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Building Insurance – Oh what a tangled web we weave

There is a wonderful scene in the film “A Beautiful Mind”, where Alicia, the wife of mathematician John Nash stumbles into a shed, the walls of which are covered with snippets, parcels of information joined by a spider’s web of inter-connected threads, linking one idea with the next, containing a mass of factual information, rules and exceptions – an imbroglio of incomprehensible, inter-related fact.

You could be forgiven for thinking that this spaghetti diagram was in fact the film-maker’s attempt to depict, in cinemascope, the confusing and complicated Victorian laws of compulsory insurance for new buildings.

One example should suffice.

Section 32B(b) of the Sale of Land Act requires a vendor to disclose particulars of “required insurance” if section 137B of the Building Act applies. That section applies to the construction of a building except a building constructed by a registered builder or architect, unless the building is a home. In the case of a home, the section will not apply if there is a “major domestic building contract” (as defined in the Domestic Building Contracts Act). In summary, s137B applies to owner-builders –except those who have not been exempted by an order made by VCAT.

To find out what constitutes the “required insurance” you will need to look at the current Ministerial Order (there have been at least 4 of them) and the amendment to it published in Government Gazette G22 on 29 May 2014, noting the threshold amount at which a contract becomes an “insurable domestic building contract” and also bearing in mind the exemption relating to multi-storey residential buildings found in the Building Regulations.

The bottom line however is that the cover afforded by the “required insurance” is only insurance of last resort which can only be accessed if your owner-builder dies, disappears or becomes insolvent. In all other circumstances, your claim is against the owner-builder and if necessary, an action in the Victorian Civil and Administrative Tribunal or the courts.

With Rob Bradley

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