Owner Builders and Contractors

When an owner builder engages a subcontractor to carry out residential building work, there are a number of different factors that he or she must monitor and manage to protect themselves. By failing to monitor and manage just one aspect of a sub-contractor that you have engaged, as an owner builder could be left heavily exposed.

Below is a summary of the main factors that an owner builder should watch out for.

Licensing - An owner builder should always make sure that any sub-contractors he or she engages to carry out residential building work hold the appropriate licence as issued by NSW Fair Trading for the building work they perform.

If the owner builder engages a sub-contractor who is unlicensed, then both the owner builder and the sub-contractor could face heavy penalties.

Insurances - An owner builder should make sure that each sub-contractor holds adequate insurances, including workers compensation insurance (if applicable), personal accident and sickness insurance, public liability insurance, and sometimes construction works insurance.

If something goes wrong, and the subcontractor is uninsured, then the liability may fall back on the owner builder.

Home Warranty Insurance - If an owner builder engages a sub-contractor to perform residential building work in NSW that exceeds $20,000 in value, then that sub-contractor will need to take out their own home warranty insurance policy to cover the work that they perform, and provide the certificate of insurance to the owner builder before any work is performed, and before a deposit is paid by the owner builder.

Contracts - If an owner builder engages a subcontractor to perform residential building work in NSW that exceeds $5,000 in value, then the parties must enter into a written building contract that complies with the Home Building Act 1989 (NSW). As an owner builder, you should be very careful of a sub-contractor that does not wish to sign a written contract with you.

Maximum Deposit - When a sub-contractor is engaged directly by an owner builder, the Home Building Act 1989 (NSW) prescribes a maximum deposit that the sub-contractor can request, demand or be entitled to, before any residential building work is carried out by the sub-contractor.

Under the law, a sub-contractor must not demand or receive a deposit or other payment on account, or enter into a contract under which the sub-contractor is entitled to demand or receive a deposit or other payment on account, before residential building work commences, if that deposit or other payment is more than 10% of the contract price.

The maximum penalties for a sub-contractor contravening this part of the law range from $22,000 - $110,000.

Safety - Although the owner builder is primarily responsible for safety on site, a sub-contractor is still obligated to carry out work in a safe manner, and follow all directions from the owner builder that relate to safety (including Site Safety Rules). Furthermore, where the sub-contractor will be carrying out 'high risk construction work' (as defined in clause 291 of the Work Health and Safety Regulation 2011), a Safe Work Method Statement must also be prepared, and the sub-contractor must ensure that any high risk construction work is carried out in accordance with that Statement.