Section 137B - Owner Builder Insurance Reports 

Recent tightening of building controls by the Building Commission mean that new residential construction must be carried out by a licensed builder with current warranty insurance. This is aimed at improving the quality of building stock and drive out ‘dodgy’ builders. 

Selling a house built or renovated by an owner builder. 

Before entering into a contract to sell a house which has been built or renovated by a person other than a registered building practitioner, where the works have been completed for less than 6 years prior to the date of sale, the owner builder must:

1. Obtain this Inspection Report. It must be provided to the intended purchaser by the owner builder. The Inspection Report must not be older than six (6) months old at the date of the contract.

2. Send to an approved insurer:
- a completed ‘Application for Owner Builder’s Indemnity Insurance’,
- a copy of this Inspection Report,
- the appropriate fee – confirm the fee with the insurer.

If all items are in order, the insurer will send you the necessary certificate or schedule of insurance.

3. Provide evidence of the insurance to the intended purchaser.

4. Ensure your contract contains the listed warranties.  After the contract has been signed, the owner builder must send a copy of the contract to the insurer.

If a contract of sale has been entered into in contravention of the legislation, the contract is not void by reason only of the contravention but is voidable at the option of the purchaser at any time before the completion of the contract. 

The insurance is applicable to structural works done by the owner builder which have been completed for less than 6 years prior to the date of sale. The insurance ceases for structural works when that 6 year period expires. (The insurance ceases in 2 years for non structural works) 

The insurance only covers defects caused by the owner builder and does not cover any defects identified in the report. 

Please note that where the owner builder has renovated or extended the home, the insurance only relates to those works. The balance of the house is not covered by this insurance at all.

Defects identified in the Insurance Report are those caused by bad workmanship or movement of foundations. The report does not necessarily refer to routine maintenance items (e.g. hair-line plaster cracks or jamming doors and windows) which are caused by normal shrinkage providing the workmanship was not defective.

Serious defects are defects which seriously affect the structural integrity of the property or require the substantial replacement of plumbing or electrical services. In the case of cracking, serious defects denote severe cracking as defined by Category 4 Appendix A – Australian Standard AS 2870.1 – 1988. 

Many insurance providers will underwrite these types of projects, provided they are independently verified by a licensed building practitioner.

The Guide to Standards and Tolerances published by the Building Commission of Victoria is provided as a useful guide for Owner Builders and prospective purchasers. Click to download.