HOW1 | HOW2 | HOW3 | SMH - June 2008 Home Warranty Insurance Claims Review
Advisory Note 1 | Advisory Note 2 | Advisory Note 3| Contacts

HOW I (Extract Source: Andreones)

HOW Insurance Regimes

Introduction

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

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

2. “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.

HOW I

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.

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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.

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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.

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SMH - June 2008 Home Warranty Insurance Claims Review

Flawed Foundations Articles - Home Warranty Insurance

Part 1     |     Part 2     |     Part 3

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Access Property Services - Advisory Note No1

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.

The Lead Advisory Service Australia also provide:

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

·                                       free written material Email: http://www.lead.org.au/contact.htm
                                        Web: www.lead.org.au 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 www.planning.nsw.gov.au/plansforaction/pdf/managinglead.pdf

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Access Property Services - Advisory Note No2

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

 http://www.workcover.nsw.gov.au/Publications/OHS/SafetyGuides/workingasbestos.htm

 http://www.nsw.gov.au/fibro/

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Access Property Services - Advisory Note No3

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.

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 Contacts

The Work Cover Assistance Service Ph 13 10 50

Asbestos Diseases Foundation Ph: 1800 006 196 or asbestos@optusnet.com.au
Asbestos Information Support Service Ph: 03 9654 95555 or asbestosiss@bigpond.com

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  http://www.asbestosdetectives.com