I am often asked whether repairs need home owners warranty (HOW) insurance under the Home Building Act 1989 (NSW). The simple answer is yes, if the value of the work is over $20,000.
Although the construction of a high rise building over three storeys does not require HOW insurance, repair works to an existing high rise building may. Section 92 of the Act provides that a person must not do residential building work under a contract unless they have HOW insurance. The exception is if the work the contract relates to is under $20,000. If it is under $20,000 then there is no need to obtain HOW insurance.
The definition of residential building work at section 3 of the Act includes the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling. This means that if the owners corporation is planning on undertaking repair work that will cost in excess of $20,000 it will need to insure the builder has HOW insurance. Good practice would be to obtain and keep a certificate of currency of that insurance policy.
Clearly what is “residential building work” depends on the definition of a “dwelling” under the Act and clause 5 of the Home Building Regulations 2004 (NSW). In the case of an owners corporation, although it is not a natural person and cannot live or dwell within the building the Regulations provide that certain parts of a building such as stairs and passageways or structural parts of the non-residential part of a building may be part of a dwelling for the purposes of the Act. This means that although work may be conducted in a commercial area it may still be considered to be residential building work if it services the residential areas of the building.
The maximum penalty for breaching section 92 of the Act is 1000 penalty units or $110,000 for corporations, or 200 penalty units or $22,000 for individuals. This is an extremely simplified explanation. If your owners corporation is conducting works over the value of $20,000 and is unsure whether the works require home owners warranty insurance it should seek legal advice.
On another note, if you are planning to conduct renovations to your lot and the adjacent common property and the work will be in excess of $20,000 you will need to ensure that you or your builder have HOW insurance.