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Cautionary Note 37 – Check behind the DFT insurance
December 1, 1998
Based on data collected from inspection of over 35,000 buildings we issue the following advice.
Our previous Cautionary Note 33 summarised the main changes in insurance for building consumers from the 1 May 1997.
Since then, we have been alerted to many problems facing these consumers and their advisers including:
- Building contractors may not necessarily be insured when they commence work.
- Council no longer requires proof of payment of the insurance premium prior to release of the approved plans.
- Work approved prior to 1 May 1997 may not be insured if the construction occurred after 1 May 1997.
- Building work may be uninsured if the DFT has already paid out to the limit of their specific policy.
- Owner builders do not require insurance. If they sell within 7 years they will require an independent verification of quality. This verification of quality may be misleading and not identify the many latent defects affecting the value of the property.
- There is no insurance for building work of value less than $5,000.
Having to claim on insurance can be time consuming, costly and frustrating. It is therefore important if your client is purchasing a recently built or renovating a property to:
- verify that any insurance relied upon can be substantiated and specifically applies to the building work;
- advise your client to independently verify quality of the work and ensure that defects identified are rectified and checked prior to settlement.
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