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Peter Rogozik Property Consulting

Property improvers beware

Some property owners are unwittingly breaking the law when undertaking home improvements.

In Victoria building regulations state that if total works are greater than $16,000 there must either be a major domestic building contract in place between the property owner and a registered builder or the building owner must register as an owner builder.

If the building owner registers as an owner builder then they are only allowed to complete one project every five years.

Domestic building insurance must also be taken out for work worth more than $16,000.

This law applies to property managers who are organizing works on a client’s rental property. In other words it is illegal for a property manager to organize maintenance or improvements over $16,000 without engaging a registered builder or the owner registering as an owner builder.

The cost of tradesmen and materials has risen steadily over recent times so an improvement or maintenance project can and does regularly exceed $16,000.

Regulations in Victoria governing when it is necessary to use a contract, when it is mandatory to engage a builder and what constitutes building works are covered in the Domestic Building Contracts Act (the Act).

Property owners should pay particular attention to sections 5 and 6 of the Act. This section outlines what is considered building works.

This part of the Act is very general as to what exactly constitutes building works; “the renovation, alteration, extension, improvement or repair of a home”. It seems to include cosmetic improvements such as landscaping and painting.

If the law were to be followed to the letter then merely undertaking substantial cosmetic improvements such as painting and plastering could necessitate engaging a building contractor or registering as an owner builder as the cost of these works would invariably exceed the $16,000 threshold.

The necessity to engage a builder or register as an owner builder should in my opinion only come into effect where structural works are being undertaken.Cosmetic upgrades should not necessitate the need to engage a building contractor or register as an owner builder.

If in doubt as to when it is mandatory to use a building contract or engage a building contractor property owners would be well advised to seek advice from Consumer Affairs Victoria or a lawyer that specializes in this area.

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