Home building laws in every state or territory ensure tradespeople are appropriately qualified for the work they perform on residential properties. However, the home building laws do not cover all trades. If you are a tradesperson in New South Wales (NSW), you need to know when the Home Building Act 1989 (NSW) (the Act) may apply. This article will explain when and how you comply with home building laws in NSW.
How Does the Act Define Home Building?
The Act refers to homes as dwellings. According to the Act, a dwelling means a building or part of a building that is designed, constructed or adapted for use as a residence. Examples that fall within this definition include:
- detached or semi-detached houses;
- terrace or townhouses;
- duplexes;
- villa-homes
- strata or company title home units;
- residential flats;
- spas;
- pools;
- cabanas; and
- balconies.
Meanwhile, home building (known as residential building work under the Act) is the:
- construction;
- alteration;
- addition;
- repair;
- renovation;
- decoration; or
- protective treatment of a dwelling.
The definition also includes:
- erection of prefabricated metal-framed home additions and structures;
- general building work;
- kitchen, bathroom and laundry renovation;
- structural landscaping;
- swimming pool building;
- roof plumbing work in connection with a dwelling;
- water, food or atmosphere heating and cooling;
- ventilation; and
- filtration of water in a pool or spa.
Trades
The Act has regulations that specify what trades fall within the definition of residential building work. Some of the trades included are:
- bricklaying;
- carpentry;
- decorating;
- fencing;
- general concreting;
- glazing;
- minor maintenance, cleaning and trade work;
- painting;
- roof plumbing, slating or tiling;
- stonemasonry;
- wet plastering;
- wall and floor tiling; and
- waterproofing.
If your trade is listed in the Act, the laws are unlikely to apply to you. However, the only exceptions are if the trade is classified as specialist work. Under the Act, those trades are:
- plumbing and drainage work, other than roof plumbing work;
- gasfitting work; and
- electrical wiring work.
Therefore, if you carry out any of the above work on a dwelling as defined under the Act, your trade will be covered under the Act.
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Expansion of Inspection Powers and Anti-Phoenixing Laws
In November 2023, the NSW parliament passed the Building Legislation Amendment Bill 2023, significantly changing the Act. This impacts builders, tradespeople, and homeowners involved in residential construction projects. These changes include the expansion of inspection powers and the introduction of anti-phoenixing laws.
Expansion of Inspection Powers
Under the new provisions, inspectors from the Building Commission NSW now have the authority to investigate the construction of buildings covered under the Act, such as freestanding houses, duplexes, and terraces, Class 1 buildings under the National Construction Code. Inspectors can enter residential homes under construction or where construction work is undertaken to examine build quality. However, if a building is occupied, an inspector can only enter the residential portion of the premises with the owner’s permission or by obtaining a search warrant.
Rectification and Stop Work Orders
When inspectors identify defective work, potential defects, or damage caused by defects, they can issue rectification orders to contractors. Additionally, if continuing work poses significant risks of harm or loss to the public or future occupants, inspectors can issue stop-work orders. Non-compliance with these orders could result in penalties.
Anti-Phoenixing Laws
The construction industry experiences higher rates of insolvency than other industries. In some cases, company directors in the construction industry intentionally create new companies to continue the business of a liquidated company, avoiding the completion of work, remediation of defects, or payment of outstanding debts, including subcontractor wages. This practice is known as intentional phoenix.
The Act now includes stronger powers to prevent individuals with a history of intentional phoenixing from harming consumers and tradespeople in the residential construction sector. The regulator can now refuse an application, cancel a licence, or disqualify a person from holding a contractor licence if the person has been involved in managing a company that has become insolvent in the previous 10 years. This includes individuals who were directors either during or leading up to the insolvency event.
Overall, the expansion of inspection powers and the introduction of anti-phoenixing laws in the Act aim to protect consumers and tradespeople in the residential construction sector. Builders and tradespeople should be prepared for inspections anytime, while homeowners should be aware of these new inspection powers for homes under construction. The anti-phoenixing laws will help prevent individuals with a history of intentional insolvency from causing further harm in the industry.
Continue reading this article below the formWhat Does the Act Exclude?
The Act does not apply in many circumstances. Some exclusions are:
- any work (other than specialist work) under $5,000;
- any work (other than specialist work) related to movable dwellings;
- internal painting that is not related to a residential building work contract;
- removal and transport of a dwelling that is not related to a residential building work contract;
- architect supervision;
- owner-builder supervision or of someone with a building licence;
- demolition work;
- flooring (except for tiling) that does not create structural changes to the floor; and
- buildings such as retirement homes, schools or boarding houses.
Contract Requirements
If your trade is covered by the Act, you will need to provide a written contract that includes details about the work you will provide. What you should include in your contract will depend on the price of the job.
For small jobs between $5,000 and $20,000, you should include:
- Details of the parties: Include business details, your contractor licence details and the details of your customer;
- Works: Describe the scope of work in detail, including any plans or technical specifications (if necessary);
- Price: Outline the price of the work (if known) clearly to the customer;
- quality: State you comply with any relevant laws (including the Building Code of Australia), development applications or certificates; and
- variations: Mention any variations to the contract will only occur if you and your customer agree in writing.
Works that are more than $20,000 will require you to include the above considerations. Additionally, you must also include details on:
- payment process;
- how you or your customer can vary the contract price;
- a cooling-off period; and
- insurance.
Furthermore, you are required to provide a checklist of the key considerations in the contract. If your customers are unsure whether the contract meets all 15 points, they are unlikely to sign it. Therefore, you should ensure your contract thoroughly covers all the points raised in the checklist.
Warranties
You will need to set out warranties in any home building contracts with homeowners. That means, as a tradesperson, you guarantee that:
- the work will be done with due care and skill according to plans set out in the contract;
- all materials supplied are good and suitable for the purpose to be used;
- you will comply with all relevant laws when completing the work;
- the work will be done with due diligence in the stated timeframe or within a reasonable time if there is no stated timeframe;
- the work will lead to a house that is reasonably fit for occupation; and
- if the homeowner states the particular purpose or result for the work to be done, your work will be reasonably fit for the purpose or result.
Licences
The Act requires everyone who engages in residential building to work to get a relevant licence. You will need a contractor licence if you are engaged in:
- any work where the labour and materials costs exceed $5,000;
- electrical wiring, plumbing, draining or gasfitting work; and
- air-conditioning and refrigeration work.
You should obtain a contractor licence before supplying any of the above services. Otherwise, you may face a fine, or your contracts with customers will be void. You should apply to the NSW Department of Fair Trading for your contractor licence.
Key Takeaways
The trades listed in the regulations as falling within the definition of residential building work catch the attention of many of the Act’s most significant provisions. It is important that you are aware of the various provisions that may apply to your trade, including the new expansion of inspection powers and anti-phoenixing laws under the Act. If you breach your obligations under the Act, you may be subject to penalties or your licence may be revoked.
If you have questions about your legal obligations when performing residential building work, our experienced construction lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to solicitors to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Intentional phoenixing is an illegal activity whereby the owner or manager of a company liquidates the business with the fraudulent intention of avoiding debts, tax or other liabilities. If your business is failing, you should avoid opening another company with the intent of continuing your operations under a different company name.
Contracts for residential building work must meet specific requirements based on the value of the work. For jobs between $5,000 and $20,000, the contract should include details of the parties involved, a detailed scope of work, the price, compliance with relevant laws, and terms for variations. For work exceeding $20,000, the contract must also cover the payment process, how to vary the contract price, a cooling-off period, and necessary insurance.
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