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Performing work for owner-builders

Performing work for owner-builders

Performing work for owner-builders

Builders and contractors are often approached to “project manage” or carry out a certain scope of works on projects undertaken by an owner-builder.

There are a number of risks to consider before you decide to do work for an owner-builder. While they may be enthusiastic and keen about their project, they do not have the experience or expertise of a trained building professional. Their projects can be poorly organised, trades can be incorrectly sequenced and materials ordered can be wrong, late or of poor quality. Further, if something goes wrong, they often look to shift blame back to the licenced builder or tradesperson.

What is an owner-builder?

An owner-builder is a person who has been issued an owner-builder permit from NSW Fair Trading. The permit gives the person the authority to undertake any work (including supervision and coordination of the construction, alterations, repairs and additions) to a property they own where:

  • where the reasonable market cost (including labour and materials) exceeds $10,000, and
  • the work being performed relates to a single-dwelling house, a dual occupancy (in limited circumstances) or a secondary dwelling that requires building approval.
  • If the work is over $20,000, the person may have completed an owner-builder course.

Your legal requirements when doing work for an owner-builder

If you are contracted to perform any residential building work for someone who holds an owner-builder permit, you must treat them like any ordinary home owner client. They are not a builder and you are not a subcontractor to them.

You must abide by the following requirements:

1. Contract requirements

If your contract with an owner-builder exceeds $5,000 (incl. GST), you must use a contract that complies with the Home Building Act 1989 (NSW). The ordinary rules and restrictions on deposits, progress payments and variations apply.

If you are engaged to provide “project management” or supervision services, you are still doing residential building work and you must provide them with a contract if the work exceeds $5,000 (incl. GST).

If you are only contracted to undertake a certain part of the works or to only provide some limited supervisory or foreman functions, HIA recommends that your contract contains special conditions or specifically limits your scope of works to what you have agreed to do. This ensures that you are only responsible for the works you have undertaken. The contract or special conditions should also exclude the obligation to supervise other contractors not engaged by you who may also be working on the site (e.g. other trades organised by the owner-builder directly). It should also state that you do not warrant work performed by other contractors not engaged by you.

2. Warranty insurance

For contracts with an owner-builder that exceed $20,000 (incl. GST), you must take out home owner’s warranty insurance (home building compensation cover). You must give the owner-builder a certificate of currency before you accept, receive or demand any payment (including the deposit).

This also applies where you enter into a contract to only supervise residential building for a fee that exceeds $20,000 (incl. GST).

3. Workplace Health and Safety

Where building work requires approval from the relevant building regulator, an owner-builder is considered a PCBU under workplace health and safety laws. Owner-builders have the management and control of the site and take on the responsibility and liability that would normally fall on the principal contractor.

However, as a builder or contractor engaged by the owner-builder, you should still be aware that everyone involved in construction work has a duty in regards to health and safety when carrying out the work. Where high risk construction work is being undertaken, a safe work method statement (SWMS) should be provided and kept until the end of the job.

For further information HIA has a team of Workplace Advisers who are available to assist members understanding their contractual rights and obligations. To speak with a HIA Workplace Adviser or for details on becoming a member call 1300 650 620.

Craig Jennion
HIA Executive Director – Hunter