Going it alone
Construction can be a complicated business. There’s red tape to cut through, approvals to navigate, licensing and insurance to organise and financial implications in every decision. One of the options available is to assume much of the responsibility as an owner-builder, but you’ll need to understand the implications first.
What is an owner-builder?
An owner-builder is an individual who takes on the job of managing their own residential building project and holds the appropriate required permit to do so. Being an owner-builder means performing coordination and contracting tasks usually undertaken by a licensed builder.
What is owner-builder work?
Owner-builder work is generally any activity (including supervision and coordination) involved in construction, alternations, repairs or additions to a dwelling, including houses, terraces, townhouses, garages, swimming pools and certain other structures and improvements.
Owner-builder responsibilities
The owner-builder has a number of responsibilities including:
A thorough and clear understanding of plans for the proposed work
Ensuring all necessary council and local authority approvals for the work have been obtained
Obtaining applicable required insurances including workers compensation, public liability, homeowner warranty etc
Ensuring engaged contractors are appropriately licensed and hold insurance cover required for the type of work being done
Identifying and arranging required inspections throughout the entire construction process
Overseeing and supervising all contractors and tradespeople
Ensuring that the project meets with relevant legislation and other requirements
Provision of a safe work environment that meets requirements under local occupational health and safety laws
Warrant that the work and materials will be fit for the purpose and result in a dwelling fit for purpose/occupation
Risks
An owner-builder arrangement is not for the faint-hearted or the uninitiated, as there are many risks. Any work carried out must be in compliance with the relevant building acts and regulations within the relevant state or territory, so a thorough understanding of that legislation is a must. There are additional areas of risk that should be considered as follows.
Financial risks
Project cost increases and blow-outs that result from poor estimating or inefficient sequencing of trades
Additional works requirements due to faulty tradesmanship or non-compliance
Unforeseen variations from the original plan
Loss by theft or fire on site
Site protection costs including security and safety
Occupational health and safety claims
Adjoining property owner claims
Quality risks
Inadequacy of drawings or specification documentation
Standard of workmanship by others
Regulation compliance, including both construction and occupational health and safety
Technical ability to direct trades and assess workmanship
Time risks
Identification and engagement of suitable tradespeople
Coordination, continuity and completion of work
Future risks
Cost of providing insurance to prospective purchasers and claims by new purchaser within required statutory time period
Illegal use of licence
It is an offence for the holder of an owner-builder permit to:
Knowingly engage an unlicensed contractor (where a license class exits)
Lend your permit to another person
Refuse to disclose requested information to an authorised officer
Your builder may suggest you become an owner-builder, obtaining the required permit while they get on with construction. It is a serious undertaking, fraught with risk and responsibility. You should be clear about your builder’s motivation, as this approach may be masking a serious issue including their being unlicensed or unable to secure the appropriate insurances.
Owner-builder insurances
As an owner-builder, you must ensure that the appropriate insurances have been secured.
Home warranty
In many jurisdictions, it is a requirement that each licensed contractor (builder, tradesperson or project manager) who contracts directly with an owner-builder to undertake residential building work, provide home warranty insurance when the total contract sum exceeds a certain amount.
Workers compensation
Owner-builders must take out workers compensation insurance and ensure they are fully covered in respect of persons engaged to carry out work. Contractors engaged by an owner-builder may be deemed to be a worker of that owner-builder.
Contract works
This insurance should be obtained by both builders and trade contractors. It offers the home owner protection against loss and damage to materials and work. If the builder or contractor does not have a valid contract works policy, the home owner risks inconvenience, time delays and disputes if materials are damaged or stolen.
Public liability
It is strongly recommended that owner-builders take out a public liability insurance policy. This covers injury to family or members of the public resulting from the undertaken building work.
Each state and territory has different requirements for owner-builders, but all require a valid permit to be held before works can commence. Contact the agency in your region for more information.