Understanding the risks and responsibilities of being an owner-builder
Are you looking to renovate your bathroom or build a veranda? Maybe you want to undertake a bigger project such as subdividing your land to build a townhouse?
If you are planning on starting a project as an owner-builder, it is important that you understand the risks and responsibilities first.
For example, if you want to self-manage a building project and use sub-contractors to do the work, you need to check that they are all registered and qualified.
You are also responsible for obtaining building permits from your local council, supervising or undertaking the building work, and generally making sure that all work meets building legislation and requirements.
There are pros and cons of completing a project as an owner builder. Some benefits of being in charge of the project include:
- greater control
- better flexibility, and
- potential savings on the cost of the builder’s margin.
However, being an owner-builder also comes with some risks. For example:
- you must take full responsibility for all the work, while the project is underway and for six-and-a-half years after completion
- you must honour the implied warranties, which include that the work must be carried out properly, with reasonable care and skill, and in accordance with all laws. These warranties transfer to a new owner for up to ten years from completion of the work
- the project could take up more time and money than you had originally intended
- you could face complex problems along the way.
Note that in Victoria, an owner-builder can only undertake one project every five years and must intend to live in the house once the work is completed.
If you’re still interested, you have further responsibilities. You must:
- make sure that all building work meets regulations, standards and other laws
- get all relevant planning permits from your local council, and be named as the owner-builder on all permits and other documents
- arrange for all building inspections to take place as required by law and at different stages of the building work
- buy domestic building insurance before entering into a contract to sell your property. This insurance covers future owners against any defect works if you die, disappear or become insolvent
- get a Certificate of Consent for all building works costing more than $16,000.
Remember, just as there are steps you need to take before the project begins, there are also some checklists after the building work is complete:
For example, you’ll need to get your building surveyor to provide you with an Occupancy Permit or a Certificate of Final Inspection. You’ll also need to make sure you keep all relevant documents on the building works such as permits, quotes, contracts with tradespeople and suppliers, invoices and receipts, certificates and reports.
For building works of more than $16,000, you are still liable for any defective works for six-and-a-half years from the completion of the work, which is relevant if you sell your home.
If you are comfortable with the responsibilities, obligations and risks, take a deep breath – you’re on your way to being a builder-owner and completing your first project!
More tips for owner-builders
Do some extra preparation to stay well ahead of the project plan and any possible issues that may arise during the process.
Get legal advice and have all your loan approvals ready before you start. Engage with a lawyer to help you with legal jargon that comes with reading contracts and making sense of complex terminology.
If you’re still keen, think about enrolling in an owner-builder course to learn more before you start a project.
Finally, for more information about being an owner- builder, visit the Owner builders section on the Consumer Affairs Victoria website.
You can also view relevant information in the Owner builders section of the Victorian Building Authority website.
At this year’s Melbourne Home Show, you can speak to staff from Consumer Affairs Victoria, the Victorian Building Authority, the Victorian Managed Insurance Authority and Domestic Building Dispute Resolution Victoria at the Victorian Government stand. This is a great opportunity to ask detailed building queries and learn from the agencies directly.
For more information about the Home Show and purchasing tickets, you can visit the Melbourne Home Show website.