All Topics / General Property / WARNING FOR DEVELOPERS about compulsory QBCC Home Warranty Insurance Scheme

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  • Profile photo of BallerinaBallerina
    Join Date: 2011
    Post Count: 63

    Hi all
    This post relates to the compulsory Queensland Building Construction Commission Home Warranty Insurance Scheme, payable for any construction work contract above $3000 (in Queensland).
    It has to be taken out (paid for) before building approval is granted.

    Just want to share something which we have learned hard way…. And to warn all fellow developers (and developers to be) about one important clause in the insurance policy:

    Part 1: Non-completion

    1.1 payment for non-completion
    Subject to the terms of this policy, the QBCC
    agrees to pay for loss suffered by the Insured in
    the event of the contractor failing to complete the
    contract for the residential construction work

    1.9 No liability in certain circumstances
    The QBCC is not liable under this Part:
    (a) in relation to a contract or contracts for:
    (i) residential construction work involving
    more than two living units between
    the Insured and the one contractor; or

    And, as explained by QBCC representative:

    • Section 70A of the Queensland Building and Construction Commission Act 1991 provides that a person who enters into a contract to construct 3 or more living units is not entitled to indemnity under the Queensland Home Warranty Scheme. This provision is replicated in section 7.10 of the Insurance Policy Conditions.
    • The effect of this section is that while the Queensland Home Warranty Scheme provides protection to consumers, that protection is not extended to developers. While premium is payable for multi-unit projects such as townhouses, the protection offered is to the consumers who purchase the units off the developer, and not to the developer of the project. The premium is paid for the benefit of subsequent purchasers. They and the body corporate may make claims under the policy, but the developer is not entitled to a claim for the non-completion of the project.

    In simple English:

    Developer has engaged the builder to construct 3 or more units/townhouses, builder has not completed the construction (out of any reasons), contract is terminated , and insurance will not cover completion of the project.

    However, QBCC did not hesitate to take $11,174.00 for insurance premium from us (for 5 units).
    We would appreciate if solicitors on the Forum would like to comment.
    At least 10+ small developers are left in the mess at the moment, because this particular builder, who has recently gone into administration, specialised in multi residential construction.

    Profile photo of wilko1wilko1
    Join Date: 2010
    Post Count: 510


    My partner works in insurance and I think I might be sending a link to see if that clause is in building warranty polices.

    That is not a good result. What have you done since? Or planning to do

    Profile photo of BallerinaBallerina
    Join Date: 2011
    Post Count: 63

    Thank you Wilko 1, but it will not help because extract above is from the policy. And further explanation is from director of QBCC Insurance Services. We have all lodged the claims , and some have already been rejected. Ours is waiting for assessment.

    We are obtaining the quotes to complete from another builders and quotes are coming in substantially higher than original contract. Making the project totally non feasible. If we could finance it , at all.

    There is the option to lodge proof of debt with Administrator, however, it would take ages to get the funds, if at all. If builder is forced into bankruptcy, who knows how much and when creditors would get.
    I suspect not much, knowing the builder’s situation.

    To start legal action against the system is possible, but it would take for ever. And we all know how costly it is.

    Sad part is that majority of the so called developers, in this case, are Mums and Dads, developing in syndicates, and developments are structured in a way that each investor keeps a unit for investment purposes. Our units are also not to be sold and are in personal name.

    This insurance is compulsory…. Leaves you speechless.
    There is more: apparently, when new contract is signed for completion of the works, NEW insurance is payable. Currnet one can not be transferred from builder to builder!

    Last option is to JV with the new builder and give him one unit. It would mean a loss for us, but at least we will finish the project.

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