QBCC Home Warranty Insurance Scheme – Is there anything in it for us?
March 12, 2019
The Queensland Building and Construction Commission (QBCC) provides a form of statutory insurance for building defects, commonly referred to as Home Warranty Insurance. There is a common misconception within the strata/community title industry that Home Warranty Insurance doesn't apply to residential apartments at all. In fact, Home Warranty Insurance does provide some protection for residential apartments, just not as much as residential apartment owners may like. The reason for this primarily comes down to the distinction between a "home" and a "dwelling".
"Home" versus "Dwelling"
Home Warranty Insurance draws a critical distinction between a "home" and a "dwelling".
In broad terms, Home Warranty Insurance provides full coverage for domestic building works carried out in relation to a "dwelling". A "dwelling" is defined as a single detached dwelling, a duplex or multiple unit dwelling that is no more than three (3) storeys.
Some coverage is provided in respect of a "home", but this is limited to renovations, alterations, extensions and improvements. The definition of a "home" specifically includes strata or community title home units or residential units, and is not limited to buildings of a particular height.
In other words, if you have a five (5) storey residential apartment complex, that building will only be covered by Home Warranty Insurance in relation to renovations, alterations, extensions and improvements. Alternatively, if you have a three (3) storey residential apartment complex, that building will be covered by Home Warranty Insurance in respect of all domestic building works, including the original construction.
Why the distinction between a "home" and a "dwelling" is important
From a Home Warranty Insurance perspective, the distinction between a "home" and a "dwelling" is important because typically the most serious building defects stem from the original construction, whereas defects that stem from improvements and renovations tend to be less serious, or at least less expensive to rectify.
By way of example, we acted for a ten (10) storey residential scheme that had serious structural defects that stemmed from its original construction. At one stage, it was estimated that those defects would cost about $5M to repair. Due to the height of the building, however, Home Warranty Insurance was not available.
Similarly, we acted for a twenty (20) storey residential scheme that had serious water leaks that were the result of a podium renovation. Those defects cost about $75,000.00 to repair, and Home Warranty Insurance was available.
Arguably, the ten (10) storey residential scheme had a greater need for Home Warranty Insurance, but didn't have access to it because it wasn't a "dwelling" and the defects stemmed from its original construction.
Assuming Home Warranty Insurance is available, there is a common misconception that it covers you for 100% of your repair costs. In fact, Home Warranty Insurance, like all policies of insurances, has maximum limits.
In respect of defects affecting the common property of a scheme, generally Home Warranty Insurance will cover repair costs up to a maximum value of $1M or $200,000.00 multiplied by the number of lots in the scheme, whichever is the lowest amount.
Therefore, going back to the ten (10) storey residential scheme we mentioned earlier, even if Home Warranty Insurance was available, it would only cover them for a maximum of $1M, even though the estimated repair costs were about $5M.
Time limits and Critical Dates
Without question, the most prevalent misconception about Home Warranty Insurance is that you have six (6) years and six (6) months to make a claim. Whilst the total period of coverage is six (6) years and six (6) months from completion of the domestic building works, the time limits for making a claim are considerably more restrictive and require, as a first step, lodging a complaint with the QBCC.
For structural defects, complaints must be lodged with the QBCC within as few as three (3) months from noticing the defects. For non-structural defects, complaints must be lodged within as few as seven (7) months. If a complaint is not lodged in time, the QBCC may refuse to provide coverage under Home Warranty Insurance, even where it would otherwise be available.
Therefore, if a scheme notices a defect, especially a structural defect, it is critical that it lodges a complaint on time.
Home Warranty Insurance - is there anything in it for us?
Yes, but subject to a number of caveats and conditions which are broadly outlined above.
The key is acting promptly when a defect is first noticed and getting expert advice as soon as possible.
This article was contributed by Mario Esera, Partner – HWL Ebsworth Lawyers.