Most residential building work done in Queensland valued over $3,300 is subject to QBCC home warranty insurance.

That’s great for home owners – but how might it affect you as a building company director?

As a director, you may reasonably be wondering: under what circumstances could you be held personally liable for work that is not completed?

QBCC Home warranty insurance: overview

Under the QBCC home warranty insurance scheme, a licenced builder or contractor pays an insurance premium to the QBCC to insure building work carried out. The insurance scheme protects home owners where:

• A licenced builder does not complete required building work;
• A licenced builder or contractor fails to rectify defective work; or
• A building suffers from subsidence or settlement.

The type of work insured under this scheme includes construction of new dwellings (including multi-unit dwellings) of no more than three storeys and general additions to, or renovations of, such properties.

The work is generally covered under the scheme for a period of six years and six months.

Who does it apply to?

The QBCC home warranty insurance scheme applies to builders or principal contractors directly carrying out building work for the owner of a property. It does not generally apply to subcontractors.

If a relevant licenced builder or contractor does not complete work under a contract covered by QBCC home owner insurance, or fails to rectify defects in such work, a home owner can make a claim under the scheme.

The QBCC may then direct the relevant party that carried out the works to complete work or rectify defects within a required period, which will be stated in the direction.

If a direction to rectify is received, the party who received it must complete the required works or apply for a review of the QBCC’s decision and assessment of incomplete works within 28 days.

Are you at risk? Possible recovery action by the QBCC for incomplete or defective works

If a builder or contractor does not comply with, or successfully appeal against, a direction to rectify work and the QBCC is subsequently required to pay a third party’s costs of completing work or rectifying defects, the QBCC is entitled to recover the amount paid from the licenced builder.

This includes, in the case of licenced companies, recovering the amount paid from the licence holder and each of the company’s directors on a joint and several basis.

The directors who may be liable are those who were appointed at the time when the building work was carried out and those appointed at the time that the direction to rectify was given by the QBCC.

Importantly, if a company has been deregistered or is in liquidation, it is unlikely that the QBCC will give a direction to rectify to it or its directors; they will generally just engage a third party to complete works. The QBCC will then seek recovery from directors personally for the costs of rectification.

The recovery action that the QBCC may take to recover amounts payable by directors includes commencing legal proceedings against them and bankrupting them if amounts payable are not paid.

Concerned about being held liable for works?

Do you need further clarification about QBCC home owner warranty insurance and what it could mean for you and your company?

Please get in touch with us and we’ll do our best to help you minimise your risks in this regard.