Selling property with work completed by an owner builder

Journal,  Principals,  Salespeople

With increases in construction costs and material shortages across the state, homeowners are increasingly electing to perform their own building works.

While the onus is on sellers to ensure that the necessary disclosures are made when selling a property which has been renovated by an owner builder, sales agents should be aware of the risks and their obligations.

What is an owner builder?

The Queensland Building and Construction Commission (QBCC) defines owner building as when someone does a residential building project (valued at more than $11,000) on their own land without employing a licensed builder to oversee the project.[1] Anyone who completes an owner builder project must have an approved owner builder permit before commencing the project.

There are restrictions on the type of work that an owner builder can do. For example, owner builders can build a new home or renovate an existing home, build a garage, swimming pool or pergola, but they may not carry out occupational work (such as plumbing or electricity work) unless they have a suitable licence.

Once an owner builder permit is obtained, the QBCC notifies Titles Queensland. A notification of the owner builder work is placed on the title for the property for seven years.[2]

Selling an owner builder property

If an owner builder is selling the property within six years of the building work being completed, prospective buyers must be given written notice of the owner builder project prior to signing the sales contract.[3] The notice must contain details of the building work, the name of the person who performed the work and a statement confirming the work was performed under an owner builder permit. The notice must also contain the words “Warning — the building work to which this notice relates is not covered by insurance under the Queensland Building and Construction Commission Act 1991”.[4]

Two copies of the owner builder notice must be given to the buyer, and the buyer must sign one copy of the notice and return it to the seller on or before the date the contract is signed.[5]

What does this mean for sales agents?

If a sales agent is appraising a property which appears to have been recently built or recently had building works carried out to it, they should seek details of the works performed and enquire whether the building works were performed by licensed tradespeople or whether the works were completed by an owner builder.

Whilst the onus is on the seller to provide the owner builder notice to prospective buyers prior to executing a contract of sale, buyers may attempt to shift the blame to the sales agent if they discover they have purchased a property without the requisite owner builder notice.

Agents should advise their seller clients to seek advice from their solicitors as to the exact terms of the owner builder notice. Agents should also ensure that a signed copy is received back from the buyer and kept on the agent’s file before any contract of sale is executed.

A failure to provide the requisite owner builder notice will result in the seller giving the buyer a contractual warranty that the building work was properly carried out (in accordance with clause 5.4(4) of the standard terms of contract). If the buyer subsequently discovers that the work was not properly carried out, they may attempt to claim compensation from the seller, and likely the sales agent as well.

Agents should take extreme care not to make any representations or advertise the property as having the usual statutory warranties in accordance with the QBCC Act without confirming this information (in writing) from the seller. A prudent sales agent will also ensure that any marketing material is approved by the seller in writing prior to publication.

All prospective buyers should be advised to make their own enquiries and to undertake due diligence investigations prior to entering any contract of sale, rather than relying upon any representation or warranty made by the seller and/or agent.

Conclusion

Prudent sales agents should ensure that they make all reasonable enquiries of their seller clients before listing any property for sale. If an agent is aware that owner builder work has been completed at a property, they should advise their seller client to seek legal advice from their solicitor to provide the requisite owner builder notice. Failure to provide the owner builder notice may result in the buyer claiming compensation from the seller and/or the sales agent for giving a contractual warranty that the building work was properly carried out.

REIQ members with further questions on this topic or others can make contact with the Agency Practice Advisory Service.

References

[1] Queensland Building and Construction Commission Act 1991 (‘QBCC Act’) s 43D.

[2] QBCC Act s 46.

[3] QBCC Act s 47(1).

[4] Queensland Building and Construction Commission Regulation 2018 s 22(1).

[5] Queensland Building and Construction Commission Regulation 2018 s 22(2).

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