Q&A with Technical Manager David Kyburz

Posted 29 November 2019

Q&A with Technical Manager David Kyburz

Q: When are fidelity certificates required?

A: I will answer this question shortly, however, in in brief Fidelity Fund Certificates are required for each dwelling that forms part of the building work. This is a legislative requirement under Part 6 of the Building Act 2004.

What is concerning is that there have been occasions during the past year where fidelity certificates have not been issued for each dwelling that forms part of the building work multi dwelling or unit developments.

Where more than one dwelling is constructed in a development and only one Fidelity certificate has been issued, only one dwelling would be covered under that Fidelity Fund Certificate should a claim be made against the Fidelity Fund by the consumer or homeowners.

Any claim made by additional homeowners would be rejected because a valid Fidelity Fund Certificate had not been issued for other dwellings on that block. 

The builder is to ensure that he/she is vigilant when making applications for Fidelity Fund Certificates and the building certifier is to ensure that he/she is also vigilant when issuing a Building Commencement Notice.

Now, regarding the question as to when fidelity certificates are required.

The ACT Government introduced mandatory Residential Building Insurance in 1988 and then in 2002 legislated to enable Fidelity Funds to be established in the ACT. 

The principal purpose of the insurance or Fidelity Fund Certificate is to provide the homeowner with protection against financial loss resulting from the builder’s death, insolvency or disappearance.

Under the ACT Building Act 2004, both the statutory warranties and insurance provide the homeowner with a similar level of protection and sometimes referred to as Home Owners Warranty Insurance.

If a multi dwelling or unit development has progressed without a Fidelity Fund Certificate issued for each dwelling then the home owner of each dwelling will not be covered should a home owner make a claim against the Fidelity Fund.

Fidelity Fund Certificates are required for each dwelling that forms part of the building work on that block.  For example, if building approval has been granted to build two residences on a block then a certificate is required for each dwelling.

When applying for a Master Builders Fidelity Certificate a separate application must be completed for each house or unit.

This insurance or Fidelity Fund Certificate is required under the Building Act 2004 and is provided by a licensed builder for the benefit of the building owner. 

Before work can commence, the Building Certifier is required to verify the authenticity and validity of the Certificate, then give the licensed builder the Building Commencement Notice for each dwelling on that block. 

It should be noted that commencing building work before obtaining a Building Commencement Notice from a Building Certifier is an offence under the Building Act 2004 and under the Construction Occupations Licensing Act 2004.

New residential buildings

Fidelity Fund Certificates are required for the construction of all sole occupancy residences being class 1 building (detached house) or class 2 building (town house, units, apartments). Both separate dwellings and those attached to other dwellings by party walls.  This includes:

  • multi-residential units up to 3 storeys in height constructed over separate ground floor – car parking, commercial offices and/or shops;
  • garages that are an integral part of the new building: i.e. under the same roof as the residence
Additions and alterations to residences

Fidelity Fund Certificates are required for building work valued at $12,000 or more, that requires building approval.

This includes alterations that form part of the structural integrity of the building, i.e.

  • excavations that will affect the structure; and
  • the removal of internal walls, being either load bearing or acting as bracing units such as required in Australian Standards AS 1684 Residential Timber-framed Construction.

Not all internal renovations in excess of $12,000 require building approval. For example kitchen and bathroom upgrades, do not require Fidelity Fund Certificates.

 

Q: What is statutory warranty for residential building work?

A: In a brief every contract to carry out residential building work to which a builder is party is to contain a warranty under Section 88 of the ACT Building Act 2004.

The builder warrants that the building works will:

  • be carried out in accordance with the Building Act 2004;
  • be carried out in a proper and skilful way and in accordance with the approved plans;
  • have been constructed from good and proper materials;
  • have been carried out with reasonable promptness when no completion date is specified; and
  • reasonably meet the requirements expressly made by the owner. 

The warranties end after the ‘’completion day’’ for the work.

Part 4 of the Building (General) Regulation 2008 states that the warranty period in relation to a structural element of a building is 6 years after the completion day for building work and in relation to a non-structural element of a building is 2 years after the completion day for building work.

The ‘’completion day’’ for residential building work defined in Section 85 of the Building Act 2004 as;

  • the day the work is completed or the day the contract relating to the work ends, whichever is the latter, or
  • the work is taken to have been completed no later than the day a Certificate of Occupancy (if any) is issued for the work.

If you have any technical questions you may contact me on 6175 5954, mobile 0419 866 796 or via email dkyburz@mba.com.au

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