Risks of an owner-builder

Owner-builders must carry out domestic building work in compliance with the Building Act 1993 and Building Regulations. 

Owner-builders must ensure that they maintain a safe workplace and should have appropriate and public safety insurance policies in place.  They should also consider purchasing policies to protect themselves against fire, theft and defective work. When protection work is required, the owner-builder must also obtain insurance for adjoining property protection during construction, and for twelve months following completion.

An owner-builder effectively assumes the responsibilities, legal risks and liabilities of a registered building practitioner.

These risks can include:

Financial risks                     

• Project cost increases as a result of poor estimating
• Rework due to faulty workmanship and/or non-compliance
• Variations from the original plans
• Loss by theft or fire on the site
• Site protection costs (security, safety)
• Occupational health and safety claims
• Adjoining property owner claims

Quality risks                       

• Adequacy of drawings and specifications
• Standard of workmanship by others
• Compliance with regulations (building, occupational health and safety, etc)
• Technical ability to direct and assess workmanship

Time risks                        

• Identification and engagement of suitable tradespeople
• Coordination and continuity of work
• Completion of work

Future risks           

• Cost of insuring prospective purchasers for 6.5 years after a Certificate of Final Inspection or Occupancy Certificate is issued
• Claims by purchaser within required statutory time period

Many of these risks may influence the cost of building work. Risks are reduced where a trade contractor, being a registered building practitioner, is engaged under a major domestic building contract with associated warranties.  Where the contract sum exceeds $12,000 and the contractors is required to provide warranty insurance, risks are further reduced.

Contact your insurance broker about how you can offset financial risks through insurance.

What liabilities does an owner-builder have?

If a property owner sells their house within six years of completing works as an owner-builder, they must provide warranty insurance cover to the purchaser of the property. They are also required to provide a technical inspection report that identifies defects.

It is important that owner-builders understand that the insurance policy is for the benefit of the purchaser and that the owner-builder will be responsible for ensuring that the work has been done according to law.