Queensland Home Warranty Scheme, how the changes apply to painters and painting contractors

This is a copy of what I was given via Aussie painters network.
As a home owner this is vital you read this before signing with your painter!
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 will apply to contracts signed by both parties on or after 28 October, 2016. In general, everything previously insurable under the Home Warranty Scheme will continue 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 will be 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, will be subject to the new provisions. So a premium will be 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 is 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 is 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 to be 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? o The QBCC Act provides that a premium must be paid for residential construction work. o The term “residential construction work” includes primary insurable work. o 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 outermost sides of the building that separate the internal part of the building from the external environment. o 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. o 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. 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 six months after the day the work is completed. Consumers must lodge the claim with the QBCC within seven months of the completion date.

• How are premiums calculated for units and multiple dwellings? If an individual unit owner of a multiple dwelling contracts with a painter to paint the internal walls of their unit, and the insurable value of the 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, 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 premium for each unit must be calculated on this amount. 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 and there are five units, the insurance premium would be based on the value of $18,000. • 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. There is a premium calculator on the website to assist contractors.

• When does the premium need to be paid? You will be 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 it 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 will collect the premium from the consumer, and pay 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 will be paying the premium, since it is the consumer who gets the benefit of the insurance cover. There are premium tables available on the QBCC website. To find out the appropriate premium for a job, you can use the premium calculator on the QBCC website or call the QBCC on 139 333. All figures in the premium tables include GST.

The contractor will be able to promote the fact that the work will be covered by the Scheme backed by the Queensland Government. For more information on the home warranty reforms visit www.qbcc.qld.gov.au