The Risk of Owner Builders for Builders

The Risk of Owner Builders for Builders 

Most consumers will engage a builder to build their home, and this builder will be named on the building permit and be responsible for the building work.  Consumers who follow this path will have a building surveyor not only confirm their building work is compliant with building regulations but also get the benefit of the building surveyor confirming that the builder is properly registered and insured to do that work.

Some owners however decide not to engage a builder to build their home and instead go down the owner builder path. The owners are named as the builder on the building permit, and no-one will generally check the registration or insurance of trades working on this job. The exceptions are plumbers and electricians. This means that practically anyone can be engaged by an owner builder to carry out most of the work on their home.

Who Works for Owner Builders?

If the owner has the appropriate skills and experience, being an owner builder can work.  There are, however, challenges for these owners if they are not registered builders in their own right.  A trade working for an owner builder and charging more than $10,0000 must be at least a domestic builder limited. These trades are not easy to find. For example, there appears to be, in Victoria, only 57 individuals registered as domestic builders as brick or block layers and only 238 individuals registered as being allowed to do footings and slab work.  It is unlikely that these individuals are doing all their work for owner builders.

Therefore, it is likely that many owner builders end up engaging unregistered trades. They chose not to engage trades who have the proper registration and insurance in place. This may not be a problem if the owner stays in the home and does not sell it. They can effectively live with their mistake if the building work is not up to standard.

Will an Unregistered Trade be Paid? 

Unregistered trades should be aware that in Victoria, domestic building contracts legislation allows the owner to refuse to pay an unregistered builder for their labour or profit.  They also have the right to sue to recover such payments if made. This means that unregistered trades working for owner builders can find themselves only being able to recover costs for materials and for other people they hire to work on the job. They cannot be paid for their own time.  For many trades that will be the most significant part of their bill.

No Problem. I Can just Project Manage the Job for the Owner Builder? 

Another trap for unregistered trades is that they may believe that they can manage the building process for an owner builder without touching the tools. In this situation, the unregistered trade simply coordinates or arranges the building work.

This is not correct, as in Victoria the definition of domestic building work includes managing or arranging the carrying out of domestic building work.  There is a specific type of building registration available for people who project manage for owner builders – this is the Project Manager (Domestic) class of registration.

The unregistered project manager in this scenario also faces the risk of not being paid for their work. In fact, they will be unlikely to incur costs on behalf of the owner builder so they may find themselves not being paid a cent for their work or being required to refund all payments to the owner builder.

HIA members can contact HIA in Victoria online or on 1300 650 620 to get more advice on these matters. Non-members may wish to contact Consumer Affairs Victoria for more advice.