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Warning for potential owner builders
Be wary if a builder or tradesperson asks you to sign a building permit as an owner builder, even though they will be doing the work.
This is risky for you and may end up costing a lot more than you expect. The builder may be unregistered and/or trying to avoid their legal responsibilities.
Contact us or your lawyer to get advice before you agree to become an owner builder in these circumstances.
Even if you have signed as the owner builder on the building permit:
- you and a builder, contractor or tradesperson must enter into a written contract for domestic building work more than $5000
- a builder, contractor or tradesperson must give you domestic building insurance for work more than $12,000
- warranties still apply.
Am I an owner builder?
You are an owner builder if you:
- intend to use your own skills to build, extend or renovate your home
- intend to manage sub-contractors to do the work
- are a registered builder who builds, extends or renovates a home on your property.
As an owner builder, you take on many of the responsibilities of a registered builder and accept any associated financial risks. Responsibilities include:
- doing all or part of the work yourself, except work that must be carried out by licensed tradespeople
- contracting out all or part of the work to tradespeople, and checking they are registered and licensed if required
- engaging a building consultant to check the quality of the work
- arranging insurance
- occupational health and safety of workers
- obtaining permits and organising inspections.
Advantages may include:
- more control over the project, including design
- saving the cost of the builder’s margin
- more flexibility.
Risks include:
- spending more money and time than expected
- taking responsibility for the work and finance
- facing complex situations.
Legal rights and obligations of owner builders
Most laws that apply to registered builders also apply to owner builders.
Your rights and responsibilities as an owner builder are governed by the Domestic Building Contracts Act 1995 and the Building Act 1993. You must:
- get relevant planning permits from your local council
- be named as the owner builder on permits
- engage a building surveyor to obtain building permits, including an occupancy permit or certificate of final inspection on completion of work
- get a certificate of consent from the Building Practitioners Board at the Building Commission before carrying out domestic building works over $12,000
- ensure that the work meets building regulations, standards and other laws
- arrange for building inspections as required by law at particular stages of the building work.
We recommend you:
- enter into major domestic building contracts with builders and tradespeople for work over $5000
- use registered builders for work over $5000 or to reblock, restump, demolish or remove a home, regardless of the value of this work.
- ensure any builder engaged for work over $12,000 has appropriate domestic building insurance
- always use licensed electricians and plumbers
- use the checklists in our Choosing a builder or tradesperson section and Contracts for building projects section when engaging contractors.
You can get only one owner-builder permit for a single home and associated work on that property, once every three years. More information about the application process is available from the Building Practitioners Board at the Building Commission.
Finance for owner builders
Get your finance approved before you start. Lenders have stricter criteria for owner builders: some do not lend money at all to owner builders while others lend only a percentage of the total cost, or only to building-related tradespeople.
You should:
- ask about the lender’s policy for owner builders, the amount available as a loan, the equity required and any other special conditions
- prepare a building process plan to show lenders. This will also help you to manage cash flow once you start the project.
You can find more information about finance, loans and mortgages on MoneySmart, the Australian Securities and Investments Commission consumer website.
What if I want to sell my owner-built house?
If you sell your property within six years of completing your building work, you must:
- provide a defects inspection report not more than six months old from a registered building practitioner for all work regardless of value, including extensions, renovations, garages and verandas
- take out domestic building insurance for work over $12,000, to protect the person who buys your property. If a registered building practitioner carried out the work under a major domestic building contract, it should be covered by their domestic building insurance; but you also need your own domestic building insurance to cover your work.
Domestic building insurance
To get domestic building insurance, ask the insurance provider what documents they require. You will need:
- the defects report
- domestic building insurance certificates given to you by builders or tradespeople for work on your project.
The cover becomes effective once the contract of sale is signed. The buyer can only use the insurance when the owner builder has died, becomes insolvent or has disappeared. It covers costs up to $200,000 to fix:
- structural defects, for six years
- non-structural defects, for two years.
Domestic building insurance does not cover defects or incomplete work identified in the defects inspection report.
Tips for owner builders
- Seek legal advice before you decide to become an owner builder. Consider whether it is an appropriate choice for your circumstances.
- Complete an owner builder education course. Some are listed at Short Courses Victoria (Department of Education and Training) and you can find other owner builder courses online.
- Clearly plan and define the scope of works you want completed by tradespeople and check they are registered or licensed if required. Electricians are licensed by Energy Safe Victoria and plumbers and gasfitters by the Plumbing Industry Commission.
- Use our checklist for choosing a building practitioner when engaging a builder, tradesperson or other building practitioner. You can check with the Building Commission whether they are registered with the Building Practitioners Board.
- Make sure you get the relevant certificates from tradespeople:
- A licensed plumber must give you a certificate of compliance for all plumbing work with a value of $750 or more (total labour, parts and appliances), most gasfitting work and any work on below ground sanitary drains. This certifies that the work complies with the law.
- Whenever a licensed electrician completes any electrical installation work, they must provide a certificate of electrical safety. Certificates of electrical safety are only available from qualified electrical workers registered or licensed with Energy Safe Victoria.
- Choose and appoint a building surveyor to issue relevant building permits and inspect the quality and progress of works. You can find a surveyor through the Australian Institute of Building Surveyors.
- On completion, ensure your building surveyor provides an occupancy permit for a new building or a certificate of final inspection for a renovation.
- Keep all documents, including quotes, contracts with tradespeople and other suppliers, invoices, receipts, certificates and reports.
- Discuss the proposed building works with your insurance company.
Last updated: 19/02/2012