NEWS

Bad eggs – How a handful of contractors ruin construction

While most Australians enter construction contracts with no issues whatsoever, there remain instances in which builders take advantage of consumers. For instance, we draw attention to the example of Tevita and Siosiana Ungounga’s (“the Ungoungas”) and their company, T & T Sandstone Construction Pty Ltd (“T & T Sandstone”), recently published  by NSW Fair Trading. 1

Unlicensed construction work serves a timely warning

T & T Sandstone entered into a $350,000 contract with a consumer to build a three-bedroom house and pergola in East Hills. Neither the Ungoungas nor T &T Sandstone were licensed to contract or carry out the relevant works.

Deposits were accepted from the consumer and work was commenced without the necessary home warranty insurance prescribed by the Home Building Act 1989 (NSW) (“the Act”). As a result, the Ungoungas were found in breach of the Act and the Australian Consumer Law, and fined $90,000 in aggregate for their actions.

This case serves as a reminder for consumers to conduct thorough research into contractors before entering into an agreement for residential building work and the importance of knowing your rights.

It is also a reminder for contractors to ensure that they are appropriately licensed and compliant with the provisions of the Act, which includes obtaining the mandatory contract of insurance when carrying out residential building works that meets the threshold.

How to comply with residential construction regulations

By way of summary, if the proposed residential building works are greater than $20,000.00, the following will apply:

  • A person must not do residential building work under a contract unless:
    1. The person contracted to do the work has obtained the appropriate contract of insurance; and
    2. the contract of insurance has been provided to the other party (or one of the other parties) to the contract.
  • Until such time as the above is done, it is a breach of the Act to demand or receive payment under a contract for residential building work.

How to protect yourself against unlicensed building work

It is important to note that the contract of insurance protects an owner, and any subsequent owner, during the relevant period of insurance against the risk of loss resulting from the non-completion or defective building works performed by the relevant contractor.

However, the insurance policy will only respond in circumstances of insolvency (including deemed insolvency), death or disappearance of the contractor, otherwise, the relevant issues are to be resolved directly with the contractor.

Prior to engaging a contractor, consumers should utilise the free license check on the Service NSW website to confirm:

  • that the contractor is licensed builder;
  • the conditions imposed on the license are not contrary to the proposed works; and
  • to ascertain whether there has been any recorded adverse claims made against the contractor.

You can access the Service NSW license check here.

What to look out for in building contracts

After engaging a contractor, it is imperative that you obtain on a copy of the contract of insurance.  Failure by a contractor to obtain the appropriate contract of insurance or license does not prevent the contractor from being entitled to recover money in respect of the work that has been carried out.

A court or tribunal may provide such remedy if it considers that it is just and equitable to do so.2 Lastly, it may be necessary that express disclosures are made in a Contract of Sale for the property so as to notify a prospective purchaser that the relevant residential building work is not insured. The failure to do so may provide a prospective purchaser with remedies against the vendor down the track.

Unsure about a building contract?

William Roberts Lawyers can provide both consumers and contractors with quality advice on the key issues to consider when contracting to undertake residential building works, or where either party are in the unfortunate position where things have gone wrong and are unsure as to how to proceed.

For specialised advice, please do not hesitate to contact our office on (02) 9552 2111 to speak with one of our friendly and dynamic lawyers in the building and construction decision.

 

 


1 See https://www.fairtrading.nsw.gov.au/media-releases-news-updates/public-warning

2 See Home Building Act 1989 (NSW) s 94 and, for example, Pollak v Masterglass Facades Pty Ltd [2017] NSWCATAP 203 (20 October 2017).

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