term “associated insurable work” is defined in section 67WA of the QBCC Act as having the meaning in section 67WD(1), which is “any additional work that may be contracted to be carried out under a contract for primary insurable work if”:
“for primary insurable work relating to a residence—the work is carried out on the site of the residence or proposed residence and is for residential purposes”; or
“for primary insurable work relating to a related roofed building—the work is carried out on the site of the building or proposed building and is for residential purposes”.
Work does not necessarily need to be building work to be associated insurable work.[2]
Meaning of residence and related roofed building
The term “residence” is defined in section 67WA of the QBCC Act as having the meaning in section 67WE, which among other things includes a “single detached dwelling”, “1 or more attached dwellings that are separated by a common wall” and “a building, of not more than 3 storeys, containing 2 or more separate residential units”. There are also some other less common inclusions and exclusions listed in the section.
The term “related roofed building” is defined in section 67WA of the QBCC Act as having the meaning in section 67WF, which provides it is most roofed buildings on the site of a residence or proposed residence, unless most notably the roof is a sail, umbrella or similar thing. The notes to the section give examples of related roofed buildings like “A private garage, shed, carport, toilet building or change room …”.
Meaning of defective and incomplete
The term “defective” is not defined in the QBCC Act, whereas the term “incomplete” is, in section 67WA. In this context, it means “work that has not reached practical completion”, but it does not include “(a) work that does not comply with the contract because of a cosmetic difference; or (b) work that is defective”.
The first of those exclusions is supported in the QBCC Act by an example of a cosmetic difference. That example is “a different shade of paint”.
The second of those exclusions is simply aimed at identifying that work is, for the purpose of the scheme, either defective or incomplete, but never both.
Work that is not covered under the scheme
However, even if particular work meets the above definitions, there is certain work that is still not eligible for assistance from the scheme. That work is set out in section 67WB of the QBCC Act and section 26 of the QBCC Regulation and includes among other things:
work relating to travellers’ accommodation of various descriptions;
correctional centres and similar facilities;
hospitals and similar facilities;
orphanages and retirements villages and similar facilities;
educational institutions and group accommodation for persons with disabilities;
commercial or industrial premises;
building work carried out under an owner-builder permit;
certain residence-resiting works, off site prefabrication of buildings or transporting of such buildings;
work on or for a building other than a class 1(a)[3], 2[4] or 10[5] building.
The assistance the scheme provides
The scheme can only provide assistance if a consumer has suffered loss as a consequence of residential construction that is defective or incomplete,[6] meaning there needs to be some causal connection between the impugned work and the loss complained of.
The terms of the cover under which a person is entitled to assistance are those which are prescribed by regulation.[7]Presently, the QBCC Regulation at section 30(1) provides that those are the terms contained within schedule 6 of same.
It is possible for a consumer to obtain optional additional cover, essentially increasing the sum insured.[8] However, such cover must be taken out by the earlier of “30 business days after the day the consumer enters the relevant contract” and “the day the residential construction work, to be carried out under the relevant contract, starts”.[9]
Cover and commencement of the scheme
Cover under the scheme comes into force if, pursuant to section 68H(1)(a) of the QBCC Act:
“a consumer enters into a contract for the carrying out of residential construction work and—
the contract bears the licence number of a licensed contractor and, under the licensed contractor’s licence, the licensed contractor may enter into contracts with consumers to carry out residential construction work covered by the statutory insurance scheme; or
the contract is with a licensed contractor and, under the licensed contractor’s licence, the licensed contractor may enter into contracts with consumers to carry out residential construction work covered by the statutory insurance scheme”; or
“a consumer enters into a contract for the carrying out of residential construction work with a building contractor and, at or before the time the contract is entered into, the building contractor makes a representation that would cause a reasonable person to believe that the residential construction work is covered by the statutory insurance scheme”; or
“a person (the defrauded person) enters into a contract for the carrying out of residential construction work with a person (the fraudulent person) fraudulently claiming to hold a licence under which the fraudulent person may enter into contracts with consumers to carry out residential construction work covered by the statutory insurance scheme”; or
“the work is speculative residential construction work carried out by a licensed contractor and, under the contractor’s licence, the contractor may carry out residential construction work covered by the statutory insurance scheme”.
For most residential construction work, cover under the scheme comes into force pursuant to section 68I of the QBCC Act, on the earliest of the following to happen:
the licensed contractor pay the appropriate insurance premium for the work;
the consumer enters into a contract for the carrying out of the work;
the licensed contractor starts carrying out the work.
Optional additional cover comes into force when the appropriate insurance premium is paid for it.[10]
Terms of cover for the Home Warranty Scheme
The terms of cover for the scheme are divided into parts, part 2 of which provides for the assistance a consumer is entitled to claim for work that is incomplete, and part 3 of which provides the same for when the work is defective.
Incomplete work
The assistance which can be provided by the scheme depends on whether the work has started or not. If work has started, assistance is available subject to the following conditions set out in section 6:
the work is carried out under a fixed price residential contract;
the contract ends within 2 years after the day the work starts under the contract; and
the work is incomplete.
The consumer is entitled under section 7 to claim assistance for the reasonable cost of completing the residential construction work. However, the consumer is not entitled to claim the assistance if: (a) the residential construction work is prohibited under a relevant law or (b) approval required to complete the residential construction work under a relevant law cannot be obtained.
The assistance the consumer is entitled to claim in relation to the residential construction work must also be reduced by: (a) the consumer’s liability amount for the work; (b) if the consumer makes a payment to, or for, the licensed contractor for the work before the payment is due under the contract – the reasonable cost of completing the work for which the payment was made and (c) if the insurable value of the work exceeds the contract price for the work by more than 30% – the amount by which the insurable value of the work exceeds the contract price.
The term “liability amount” is defined in the terms of cover at section 2 as meaning ”the amount of the consumer’s remaining liability under … the contract immediately before the contract ended”, subject to some exceptions relating to liquidated damages, delay damages and other amounts the licensed contractor may have waived the requirement for payment in respect of, or may owe to the consumer.
In any event, no assistance can be given to the consumer unless the consumer makes a claim for assistance before the day that is 3 months after the day the contract for the work ends.
Defective work
A consumer of residential construction work is entitled to claim assistance for the reasonable cost of the following work: (a) rectifying the defective work; (b) any other building work reasonably required to be carried out to a relevant building as a consequence of the defective work (e.g. work reasonably required to repair a wall in a residence that has cracked because defective work to the concrete slab supporting the wall has resulted in subsidence of the slab).[11]
However, to the extent all of the following apply to the defective work, the consumer is not entitled to claim assistance on this basis:
the primary insurable work is defective because the work does not comply with the plans or specifications for the work;
the primary insurable work complies with all of the following—(i) the Building Act 1975; (ii) the Building Code of Australia; (iii) the Queensland Development Code; and
the use of the built work is not significantly affected as a result of the defective work.[12]
In the event described in the paragraph above, the consumer is only entitled to claim the loss in value of the built work as a result of the defective work. We sometimes refer to this as the diminution in value of the built work.[13]
In any case, the assistance must be reduced by the consumer’s liability amount for the work.
The term “liability amount” in this context and when the contract for the work has been terminated, has the same meaning as it does in respect of the incomplete work provisions.[14] However, where the contract is still on foot, it simply means “the amount of the consumer’s remaining liability under … the contract for carrying out the work”.[15]
The policy also has a limitation period, and there are two aspects to it. First, a consumer must become aware, or ought reasonably to have become aware of the defect:
in the case of structural defects, within 6 years and 6 months or alternatively 7 years from the cover commencement day for the work, depending on how long it took for the work to be substantially complete;
in the case of any other defects, within 6 months after the day the work is substantially complete.[16]
The term “cover commencement day” is defined in the terms of cover at section 16(4) as meaning:
if the consumer for the work obtains optional additional cover – the day the optional additional cover comes into force for the work;
otherwise, the day cover under the statutory insurance scheme comes into force for the work.
You will recall from above that cover comes into force pursuant to section 68I of the QBCC Act on the earlier of:
the licensed contractor pay the appropriate insurance premium for the work;
the consumer enters into a contract for the carrying out of the work;
the licensed contractor starts carrying out the work.
The term “substantially complete” is defined in the terms of cover at section 2 as meaning at least 1 of the following applies in relation to the work—
the final payment under the contract for the work is made;
if the residential construction work is for the erection or construction of a residence—the residence is occupied;
the built work is able to be used for its intended purpose despite the work not complying with the contract because of a cosmetic difference.
The second aspect to the limitation period in the policy relates to when the consumer makes the claim to the Commission. No assistance can be given to a consumer unless they make a claim:
for a structural defect, within 3 months after the day the consumer first becomes aware, or ought reasonably to have become aware, of the defect in the work;
for any other defects, within 7 months after the day the residential construction work is substantially complete.[17]
Another limitation on the policy is that a consumer is not entitled to assistance if:
the consumer has unreasonably refused the licensed contractor who carried out the defective work access to the site to carry out rectification work; or
the licensed contractor who carried out the defective work has a continuing legal obligation to complete the work.[18]
There are some further exclusions relating to pools.[19]
There are some inclusions relating to cost of accommodation, removal and storage costs while works are ongoing.[20]
Policy limits
Irrespective of whether the claim is for incomplete or defective work or both, there are monetary policy limits. In most cases, the policy limit is $200,000, or $300,000 if optional additional cover is in force. Further, within whichever of those amounts is applicable, there is a $5,000, or $10,000 limit if optional additional cover is in force, relating to the cost of accommodation, removal and storage costs while works are ongoing.
Also, the completion, reinstatement or rectification work a consumer is entitled to under the scheme is not necessarily the same as would have been available under the contract with the licensed contractor. For example:
while the consumer is entitled to claim for the cost of using materials that, as far as reasonably possible, match materials already used for the built work, or a building adjoining the work, to create a uniform appearance, if materials are used that do not match materials already used for the built work or a building adjoining the work, the reasonable cost the consumer is entitled to claim for the work does not include the cost of replacing undamaged parts of the work or adjoining building to create a uniform appearance;[21]
while the consumer is entitled to claim for the cost of obtaining a certificate in relation to the work and any inspections of the built work which are required for this purpose, the consumer is not entitled to these costs if it relates to work already wholly or partly carried out by the licensed contractor (i.e. the Commission will not have another engineer certify already-built work – the costs of obtaining such certificates is often enormous, if not impossible, without demolishing the relevant work and rebuilding it);[22]
Loss caused or contributed by someone other than the licensed contractor is also generally excluded. As too is any loss to electronic data. There is a long list of these exclusions in sections 53 and 54 of the terms of cover.
There are particular rules about electrical appliances. Generally speaking, if an appliance is not going to be permanently fixed to a building or the land, it is not covered by the scheme.[23]
A consumer for residential construction work is not entitled to claim assistance if the consumer unreasonably refuses the Commission access to the built work for the purposes of assessing a claim for the work.[24]
A consumer for residential construction work is not entitled to claim assistance in relation to a defect in the work if—(a) the residential construction work is substantially complete; and (b) the defect was apparent, or ought reasonably to have been apparent, to the consumer before the work was substantially complete.[25]
The claim to the Commission must also comply with the requirements of section 65, which in most cases mean:
some evidence of the contract and its scope;
if the contract has been terminated, evidence of termination;
evidence of all payments made in relation to the work;
a copy of any plans or specifications for the work.
You have a duty to act in good faith in relation to the claim.[26]
Before accepting a claim
Before the Commission decides to allow or disallow a claim, it must decide whether to give a direction to rectify or remedy the work to the licensed contractor.[27] If the Commission does give a direction to rectify, then it must not make a decision on the claim until the time for the licensed contractor to comply with the direction to rectify has expired.[28]
The result of a claim
The Commission must give you notice of its decision on your claim as soon as practicable after making it.[29]
The way the Commission may pay the claim is ordinarily:
to the licensed contractor the consumer contracted with (although this would be rare);
to another licensed contractor (although the Commission will receive several quotes, and may choose the cheapest contractor, to your reasonable dissatisfaction);
directly to you, in the event you wish to choose who is to perform the further works (such as if you are not satisfied with the Commission’s choice of contractor).[30]
[1] Queensland Building and Construction Commission Act 1991 (Qld) s 67X(2) (QBCC Act).
[2] QBCC Act s 67WD(2).
[3] National Construction Code pt A6: “One or more buildings, which together form a single dwelling including the following: (i) A detached house. (ii) One of a group of two or more attached dwellings, each being a building, separated by a fire-resisting wall, including a row house, terrace house, town house or villa unit.”
[4] National Construction Code Pt A6: “A Class 2 building is a building containing two or more sole-occupancy units.”
[5] National Construction Code pt A6: “A Class 10 building is a non-habitable building or structure.”
[6] QBCC Act s 67X(3).
[7] QBCC Act s 67Y.
[8] QBCC Act s 67Z.
[9] QBCC Act s 67Z(3)(a).
[10] QBCC Act s 68I(4).
[11] Terms of cover s 15.
[12] Terms of cover s 15.
[13] Terms of cover s 15.
[14] Terms of cover s 2.
[15] Terms of cover s 2.
[16] Terms of cover s 16(1).
[17] Terms of cover s 16.
[18] Terms of cover s 18.
[19] Terms of cover s 19.
[20] Terms of cover s 20.
[21] Terms of cover s 50.
[22] Terms of cover s 51.
[23] Terms of cover s 55.
[24] Terms of cover s 58.
[25] Terms of cover s 59.
[26] Terms of cover s 70.
[27] Terms of cover s 67.
[28] Terms of cover s 68.
[29] Terms of cover s 69.
[30] Terms of cover s 73.
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