Changes to Queensland Home Warranty Scheme - How the changes apply to painting
What does this mean for licensed painters?
It is important that you are aware of recent changes to the law concerning what is insurable building work and premiums for the Queensland Home Warranty Scheme (the Scheme). The Scheme is managed by the Queensland Building and Construction Commission (QBCC).
These changes apply to contracts signed by both parties on or after 28 October, 2016.
In general, everything previously insurable under the Home Warranty Scheme continues to be insurable, although the Scheme has been expanded to cover other types of building work.
The Scheme now includes painting, both internal and external, of a residence or related roofed building (for example, a shed) that is over the value of $3,300 (GST inclusive).
|So, if you are carrying out painting work that fits this description and the contract value is over $3,300, you are required to collect the appropriate insurance premium from the consumer and pay the premium on to the QBCC.|
We realise that as a licensed painter, you have probably not had to use the Scheme before.
Here are answers to some commonly asked questions:
What about jobs that you have already provided quotes for?
Any contract signed by both parties on or after 28 October, 2016, is subject to the new provisions and a premium is payable (providing the work is over $3,300).
If no contract has been signed yet, the contractor should liaise with the consumer and provide a new quote which factors in the premium payable, if the contract is to be signed on or after 28 October, 2016.
If the contract is only for painting and was signed by both parties prior to 28 October, no premium is payable.
What about contracts already in place?
If the contract is only for painting, and was signed by both parties prior to 28 October, no premium is payable.
Does it apply to all types of painting?
Yes, providing it is over $3,300 and is carried out by a licensed contractor, within the building envelope of a residence or related roofed building.
When it comes to painting, the Scheme applies to the internal and external painting of residential buildings with up to three storeys of residential units. To clarify, a four-storey unit block with the bottom level being a car park, and three levels of residential units, is covered.
Government and public housing is also included in the Scheme, unless the work is performed by the State or local government.
Does it apply to new paint jobs and re-painting?
Yes, it applies to both.
There is confusion about whether painting work is actually considered building work, as opposed to decorative work. What is actually included as part of the Scheme?
Painting is building work within the definition of “building work” in the Queensland Building and Construction Commission Act 1991 (QBCC Act).
How is painting included in the new provisions?
- The QBCC Act provides that a premium must be paid for residential construction work.
- The term “residential construction work” includes primary insurable work.
- The amendments to the legislation state that building work within the building envelope of a residence or related roofed building is primary insurable work (providing it is over $3,300 and carried out by a licensed contractor). The term “building envelope” is defined to mean the outer-most sides of the building that separate the internal part of the building from the external environment.
- So, if the house is painted (either internally or externally), and the value of the work is over $3,300 this is building work within the building envelope of a residence.
- As such, this is primary insurable work for which a premium must be paid.
What coverage is provided for painting?
- The Scheme covers consumers for loss suffered if a contractor (or an individual where fraud or certain representations are made) fails to complete a contract for residential work or fails to rectify defective work. The terms of cover, however, contain certain limitations and restrictions. The term “residential construction work” includes primary insurable work.
- This generally means that incomplete or defective painting work will be covered by the Scheme. The Scheme does not cover defective products however. For example, a defective batch of paint resulting in peeling will not be covered, however, using the incorrect paint for an area resulting in peeling will be covered.
- Non-structural defects like painting are generally covered for 6 months after the day the work is completed. Consumers must lodge the claim with the QBCC within 7 months of the completion date.
- Structural defects are generally covered for 6 years 6 months from the date of the contract, date of payment of insurance premium or date the works start (whichever is earliest). Consumers must lodge their claim with the QBCC within 3 months after becoming aware of the defect. The following are some examples of when painting can have a structural impact on a building:
- painting of exposed metal elements in coastal environments
- where painting provides weather proofing of building elements
- protective coating applied to decking boards.
How are premiums calculated for units and multiple dwellings?
For contracts signed between 28 October and 1 December 2016 (both dates inclusive).
If an individual unit owner of a multiple dwelling contracts with a painter to paint the internal walls of their unit, and the insurable work is over $3,300, then the insurance premium is based on the value of that work.
If the Body Corporate contracts with a painter to paint common property which is in or on the multiple dwelling or duplex, and the insurable value of the work is more than $20,000, then the value of the work must be divided by the number of units in the multiple dwelling, and the corresponding premium set out for this amount must be multiplied by the number of units to determine the premium payable. This method for calculating premiums is referred to as 'notional pricing'.
|For example, if the insurable value is $25,000 and there are five units, the value of work for each unit is $5,000. The insurance premium for $5,000 would need to be calculated (by reference to the relevant premium table) and multiplied by five to provide the total premium payable for this work. One premium is payable representing this total amount.|
If the Body Corporate contracts with a painter to paint common property, and the insurable value of the work is $20,000 or less, then the premium is based on this value. For example, if the insurable value is $18,000, the insurance premium would be based on this value regardless of the number of units in the complex (notional pricing does not apply).
For contracts signed on or after 2 December 2016
If an individual unit owner of a multiple dwellingor duplex contracts with a painter to paint the internal walls of their unit, and the insurable work is over $3,300, then the insurance premium is based on the value of that work (notional pricing does not apply).
If the Body Corporate contracts with a painter to paint common property which is in or on the multiple dwelling or duplex, and the insurable value of the work is more than $3,300, then the insurance premium is based on the value of the work (notional pricing does not apply).
How do premiums apply for "do and charge" jobs?
Previously the QBCC premium was calculated based on the contract price, or the value of the work. Now the premium is based on the insurable value of the work.
The term “insurable value” is the amount which represents the reasonable cost of having the work carried out by a licensed contractor on the basis that all materials are to be supplied by the contractor – whether or not the work is carried out on this basis.
A cost-plus contract (or a “do and charge job”) is a domestic building contract where the contractor cannot accurately calculate what the final price of the work would be when the contract is entered into, even if prime cost items and provisional sums are ignored.
There would only be cause to use cost-plus contracts in extremely rare circumstances. Otherwise contractors should be providing a fixed-price contract to the consumer.
When does the premium need to be paid?
You are required to collect the insurance premium from the consumer and pass the premium on to the QBCC before the first of the following occurs:
- 10 business days elapse from the day the contract was entered into; or
- the residential construction work starts.
The premium payment must be made within 10 business days of the contract being signed, whether you have received payment from the consumer or not. Therefore, it would be a good idea to ensure the home owner pays you the premium on signing the contract.
How is this going to be policed?
The legislation is clear – it is an offence not to pay a premium for work that requires it to be paid.
If it comes to the attention of the QBCC that a premium should have been paid and was not, then the QBCC can take appropriate compliance action.
Is it going to cost painting contractors more money?
The contractor collects the premium from the consumer, and pays the premium to the QBCC. The premium should be factored into the total contract price, which is paid by the consumer.
|So, ultimately, it is the consumer who pays the premium, since it is the consumer who gets the benefit of the insurance cover.|
There are premium tables available on our website. Or, you can find out the appropriate premium for a job by calling us on 139 333. All figures in the premium tables include GST.
Consumers should feel reassured that the work will be covered by the Scheme which is backed by the Queensland Government.