Changes to NSW Home Building Compensation Fund announced
The NSW Home Building Compensation Fund (HBCF) has been overhauled to enable private insurers to enter the market. The new system provides a safety net for consumers in situations where a builder cannot complete residential building work or fix defects due to insolvency, death, disappearance or license suspension.
HBCF is a mandatory insurance product that builders are required to take out for residential building work over $20,000.
Key changes include:
- Insurers will be able to offer split cover for defects and non-completion, with home owners entitled to $340,000 of cover for each product.
- Risk-based pricing will be introduced so that premiums better reflect a builder’s individual level of risk.
- Premium increases will take effect in early 2017 to ensure the scheme’s sustainability.
- Broker commissions will be phased out to improve the scheme’s efficiency, eliminating 15% of the current cost of the policy.
- The government will inject additional funds to return the scheme to surplus.
The current scheme has been in significant deficit for many years and is in need of reform, according to Victor Dominello, Minister for Innovation and Better Regulation.
“NSW is experiencing a residential construction boom and these reforms protect home owners and empower them to make more informed decisions,” said Dominello.
A bill to reform the HBCF is expected to be introduced to parliament in the first half of 2017. More information is available from www.sira.nsw.gov.au.
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