Advisory Notes

HOW Table (Extract Source: Andreones)

Insurance Regime





Period Application


1 May 1997 to
30 June 2002

1 July 2002 to
30 December 2003

31 December 2003 to
date and continuing

Time Limits


6 months from date
of awareness of defects

6 months from date
of awareness of defects

6 months from date
of awareness of defects



7 years from date of
practical completion
(all defects)

2 years from date of
practical completion
(general defects)
6 years from date of
practical completion
(structural defects)

2 years from date of
practical completion
(general defects)
6 years from date of
practical completion
(structural defects)



45 days from date of
receipt of determination
of HOW insurer

45 days from date of
receipt of determination
of HOW insurer

45 days from date of
receipt of determination
of HOW insurer



Buildings greater
than 3 storeys


HOW Insurance Regimes (Extract Source: Andreones)




Under the Home Building Act 1989 (NSW) (HBA) there are 2 Home Warranty insurance (HOW) regimes.

“HOW I” (applies from 1 May 1997 to 30 June 2002).

“HOW II” (applies from 1 July 2002 to date).

The HBA requires contractors that carry out residential building work to be covered by HOW insurance.


In addition, amendments have been made to the requirements of HOW II.


Section 18B of the HBA prescribes statutory warranties, given by all builders and implied into all building contracts for residential building work entered on or after 1 May 1997.


A breach by a builder of any one or more of the statutory warranties in section 18B, gives rise to a building defects claim against the builder and entitles an owner corporation or individual lot owner to lodge an insurance claim against the builder’s HOW insurer.


Following are checklists of the essential features of HOW I and HOW II, a description of the claims process, and the requirements for building contracts under the HBA.




Key Features


  • HOW I applies to residential building work commenced in the period from 1 May 1997 to 30 June 2002.
  • HOW I is a first resort scheme – this means an owners corporation or individual lot owner may claim against a builder’s HOW insurer once a breach of any one or more of the statutory warranties contained in section 18B has been established. This does not prevent the insurer requiring the builder to return to rectify the defects.
  • There are time limits for:
    • Notifying a HOW insurer of a potential claim.
    • Making an insurance claim.
    • Appealing decisions of the insurer (see table).
    • Maximum amount recoverable is $200,000 per dwelling.
    • $500 excess applies per claim.
HOW II Key Features


  • HOW II applies to residential building work commenced in the period from 1 July 2002 to date.
  • Last resort scheme – this means the owners corporation or individual lot owner who wish to make an insurance claim must first exhaust all other avenues (i.e. suing the builder directly).

HOW II (Extract Source: Andreones)


Procedure for dealing with building defects


  • Once a complaint is received, strata managing agents must quickly determine who was the builder, developer, architect, project manager, etc who may be responsible, or partly responsible, for the building defects (the building contract, plans, specifications and council documents will contain this information).
  • It is essential that strata managing agents ensure developers deliver all relevant documents to the owner’s corporation at the first annual general meeting.
  • Under HOW II it is important to obtain an expert report at the earliest opportunity, in order to determine which parties are responsible for the defects affecting the building.
  • The parties responsible for the building defects must be pursued by the owner’s corporation in civil proceedings.
  • Once all civil proceedings have been exhausted, then an owners corporation or individual lot owner may lodge a HOW insurance claim form with the builders HOW insurer.
  • Reasonable legal fees are recoverable under insurance policy.
  • General process for insurance claims applies as in HOW I, once a claim has been lodged.
  • Appeal time limits apply as for HOW I (see table).


Building contracts under the HBA


All residential building contracts entered on or after 1 May 1997 must comply with the HBA.


Once an owners corporation or individual lot owner has successfully finalised a HOW claim, or has succeeded in civil proceedings against the party responsible for the building defects, they will need to enter a residential building contract for the rectification of the defects.


All residential building contracts in excess of $12,000 must satisfy all of the following requirements:


  • Contract must be in writing and dated.
  • Contract price stated on front page, including quotations and any variations (must be written and signed).
  • The builder’s licence number must be stated in the contract (check name of licencee is identical to the named builder in contract.
  • The builder must be insured and certificates of insurance must be attached to the contract as follows:
    • HOW insurance.
    • Workers compensation.
    • Public liability ($10 million), and
    • Contractors all risk
  • Section 18B of the HBA statutory warranties – copy to be attached to contract.
  • Precise details of the work to be done – this will be achieved by attaching the scope of works, plans and specifications for the work to be carried out.


It is also advisable the owners corporation enters a supervision contract with its expert building consultant, for the supervision and certification of the rectification works.


We recommend legal advice is sought at the earliest opportunity to ensure time limits are complied with and the owners corporation’s rights are protected.

HOW III (Extract Source: Andreones
  • It is essential to notify the builder’s HOW insurer of the matters that may give rise to a potential insurance claim, as soon as possible.
  • Different time limits apply for making claims under HOW II (see Table).
  • There is a distinction between “structural defects” and other defects, and different time limits apply in respect of each of these (structural defects 6 years and general defects 2 years – See Table).

Changes to HOW II (HOW III)


  • With effect from 31 December 2003, clause 74 of the Home Builders Regulation 2004 grants an exemption for the requirement for a builder to comply with part 6 of the HBA.
  • The exemption relates to the construction of a multi-storey building. Multi-story has been defined to mean a building.
    • That has a rise of storeys of more than 3.
    • That contains 2 or more separate dwellings.
    • All other aspects of HOW II remain effective.

 Claims Process

  • Strata managing agent receives complaint(s) from individual lot owners and/or owners corporation regarding problems with the building.
  • Is the problem a building defect, or a maintenance issue? (defects only covered by HOW insurance)
  • It is a good idea to issue a survey to all lot owners asking them to list problems/complaints about their units (this may help determine whether problems are caused by systemic defects).
  • Determine who is the HOW insurer (see lot owner’s contracts for sale to obtain a copy of certificate of insurance).
  • Notify insurer of the matters that may give rise to a potential HOW insurance claim (see Table for time limit).
  • Obtain details of the original building work by the builder eg. Copies of the building contract, plans, specifications, inspection reports, certificates and site minutes (many of these documents should be delivered to the owners corporation at the first annual general meeting, however in practice this does not often happen).
  • Engage expert building consultant to:
    • Prepare a detailed building defects report including identification of all breaches of statutory warranties by the builder.
    • Draft a scope of works and specification.
    • Draft tender documents and go to tender to obtain 3 quotations from licenced and insured builders
  • If the builder is still trading it may be possible to negotiate the rectification works with the builder. This is now required under HOW II as it is a scheme of last resort. See key features above.
  • Lodge HOW insurance claim form, attaching detailed expert report (all other documents can be served as they are obtained from the expert).
  • Insurer is required to assess the claim within 45 days.
  • If the insurer fails to assess the claim within 45 days, the insurance claim is “deemed” to have been refused by the insurer and the claimant may proceed straight to an appeal of that deemed refusal.
  • From 1 September 2005, the insurer is taken to have accepted liability if written notice of the insurers decision in relation to the claim is not given to the beneficiary within 90 days of lodging the claim.
  • If an actual refusal of  a claim is received, any appeal of that determination must be lodged within 45 days to the Consumer, Traders & Tenancy Tribunal (CTTT) or other court (jurisdiction is determined based on the quantum of the claim).
  • If any urgent works need to be carried out, especially where the urgency involves health and/or safety issues, that work should be carried out as soon as possible. However, it is advisable to notify the HOW insurer of the work being carried out and, where time allows, seek its consent to that work.
SMH - June 2008 Home Warranty Insurance Claims Review


Flawed Foundations Articles - Home Warranty Insurance

Part 1     |     Part 2     |     Part 3

Access Property Services - Advisory Note No1

APS Recommended Procedures When Purchasing a New Unit

  1. Engage a lawyer who specialises in off- the-plan and new sales contracts to review your contract and specifically advise you on the acceptability of contract conditions relating to ‘Defects Notification’ and ‘Rectification’. Ask for prior client referrals and check them to determine what they thought of the lawyer’s skills. If contract conditions are unduly tough suggest to your lawyer that they amend the contract so that you have some redress in the event that significant defects or faults are found in your unit. This is easier to do when the market has softened and vendors are more motivated to sell.
  2. Request that the vendor provide all important construction or architectural ‘as built’ plans of your unit, which should also indicate the types of unit separating walls, preferably on an A4 sized document and give this to your building consultant prior to their inspection. Request that the vendor also provide the name and contact details of the Principal Certifying Authority for the project and provide these to your consultant or get them from Council. Always check with Council that a Certificate of Occupation has been issued for the building prior to settlement.
  3. Engage a licensed building consultant with experience in new building final defects survey reports, asking whether they include photographs in their report. Check that the consultant carries professional indemnity insurance. Request to see a sample report to determine suitability as they can be e- mailed. If you have already made your own partial list of defects provide this to your building consultant and ask that they include them within their report. If your unit incorporates ducted air conditioning seriously consider having a separate mechanical services inspection report undertaken by a qualified mechanical engineer, as building consultants do not cover these complex and expensive services.
  4. Preferably the final inspection report/s should be undertaken prior to final settlement and two copies should be forwarded to your lawyer for review and distribution of one copy to the vendor, with a covering letter. N.B* If a number of different defect report's are produced they should be submitted as a single document so as not to unfairly reduce your right to further defect notifications.
  5. If significant building defects or faults are found request that your lawyer try to negotiate withholding sufficient settlement funds to cover rectification works, until they have been completed. If this is not contractually possible ask your lawyer to request the vendor rectify your defects within the ‘defects liability period’ (usually 90 days) and provide you with written advice confirming those items which they believe they have rectified. Upon completion consider engaging your building consultant to reinspect the property to ensure works have been completed satisfactorily.

Pitfalls of Buying New Houses and Off-the-Plan Apartments

New residential property purchasers should obtain a defect survey PPI (pre purchase property inspection) report by a qualified building consultant experienced with the complex structures which are apartments, to highlight defects before settlement.

We say this for a variety of reasons;

  1. Draconian vendor contracts, which can severely impede a purchaser’s ability to seek defects rectification and sometimes can actually limit the number of ‘defect notifications’ and/or put a time limit on submission, if signed by a purchaser (refer sample Annexure 1)
  2. Apartment buildings above 3 stories no longer have Home Owners Warranty Insurance cover, which means individuals and the O.C have to litigate against a builder/ developer and
  3. Apartments have the most minimal 'critical stage' inspection requirements by the Principal Certifying Authority (PCA) of any residential building under the EP&A Act (section 109E (3) (d)), so it's little wonder they have the most defects and non-compliant issues and also why the HWI insurers lobbied the NSW Govt to remove the insurance some years ago. (refer Annexure 2 extract from EP&A Act)

NSW building standards have been spiralling down since 1997 (introduction of private certification and HWI) because;

(a) the bare minimum critical stage inspection requirements, which currently don't even include fire safety services as the PCA often relies entirely on individual contractors (e.g. fire door Co) self-certification to then certify that the works are compliant.

(b) The PCA and contractors are almost always employed by the vendor / developer and therefore there is potential for a substantial conflict of interest.

(c) the Building Professionals Board (BPB) who accredit and discipline PCA's often take little action and its complex to lodge a complaint.

(d) If the PCA is a Council they can and often do issue Orders on the Owners to rectify any non-compliant issues that are found and if this occurs after purchase from the developer its the poor unsuspecting new owners who become responsible yet they have bought off-the-plan assuming everything will be fine because it's 'new'. Also, for houses, the purchasers are relying on the validity of the Occupation Certificate for SEPP legislative compliance for properties whose DA was submitted after 01.07.04 to be BASIX compliant.

(e) If Council are not the PCA they usually are very reluctant to get involved as when they do the developer typically lodges a Land and Environment court claim, which makes it expensive to fight and so they often find it easier to issue rectification Orders on the subsequent unsuspecting purchaser. Councils see PCA’s as their competition and are now having to resolve the loss of revenue to PCA’s on minimum inspection requirements yet PCA misconduct leading to non-compliance comes back to Council to investigate due to the non-compliant DA consent that results.

We strongly recommend that Owners Corporations have a defect inspection survey of the common areas during the first 3-6 months or within the vendors defects liability period which is usually (but not always) defined in the sale contract.

Adding to consumer concerns, the Office Of Fair Trading removed licensing of NSW building consultants in 2009 meaning anyone can call themselves a 'building consultant' and there is no need to carry Professional Indemnity.

Under proposed Vendor Disclosure PPI legislation being considered by NSW Govt, this will be further compromised if the PPI is instigated by developers or real estate agents. The same Vendor Disclosure requirement in the ACT has resulted in RE agents dictating (or report shopping) who should inspect properties for sale to ensure a tame report is produced.

There are also implications for the proposed 2011 introduction of Federal legislation of Mandatory Energy rating on homes listed for sale when the NSW BASIX may not have been complied with simply because there is no as built verification inspection requirement for BASIX .

Annexure 1

Special Conditions

  1. In the event of inconsistency between these special conditions and the printed form contract, these special conditions shall prevail.
  2. The purchaser warrants to the vendor that it was not introduced to the property by any real estate agent other than the real estate agent listed on the front page of this contract. The purchaser further agrees to indemnify the vendor against any claim whatsoever for commission which is made by any real estate agent or other person other than the vendor's agent nominated in page 1 of this contract.
  3. This agreement constitutes the entire agreement between the parties and as such, the parties agree that they do not rely on any prior agreement, representation, arrangement or interpretation whether in writing, oral or by conduct or by omission not contained within this contract. The parties further agree that any such agreement, representation, arrangement or interpretation shall have no effect.
  4. Should either of the parties (or any one person who is joined as a party to this contract) die, become mentally ill, become bankrupt or enter into a scheme or arrangement for the benefit of creditors as defined in Part 5.1 of the Corporations law, then the other party may rescind the Contract by notice in writing and thereupon the contract shall be at an end and Condition 19 shall apply.
  5.  The purchaser acknowledges that the property and its inclusions and fixtures are being purchased in their present condition and state of repair and with any defects. The purchaser further acknowledges that the vendor or its agents have not made any representation or warranty as to the fitness or suitability for any particular purpose of the property or the improvements therein. The purchaser further acknowledges that it does not rely on any matter to which this clause could apply. The purchase acknowledges and agrees that it shall make no objection, requisition, rescission or claim for compensation in respect thereof.

Annexure 2

EP&A Act 2000 Sect 109E Principal certifying authorities

(d) that building work or subdivision work on the site has been inspected by the principal certifying authority or another certifying authority on such occasions (if any) as are prescribed by the regulations and on such other occasions as may be required by the principal certifying authority, before the principal certifying authority issues an occupation certificate or subdivision certificate for the building or work, and

Section 162A Critical stage inspections required by section 109E (3) (d)

  1. For the purposes of section 109E (3) (d) of the Act, the occasions on which building work must be inspected are as set out in this clause. Note. These inspections are the critical stage inspections.
  2. Except as provided by sub clause (3), the critical stage inspections may be carried out by the principal certifying authority or, if the principal certifying authority (PCA) agrees, by another certifying authority.
  3. The last critical stage inspection required to be carried out for the class of building concerned must be carried out by the PCA.
  4. In the case of a Class 2 (Apartments) 3 or 4 building, the occasions on which building work must be inspected are:

(a) (Repealed)
(b) prior to covering of waterproofing in any wet areas, for a minimum of 10% of rooms with wet areas within a building, and
(c) prior to covering any stormwater drainage connections, and
(d) after the building work has been completed and prior to any Occupation Certificate being issued in relation to the building.

Access Property Services - Advisory Note No2

Lead in Buildings

Most pre 1970 houses are likely to contain lead-based paint and or dust within the roof void (attic) and wall cavities. Even if only small amounts of lead are ingested (through breathing or hand to mouth contact) it can present a very significant health hazard particularly to young children and pregnant women who can suffer from acute lead poisoning, leading to serious long term effects.

Ceiling / Wall Dust;

If you intend altering internal walls or ceilings or installing and attic ladder and there is dust in the roof void you should seriously consider having it tested (for lead or pesticides) and then having it professionally vacuum removed using an approved HEPA filtered system, before renovating. Never attempt to vacuum it yourself using a normal vacuum as you will most likely spread it around further.

Painted Surfaces;

If your house pre dates 1970 and your renovations involve painting you should attempt to test all existing paint for the presence of lead before painting works commence. Most lead poisoning cases have resulted from home renovations which were poorly managed

If you or a child may have been exposed to lead the only reliable way of knowing is to have a blood lead test conducted by your GP.

The Lead Advisory Service Australia provide advice and support about any lead related questions including where to have samples of paint, dust or soil analysed, how to take simple steps with diet to reduce the absorption rate of lead, how to undertake a safe renovation or how to ensure your tradesperson uses safe methods.

he Lead Advisory Service Australia also provide:

·   free telephone service call 1800 626 086 or Ph (02) 9716 0132

·   free written material
Fax (02) 9716 9005

·   community workshops and meetings to parents.

DIPNR put out a Guide called "Managing Lead Contamination in Home Maintenance, Renovation & Demolition Practices" a copy can be obtained by visiting

Access Property Services - Advisory Note No3



Prior to the 1980’s asbestos was used in as many as 3,000 products and some people consider that asbestos is present (in one form or another) in as many as 50% of all Australian houses. Asbestos left untouched may not pose a problem, but if it's tampered with by drilling, sanding or sawing, it can kill you, as the tiny fibres in asbestos become airborne and can be inhaled into the lungs.


This can then lead to a hideously lethal type cancer called mesothelioma. Mesothelioma can take up to 40 years to develop, but once you've been diagnosed, the average life expectancy from that point is around 12 months.


Flinders University research estimates the number of people diagnosed with asbestos-related diseases will peak around 2020. By then there will be 13,000 cases of mesothelioma and up to 40,000 cases of asbestos-related lung cancer. That's 53,000 cases of incurable cancer caused by asbestos over the next 20 years!!!


For these reasons, before renovating, it is best to have a specialist check your house and determine if any asbestos is present and what risk it may present. Some Councils, such as Ashfield, now require an asbestos clearance certificate before allowing renovations to commence, so always check with your local council first.


The removal of asbestos must be taken seriously and should ideally be removed by licensed contractors wearing specialist equipment and use HEPA filtered vacuums to clean up any residual dust and then dispose of an approved manner, in marked sealed plastic bags. Never place asbestos material in a standard skip bin.


The Asbestos Foundation of Australia suggests no-one handle asbestos products. It is recommended that before you undertake building or renovation that you contact Work Cover or the Department of Health or your local council for advice about the hazardous products may be involved in the proposed work.

  • Always call in the professionals. However if you must work with asbestos, the following suggestions can't guarantee your safety, but will help reduce the risk of exposure to the deadly fibers.
  • Always use a respirator approved to Australian Standard A.S.1715 to protect against asbestos. Wear disposable coveralls and leather gloves.
  • If you do not use disposable overalls then wear old clothes. When you have finished work put the clothes into a rubbish bag and seal it. Do this before you remove your mask. Don't allow anyone else to touch the clothes.
  • Always thoroughly wet the material you are working with to reduce dust.
  • Use drop sheets to collect debris and hand tools rather than power tools and never sand, cut or abrade asbestos.
  • Don't allow any family members or other people near where you are working.
  • If you do not use disposable overalls then wear old clothes. When you have finished work put the clothes into a heavy duty rubbish bag and seal it. Do this before you remove your mask. Don't allow anyone else to touch the clothes.
  • Never sweep up. Always use a HEPA filtered vacuum cleaner to clean up any dust.
  • Put the vacuum bag carefully into a heavy duty rubbish bag and seal it. Keep your mask on while you do this.
  • Put any discarded material in a heavy duty rubbish bag and seal it. Then remove your mask and seal it in a rubbish bag.
  • Never put the rubbish bags in your garbage bin and do not take them to the tip. Call your local council for the Department of Environment and Conservation Pollution line (Ph 13 15 55) on the transport and disposal of asbestos. When using a skip call your skip supplier and ask if the provide asbestos bins as many now do at extra cost. It is illegal to reuse or water-blast asbestos cement.
  • Shower thoroughly immediately after finishing work.
  • See your doctor if you think you have been exposed to asbestos.

Regulations about dealing with asbestos vary from State to State but that they are based on national guidelines produced by the National Occupational Health and Safety Commission (NOHC) which have produced three central documents relating to asbestos;


Guide to the Control of Asbestos Hazards in Buildings and Structures

Code of Practice for the Safe Removal of Asbestos

Guidance Note on the Membrane Filter Method for Estimating Airborne Asbestos Dust


Work Cover NSW has produced two valuable documents relating to asbestos;

Your Guide to Working With Asbestos

Fibro & Asbestos –A Renovator & Home Owners Guide


These can be downloaded from their web site address

Access Property Services - Advisory Note No4

Mould in Buildings

Poor drainage, leaking roofs (in particular), pipes and windows, damp, un-flued gas heaters and un-ducted clothes dryers are all causes of moisture that can encourage mould contamination.

Increased humidity due to poor ventilation including from improper drainage and a moist sub floor can also cause mould to grow. Keeping the house closed without running dehumidifier and poor housecleaning can also cause mould growth. The last thing we want to do on a winters morning is open the windows and most people awake on a cold winters morning, have a hot shower, put a wet towel on the rack, put the kettle on, open the wardrobe and choose the days clothes, make a hot breakfast and close the front and race off to work. - all that moisture is waiting where you left it for when you come home - providing ideal conditions for mould growth.

Moulds reproduce by tiny spores; the spores are invisible to the naked eye and float through outdoor and indoor air. Mould can grow indoors when something as simple as mould spores land on surfaces that are wet for several hours. There are many types of mould, but none of them will grow without a source of moisture. Mould growth is often visible, it may appear cottony, velvety, granular, or leathery and have varied colours of white, grey, brown, black, yellow, or green and will have a distinct mould odour – usually musty.

Some people are allergic to some types of mould spores or the VOCs produced by the moulds metabolism. In such people, the presence of mould may cause or aggravate and asthma attack or other allergic reaction. Some moulds metabolic volatiles are toxic and can cause serious illness to anyone exposed to them. This includes the mould Stachybotyrs, which is often present in leaky buildings. Other symptoms of mould infestation can be respiratory problems (wheezing and difficulty to breath), nasal and sinus congestion, eye irritation (burning, watery, red, blurry vision, and light sensitivity), dry, hacking coughs, sore throats, nose and throat irritation, shortness of breath, central nervous system problems (headaches, memory problems, and mood swings), aches and pains, and possible fevers. Long term effects can change inhabitant’s moods, make them lethargic and can affect the central nervous system. Also, you're likely to end up with structural damage to your home.

As with asbestos, specialists should deal with removing this type of mould to avoid releasing mould metabolites into the house and affecting the health of its occupants.

Indoor mould growth can be reduced by leaving windows open, particularly during winter, to facilitate cross flow ventilation, and opening wardrobes to allow these moist environments to ventilate, clothes dryers should be ducted to the exterior as should bathroom exhaust fans which should always be used and left to run for 10 minutes after showering. Kitchen exhausts should be ducted to the outside and used when cooking. If you have air conditioning you can activate it is cooling cycle periodically in winter to act as dehumidifier.

It is impossible to get rid of all mould as some spores float through the air and dust. However, mould spores can't grow without moisture. You can clean mould with a vinegar or mild bleach solution however this only makes it invisible, but doesn't kill it and the long-term effects of being exposed to mould can be as toxic as nerve gas. Long-term mould control requires making the house dryer and warmer with more insulation, better heating, better ventilation and control of any significant moisture sources.

If the moisture source is not rectified e.g. roof continues to leak, the mould will have a constant source of moisture to encourage its growth and by just bleaching any visible mould your family will be breathing in mould spores all year round h. Any newly applied paint should have a mould inhibitor added

ABCB Advisory Note - Protection of Openable Windows




The Work Cover Assistance Service Ph 13 10 50

Asbestos Diseases Foundation Ph: 1800 006 196 or

Asbestos Information Support Service Ph: 03 9654 95555 or

Department of Environment and Conservation Pollution line Ph 13 15 55.

NSW Department of Local Government (for the website of your Local Council)

Waste Service NSW

Asbestos Detectives Ph 9601 4542