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What does it mean to be an owner-builder?

What does it mean to be an owner-builder?

Being an owner-builder means you are responsible for domestic building work carried out on your own property. Essentially, an owner-builder assumes the role of a building professional, is liable for the entire project, and may have ongoing obligations after the building work is completed.

Understanding the requirements and extent of the obligations of an owner-builder will assist those considering such a role to make an informed decision.

Becoming an owner-builder – eligibility

An owner-builder must own or co-own the land on which the work will be undertaken. If the land is held with others, their written consent must be obtained. The owner-builder must also reside or intend to reside in the dwelling and not propose to sell or lease the property.

An owner-builder may take on all or part of the work to be performed, provided he or she has the appropriate licence / qualifications, or may engage qualified tradespeople to carry out some parts of the project. A person is not an owner-builder if one builder is engaged to undertake the entire project.

A certificate of consent from the Victorian Building Authority (VBA) must be obtained by an owner-builder who intends to carry out domestic building work valued at over $16,000.

The VBA must be satisfied that an applicant has the necessary knowledge of the duties and responsibilities required of an owner-builder by completing a prescribed learning assessment.

If the proposed construction site is considered a ‘workplace’ under Occupational Health and Safety legislation, applicants must also have completed construction induction training (such as WorkSafe white card or equivalent).

Responsibilities and obligations – assessing the risks

There may be benefits in taking on your own domestic building project as an ownerbuilder. Provided you have the necessary practical and organisational skills, there can be potential savings and a sense of achievement in building a new home or carrying out a renovation project yourself.

Being an owner-builder however comes with responsibility and potential risks. An owner-builder steps into the role of a building professional and accordingly assumes the obligations and liability associated with a domestic building project.

Essentially, the owner-builder must obtain the relevant permits, carry out or supervise the carrying out of the building work, ensure the work complies with regulations and standards and arrange inspections for certification of the work.

An owner-builder is liable for non-complying work and sub-standard work practices and may be subject to enforcement action or monetary penalties issued by a building authority such as the VBA. Workplace safety and high occupational health and safety standards are essential and specialised risks may need to be dealt with such as the identification and removal of asbestos, swimming pool compliance and building in bushfire prone areas.

Good communication and management skills are important, as the owner-builder will usually need to coordinate and liaise with local council planning officers, building surveyors, builders and tradespeople.

The owner-builder may also need to negotiate with adjoining owners on issues such as access, protection works, noise and complaints.

Finally, the owner-builder will be responsible for rectification of defective or noncomplying work including future claims by a subsequent purchaser if the home is sold after the works are completed and generally for a period of ten (10) years from the issue of the Occupancy Permit/Certificate of Final Inspection.

Minimising risk

Following are some steps an owner-builder can take to mitigate risk.

Use registered builders / tradespersons

As an owner-builder it is likely that you will undertake some work yourself and outsource other parts of the project. It is essential that all builders and tradespersons are registered and properly licensed for the work to be carried out.

Builders and tradespeople must be registered with the VBA in the correct class of building practitioner, appropriate to the type of work being performed. Registration can be checked using the search function on the VBA’s website.

Use major domestic building contracts

If a domestic building project is worth $10,000 or more (including materials and labour) it is considered ‘major domestic building work’ for which a major domestic building contract must be used. There are some exceptions for tradespersons undertaking a single trade only for certain prescribed trades including, but not limited to, plastering, painting, insulating, tiling, plumbing and electrical work.

By entering a major domestic building contract for outsourced work, an owner-builder has the benefit of certain consumer protection terms prescribed by legislation. These include cooling-off rights, warranties as to the quality of workmanship and materials, restrictions on how progress payments may be claimed by the builder and termination
rights for certain events such as undue delays or unexpected price increases.

If the contract price is over $16,000 the builder must take out domestic building insurance on behalf of the homeowner and provide a copy of the policy before taking any payments under the contract. In such cases, an owner-builder will have the benefit of insurance to rectify incomplete or defective building work if the builder dies, becomes insolvent or disappears, or fails to comply with a tribunal or court order.

Obtain insurance

When engaging builders and contractors, copies of insurances including workers compensation should be obtained.

Exposure to some risk by the owner-builder can be managed by taking out appropriate insurance.

The types of insurance and level of cover required will depend on the circumstances including the site, the nature and scope of the building project. An insurance policy is a contract between the insured and the insurer and its terms and conditions such as the insured events, maximum sum insured, disclosure requirements and exclusions must be carefully scrutinised. Appropriate cover may be discussed with an insurance professional who may recommend one or more of the following:

  • public liability insurance which generally covers third-party injury, death and property damage;
  • construction insurance for unforeseen events such as theft and vandalism and hazards such as fire and storm damage;
  • personal accident / injury insurance for the owner-builder should he or she be injured on site;
  • voluntary works for family members or friends assisting with works;
  • workers compensation, if relevant.

Conclusion

If you are talented with the tools, conversant across the construction industry, or have good building resources, then you may be considering taking on your renovation or new home building project as an owner-builder. Before doing so however, it is important to understand the full implications of being an owner-builder.

If you or someone you know wants more information or needs help or advice, please contact us on 03 8787 8900 or email law@davidnaidoo.com.au.