StrataScene – QBCC Home Warranty Scheme
StrataScene –your resource for articles that are co-written and published by BCP Strata and a local tradesperson – highlighting a particular issue that has occurred in the office and providing a unique combined perspective of Body Corporate Manager and tradesperson.
This edition of StrataScene comes to you from the desk of our Body Corporate Managers, and in response to a recent training session.
As Body Corporate Managers, our role sees us wearing many different hats and there is a real expectation from our owners that we know something about everything. To assist our staff in being able to service you better, we participate in multiple training sessions that cover a broad range of topics. One particular matter that has popped up quite a bit over the past month – QBCC Warranty – what it is, when does it apply and how do you claim on it?
Who is QBCC and what is QBCC home warranty?
QBCC supports the Queensland community by not only providing information, advice and regulations to ensure proper standards are adhered to, they also step in and assist with the remedy of defective work.
The QBCC Home Warranty is an insurance policy taken out by a contractor from Queensland Building and Construction Commission for residential building works. The warranty exists for instances where a defect exists and the original work was of poor quality, was not completed or the contractor no longer exists. QBCC will step in and engage another contractor to attend to the defect.
What is covered by the policy?
- construction of a new home, related roofed building (e.g. garage), townhouse or multiple unit dwelling (no more than 3 stories high)
- the extension, addition, alteration, renovation or repair of any of the above buildings
- replacement or refit of fixtures or fittings in a kitchen or bathroom
- work on a deck or verandah, attached to a residence
- building work that affects the structural integrity of the building
From 28 October 2016, in addition to the above, the following work is also covered:
- work on or in the home or related roofed building (e.g. painting)
- work on a deck or verandah attached to a related roofed building
- anything attached to the home or related roofed building
- any structure attached to the external part of a home or related roofed building which has no other supporting structure (e.g. awning, handrail)
- stairs or ramp which provide access, and are permanently attached to the home or related roofed building
- swimming pools
The examples below do not require insurance if done on their own:
- driveways, paths or roads
When can the warranty be taken out/applied?
It is important to note that the warranty is similar to an insurance policy. It is paid for by the licenced contractor doing the work, and is only applicable for works in excess of $3,300. It has time limit restrictions, which are 12 months for non-structural defects and 6 years and 6 months for structural defects including water ingress. It is restricted to buildings which are 3 livable levels or less, and which are residential only. It specifically excludes mixed use and commercial properties.
How much does the policy cost?
There are two types of methods used to calculate the premium – regular and notional. QBCC have produced Premium Tables for contractors to assist in the correct calculation of premiums.
The Regular method premium is based on the value of the work, and is used for work such as painting, solid plastering, rendering, fire protection works and physical termite management work.
Other work, such as roofing, carpentry, tiling etc. use notional pricing, which is based on the number of residential units – more on that below.
The contractor simply refers to the correct premium table issued by QBCC for the task they are doing and looks at the premium that corresponds with the total value of the works – for example, works valued at $150,000.00 have a premium of $864.70.
Notional pricing is where the cost of the works is spread evenly over the number of units in the scheme (work such as roofing, carpentry, roofing, tiling etc.). The premium is calculated based on the average amount per unit, and then multiplied by the number of units. Notional pricing is far more expensive than normal, so it’s important to check that the contractor has used the correct pricing. As an example, a scheme with 5 lots undertakes work totaling $150,000.00 – calculated to be a “notional price” of $30,000.00 per unit. The contractor looks at the premium for $30,000.00 ($354.95) and multiples that by the number of units (5) and comes to a total premium of $1,774.75.
As you can see, the difference in premium can be quite substantial, so it’s important to understand how it is calculated and what is allowed for in the contract.
Why should you ensure a warranty applies for works?
Firstly, it’s a legal requirement for all QBCC licensees to ensure that all required residential building work has the correct QBCC home warranty insurance policy. Licensee’s risk fines and demerit points to their license if they fail to follow the guidelines.
Secondly, in most cases the cost of the warranty is minor compared to the value of the works. With a warranty in place, the Body Corporate can utilise the QBCC to assist in having the works completed or repaired at no additional cost (to the Body Corporate, or individual owners). Without QBCC home warranty the Body Corporate is putting itself, and each owner, at risk for future financial burden should works not be completed or completed poorly (with the contractor refusing to rectify, or unable to rectify if they are no longer in business). The contractor can also be fined (either monetary or demerit points) for not taking out the insurance, if they are licensed with QBCC, so it really is in their best interests to comply as well.
How do you claim on the warranty?
Technically you don’t claim on the warranty. You notify QBCC of your problems in the prescribed manner, and they will walk you through the process in lodging a complaint. A representative from QBCC will then mediate the complaint with you and the tradesperson. If the complaint cannot be resolved, QBCC will claim on the policy on your behalf and have the works completed/rectified.
- Most policies range between $300 and $600, which cover works from $17,000 to $60,000
- Most notional pricing ranges from $206 per unit to $300 per unit but is conditional on the total job value and the number of units in the scheme
- QBCC can, and do, temporarily suspend or even cancel licenses due to failure to conform to conditions/restrictions, liquidation of a company, failure to pay judgement debts or fees, unsafe conduct onsite etc. – 775 licenses were suspended or cancelled last year
- There are currently 91,164 licensees registered with QBCC, which means there are plenty of contractors to choose from – QBCC also has a Local Contractor search tool to assist
- Last year, QBCC facilitated and approved $41.3 million in claim costs. Of that, $15 million for defective work, and $20.7 million for non-completion of works. Only $1.7 million could be recovered from contractors (it is likely the remainder belongs to companies who no longer operate)
- Make sure you use a licensed tradesperson. Use the free QBCC license check tool. This will not only protect the Body Corporate; it will also help protect future clients who use the contractor
- Ensure you have a contract and that is signed by all parties
- Ask for a copy of the policy, and keep it on file
- Ideally work with your contractor to remedy defects before lodging a complaint with QBCC
If you would like more information, First Response Maintenance Solutions has a guide to QBCC Home Warranty Insurance available to download.
You can also find out more in-depth information on the Home Warranty on the QBCC website.