Northern Territory Building Residential Building Package

On 1 January 2013 a number of changes to Building Act commenced.

The new laws, referred to as the Residential Building Cover Package, introduce a number of major changes, including changes to registration, insurance, contracts, invoicing and dispute resolution.

Registration: new net asset requirements

A new condition of registration or renewal is thata buildermust hold $50,000 in net tangible assets remains throughout the period of registration and you can only use part of jointly owned assets to meet the requirement.

Another condition of registration is that the building company have a director or nominee who is a registered building practitioner in the appropriate category for the work and who MUST adequately supervise the building works.

New Residential Building Cover (Insurance)

Replacing the Government run Home Building Certification Fund (HBCF, a Fidelity Fund has been established to provide owners with coverage against financial loss because of incomplete or defective work if the builder disappears, dies, becomes insolvent, or becomes deregistered. This is similar to the home owners warranty insurance that is in place in some other states and territories. A Fidelity Certificates provide six years cover for structural defects, and one year cover for non-structural defects.

Master Builders’ Association NT is managing the fund and will issue fidelity certificates. Builders must satisfy the Master Builders NT Fidelity Fundfor eligibility to be granted a fidelity certificate.

No HBCF policies for any building work will be issued after 31 December 2012.

Changes to residential building contracts

There are new regulations affecting the form and content of building contracts. These regulations impact on progress payment claim stages, building insurance, dispute resolution and introduce consumer guarantees.

These new rules apply to contracts entered into after 1 January 2013 to signed contract in place on 1 January 2013 where no HBCF policy or building permit has been issued. More details on the new regulations are set out below.

Consumer guarantees

The Building Act now contains guarantees that:

The builder will carry out the building work in a proper and workmanlike manner and in accordance with the plans and specifications specified in the building permit for the work and specified in this contract.

All materials supplied by the builder will be good and suitable for the purpose for which they are to be used.

All materials supplied by the builder will be new unless there is a special condition in this contract specifying otherwise.

The builder will carry out the building work in accordance with the Building Act, the Building Regulations, the Building Code of Australia and other laws in force in the Northern Territory.

The builder will carry out the building work with reasonable care and skill.

The builder will complete the building work by the date or within the period specified in this contract or if no date or period is specified, within a reasonable period.

These are similar to the statutory warranties that apply to residential builders in other states and territories.

Dispute resolution – new Commissioner of Residential Building Disputes

A Commissioner of Residential Building Disputes has been established. Consumers can make complaints to the Commissioner about quality of work issues or alleged breaches of the consumer guarantees. The Commissioner may facilitate mediation and conciliation, or if the contract is at an end, the Commissioner will hear an application. In these disputes, the Commissioner has the power to make a binding decision for the rectification of defective work.

This will change the way disputes can be managed under the HIA contracts, with parties no longer able to automatically go to arbitration or expert determination although the parties can still attempt to resolve the dispute informally and through non-binding conciliation and builders will still have access to security of payment laws.

The Building Advisory Services will be publishing standards and tolerances guide setting out the so-called acceptable minimum standards for various aspects of building work.

What does the RBC notcover?

The RBC does not cover a shortfall or under pricing on a contract.

Should your builder not be able to complete your contract and has underpriced the works, the RBC will only cover the cost to transfer the contract and associated certification and permit costs to another builder. See example table below.

$400,000 Value of contract.
$300,000 Quoted amount on contract.
$250,000 Paid to builder before going insolvent.
$50,000 Funds available to complete contract.
$150,000 Value of work to complete contract.
$100,000 Shortfall in funds required to complete value of work.
The $100,000 required to complete the contract is not covered by the RBC.

RBC Contribution Rate Scale

*Contribution rates include GST and Stamp Duty

Contract Value up to $,000 *Contribution Rate
$12,000 – $24,999 $700
$25,000 – $74,999 $850
$75,000 – $94,999 $900
$95,000 – $99,999 $1,100
$100,000 – $149,999 $1,300
$150,000 – $199,999 $1,550
$200,000 – $249,999 $1,750
$250,000 – $299,999 $2,000
$300,000 – $349,999 $2,200
$350,000 – $399,999 $2,450
$400,000 – $449,999 $2,650
$450,000 – $499,999 $2,900
$500,000 – $549,999 $3,100
$550,000 – $599,999 $3,350
$600,000 – $649,999 $3,550
$650,000 – $699,999 $3,800
$700,000 – $749,999 $4,000
$750,000 – $799,999 $4,250
$800,000 – $849,999 $4,450
$850,000 – $899,999 $4,700
$900,000 – $949,999 $4,900
$950,000 – $999,999 $5,150
$1,000,000 – $1,099,999 $5,350
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