Sellers of residential property are required to disclose details of works carried out at their property, including providing details of building permits issued for works carried out at the property within seven years of the sale and details of domestic builders warranty insurance for works exceeding $16,000.00.

The items to be disclosed will depend on who carried out the work and the value of the work carried out.

If the work was not carried out by a “Registered Building Practitioner” such as a builder who is registered with the Victorian Building Authority these works will often fall under the category of owner builder works.

Owner builder obligations

When a seller of residential property has undertaken “owner builder” works they are required to include additional disclosures in their sale documents. These requirements are set out in Section 137B of the Building Act 1993 and require the seller to:

• Give the buyer a current report prepared and issued by a qualified building inspector (known as a “s137B owner builder defects report”) before the contract is signed. The report is required if the vendor sells within seven years of carrying out any domestic building work (including work that did not require a permit and may be considered minor and cosmetic in nature and regardless of the value of the work carried out);

and

• Provide owner builder warranty insurance for any owner builder work that exceeds $16,000.00 in value to protect the buyer (and future owners) if the owner builder fails to rectify any defects with their work, dies, becomes insolvent or has disappeared. The insurance cover becomes effective once the contract of sale is signed, it generally covers costs up to $300,000.00 to fix structural defects, for six years and non-structural defects, for two years. But the insurance does not cover defects or incomplete work identified in the defects inspection report.

and

• Warrant their work to the buyer by including the required statutory warranties relating to their work in the contract (as set out in Section 137B of the Building Act 1993). The warranties apply to the owner builder work and generally transfer to a new owner and subsequent owners for up to 10 years from completion of the work.

Where the vendor sells a property without including the required disclosures, the consequences set out in Section 137B of Building Act 1993 allow a purchaser to elect to terminate the contract at any time prior to settlement (with no recourse). The buyer and future owners also have rights to pursue the owner builder for breach of warranties after settlement.