Building Advisory Services

Residential Building Cover Package

Industry Briefings

Representatives from the Department of Lands, Planning and the Environment, Master Builders NT and the Northern Territory Commissioner of Consumer Affairs held information sessions regarding the Residential Building Cover Package in Alice Springs, Darwin, Tennant Creek and Katherine from 19 November to 23 November 2012.

These briefing sessions were well attended and covered details of the Residential Building Cover Package including:

• New requirements for building contracts, such as progress payments and consumer guarantees;
• The Residential Building Cover that will replace the Home Building Certification Fund (HBCF); and
• New processes for dealing with residential building disputes.

The revised Questions and Answers document covers the following matters. 

• Registration matters, including net tangible asset requirements
• Residential Building Cover what it is and how does it work
• Residential Building Cover how to get it and what does it costs
• Residential Building Contract issues, such as progress payments, consumer guarantees and consumer dispute resolution
• Residential Building Dispute processes.

Draft Northern Territory Standards and Tolerances Guide for Residential Building

The Draft Northern Territory Standards and Tolerances Guide for Residential Building (Draft Guide) was developed to assist builders, consumers, regulators and providers of insurance or fidelity fund cover when considering workmanship standards and tolerances for residential construction across the Northern Territory.  It is hoped that this Guide will assist in avoiding unnecessary building disputes or in resolving disputes when they do occur. This Guide covers elements of the residential construction process including footings and slab systems through to internal fixings such as basins and kitchen cupboards. 

Industry and consumer feedback on the Draft Guide was sought and the consultation period is now closed. The completed Guide is under preparation and is expected to be released on this website soon.  

Transitional

There are a number of transitional matters associated with the introduction of the Residential Building Consumer Package, including contracts and insurance entered into and taken out before 1 January 2013.  Builders should be aware of the following transitional matters.

• If there is a valid building permit in force on or before 1 January 2013, building work can either commence or continue under the current legislation.
• If there is only a signed contract in place on 1 January 2013 and no HBCF policy or building permit, the new provisions will apply to the building work and you will need to obtain a fidelity certificate. You must amend your contract so that it complies with the new legislation and include a progress payments schedule, the consumer guarantees and a compliant dispute resolution clause.
• If there is an HBCF policy and contract in place on 1 January 2013, a certifier may issue the building permit, noting that it falls under the transitional arrangements. This means that the work will not be subject to the insurance or fidelity fund cover, or the Consumer Guarantees and dispute resolution process.
• For work where a contract is required, and there is only an HBCF certificate, apply for a refund and start again under the new legislation e.g. complying contract and fidelity certificate.
• Where a residential building contract is not required in relation to the building work (for instance the work relates to a class 2 building), if before commencement day an HBCF policy is in force and no building permit has been granted, a certifier may issue a building permit in accordance with the former laws. If the certifier issues a building permit on this basis, the certifier must make a note on the building permit stating that the permit has been granted under the transitional provisions and the former laws continue to apply to the building work (this means the work will not be subject to the consumer guarantees or the dispute resolution process).

Getting ready for the introduction of the Residential Building Cover – What you can do

There are a number of things builders can do to prepare for the introduction of Residential Building Cover on 1 January 2013.  This includes changes to building contract templates, setting up progress payments and invoicing systems and gathering information required by the Master Builders Association (NT) to carry out an eligibility assessment which will includes details such as financial statements, business structure and construction history.  Builders must be registered builders.

• If you are a Building Contractor Company - put in place documented and actual procedures to ensure adequate supervision because you will be required by law to provide adequate supervision and can be prosecuted for a failure to do so.
• If applying for registration or renewing your registration make sure you have adequate net financial assets and contact your accountant to arrange a Net Assets Certificate.
• Getting documents into order so that you will be able to apply for an eligibility assessment from the MBA in advance of 1 January 2013. Documents are likely to include latest tax returns, financial statements, details of your turnover history, details of work you have undertaken over the past few years, proof of registration, documents evidencing your structure – corporate, partnership, sole trader etc, your tax file number, your ABN, your accountant's details, details of your suppliers for credit checks.
• Work out what level of cover you are likely to need next year – how many builds and to what value.
• Be ready to amend your contracts either by purchasing an MBA or HIA contract which will be updated in mid-December or by reference to suggested clauses which will be posted on the BAS website. The clauses which will need to be considered are:

• Progress payments
• Consumer guarantees
• Dispute resolution

• Amend your invoicing system to ensure that your invoices align with the standard progress payments, or where they have been varied, the agreed progress payments, remembering that it is mandatory to claim no more than 5% as a deposit and that a minimum of 3% of the total contracted price must be retained for final completion.
• Amend your invoicing system to ensure that when you send out an invoice for a progress payment the invoice will contain a declaration as to the completion of the relevant stage.
• Fact Sheet 8 Residential Building Contracts is now available for viewing and provides general information on mandatory provisions including progress payments, consumer guarantees, a suggested dispute resolution clause and an example of a sample invoice.

Further Information

For all Residential Building Cover matters – contact Building Advisory Services:

Telephone: 8999 8989
Email: rbi@nt.gov.au

For information regarding the Fidelity Fund Scheme, managed by the Master Builders Association NT (MBA-NT), including eligibility, assessment and fidelity certificate costs, contact Master Builders Association (NT).

Telephone: 89 22 9680
Email: fidelityfund@mbant.com.au