Owner-Builder Licence and Insurance

[Flyboy]

G'day all,

Just about to start building a new house and had a couple of (boring) legal questions. The builder I'll be using is a good mate whose just gone out on his own as a builder, and we were looking at whether we couldn't save a few $k and get the ball rolling quicker if we did the job with me as owner-builder, rather than under his licence and insurance.

We've taken into account the cost of Public Liability Insurance, but disregarded Home Warranty as I'm not intending to move out in less than 6 years.

Can anyone see any disadvantages in doing this?

Also, any recommendations for insurance companies or Owner-Builder courses would be greatly appreciated. I'm currently looking at the Buildsafe online course for $95.

Cheers

[Pulpo]

Some people like this others do not.

Obvious fact is that your are removing some liability for the builder and reducing costs as the [something] insurance is not required.

With your 'good mate' builder work out before commencing what he will be doing and what the subcontractors will be doing and who will be employing them.

TAFE have an owner builder course, which I did, but they are all the same just informing you of all the red tape.

Cannot see it being quicker you being the owner builder, unless the builder is not fully set-up with insurances etc.

You can only use an owner builders licence once every 6 years.

I would do it not only to save money but I would want to be more involved as well.

Good luck

Pulpo

[journeyman Mick]

You may want to look into the financial aspects first. Generally the bank requires that the builder (of whatever flavour) fronts the money for each stage. Depending on the institution you may only get paid at 3 stages: footings, lock-up and final. So somebody (the builder) needs to have (or get) the money to pay for all the materials and labour in the meantime. Banks are very wary of owner builders as there's been many cases where theyre left holding a mortgage on a property with a partly built house. So you need to have a large credit limit with a few hardware stores and timber yards, an industrial size credit card and enough readys to pay the contractors and hopefully be able to finish a stage by the time the accounts are due. Can be stress city!

Mick

[Metung]

Don't confuse Home Warrranty Insurance with Construction Insurance. What happens if you only have Public Liability insurance and everything is stolen from your building site or it burns down just after lock up? I would suggest Public Liability and Construction Insurance.

[Barry_White]

In NSW as a owner builder you will probably have to sign a form with your council that make you liable for up to 7 years if you sell the property before. Go to your council and check with them first. I think you will find they wont even release approved drawings until insurance is in place.

The other thing you will find is that all subcontractors that do work over $12,000 has to have home owners insurance on it and they will add it to their account.

I think you will find that is only one Home Warranty Insurer in NSW and you would probably find they wont insure owner builders and added to that a builder has to mortgage his own home a be prepared to sign just about everything they own over to them before they will insure the builder. And then if there is a claim against the builder they go after the builder with the dogs.

[Gaza]

In NSW if your mate is the project manager / foreman / cleint rep they to must have Home Owners Warranity, and all trades over $12000 (as stated perviously) this means unless you are paying your mate $11999.00 he will have to still get home owners warainty. 99% of subbies will not have HW,

Contact Dept Fair Trading in NSW to see there view.

The idea of trying to "prettend" to be a owner builder to save money and avoid the builder getting cover does not always work and has been tryed a number of times. Your mate will need to have a number of jobs under his belt in order to increase the value of work that he is insured to do, if he does yours on the side he can not use it as a refernce.

[Programmer]

Forgetting finanical and legal issues for just a moment - are you really prepared to give your mate a kick if things go wrong? If not, I'd get someone you think is good, a reasonable person, and NOT a mate.

It's a great idea if things work well, but can be a nightmare (for you both) if things do not.

[Flyboy]

Thanks for the replies.

The way I understand it (and feel free to shoot me down in flames if I'm wrong) is that as an owner builder I have to take out Public Liability and Construction Insurance (about $2k through the NRMA). Anyone working on the site would be considered my employee, and must have their own Home Warranty and Workers Comp Insurance, and I should sight certificates of these before hiring them.

I guess what I need to know is do these 4 insurances cover all the possibilities as far as me getting sued for a stuff up/injury?

The plan (for this week anyway) is that I'll get the house built to Certificate of Occupancy stage, and then finish off the flooring, tiling, painting etc myself. So I'm going to have to owner build at some stage, whether its now or later. The advantage of doing it now is that we'll be able to get the Construction Certificate 3-4 weeks earlier and save a few thousand in insurance. The disadvantage is that its feeling slightly breezy over my ar$*.

Good point about the references, Gaza. I'll have a chat to my mate and see which way he wants to go with that.

I hear what you're saying Programmer, and I've been thinking about that a lot. Guess we have to sit down and figure out how were going to handle it if things turn pear shaped without it all ending in tears and forgetting whose shout it is.

Cheers

[ozwinner]

Just who are you tying to rort here.

Yourself?
Your Mate?
The insurance companys?
Or the tax man ( me/you/everyone )?

Al :confused:

[maglite]

Fly Boy,

I would strongly suggest that you also talk with a lawyer that is experienced with the building + construction industry.
Im not a builder but i know in the industry i work in, it isnt as simple as veiwing a subbies insurance details and bobs your uncle.
In most cases you are going to have at least a similar amount of insurance to cover that of the subbies that you contract, at least you do do in WA.

After the house is to lockup stage, ask your insurance company if you are still covered.
Our reno was done to lockup by a reg builder and we have been hiring subbies to the fitting out.
My insurance rep informed me that if i was an owner/builder and if the work was valued at more that 25 k......we were no longer insured, scary stuff.

I spose the question you have to ask yourself is wether you are happy to wear the risk of extreme financial distress and the very real possibility that, if something were to go wrong, of losing your home just to save a few grand.
It might pay to have a look at the possible cost rather than the possible saving.

Just my 2c worth.
Cheers
Steve

[craigb]

Remember the golden rule:

Never go into a business with a friend.
Because 9 times out of ten one or the other won't last the distance.

[Sturdee]

Can anyone see any disadvantages in doing this?

Yes, I can see many disadvantages. A lot of them have been mentioned already but the real question should be will you still have saved a few $k after you have paid for the consequences of the stuffups that will happen.

Having worked for a builder in my previous life I know that it is not a case of may happen but will happen.


Peter.

[jaws]

In Victoria if you are a reg Builder you can't build for an owner builder, in other words you must register the job for warranty insurance if you don't have enough limit to register the job you can't do it.
If your Builder takes on your job as an owner builder and the rego board finds out he could be in serious trouble. I understand he wants to build as thats his job but the rules are their to protect both Builders and genuine ownerbuilders
Good Luck
John

[mcfu tom]

I've just done the owner builder course through OTEN, distance study. They send you out the info and you do it yourself. I think doing it through a one day course might be better.
Like the other replies be careful of using a mate to do the work. The general advice is to go owner builder if you are doing it yourself. The liability is still yours. It gets complicated if anything goes wrong on site, like injuries. If your mate is running the job but you are the owner builder the liability comes back to you.
Any contract for work over $12,000 still requires home owner warranty from the subcontractors. If a subcontractor does a series on jobs for you totaling over $12,000 it is counted as one job and requires him to provide home owner warranty.
Good luck with it.
Tom