Threshold and limit changes – What does this mean for consumers?
Section 3 (1) – ‘Threshold amount’
The prescribed ‘threshold amount’ to which the HBC Act applies will be increased from $6,000 to $7,500 to correspond with the upper limit of the Magistrates’ Court. The threshold will be increased again in January 2009 when the Magistrates’ Court increases its limit to $10,000.
This change will mainly affect consumers and owner-builders who contract directly with the building trades.
Changes to the prescribed ‘threshold amount’ clarifies the jurisdiction for hearing small contractual issues. Amounts less than $7,500 will be dealt with in the Magistrates’ Court, while contractual disputes greater than $7,500 will be heard in the Building Disputes Tribunal. Whilst the HBC Act will not apply to work valued at less then $7,500, the requirements of the Fair Trading Act 1987 (WA) prohibits a wide range of improper trading practicesm as well as imposing implied conditions and warratnies into all consumer contracts.
The Building Disputes Tribunal will continue to have the jurisdiction to deal with all issues arising from poor workmanship..
Section 3 (1) – ‘Upper’ limit
The prescribed amount of the ‘upper limit’ of the HBC Act will increase from $200,000 to $500,000.
All lump sum ‘home building work’ contracts between the amounts of $7,500 and $500,000 will be subject to regulation under the HBC Act. ‘Rise and fall’ clauses will be prohibited, deposits will be limited to 6.5 % of the total contract price, and there will be conditions to both progress payments and to variations on the contract.
Increasing the prescribed ‘upper limit’ to $500,000 means that the Building Disputes Tribunal will have the jurisdiction to hear many more disputes about home building contracts. Previously consumers with building contracts greater than $200,000 could have workmanship issues decided in the Building Disputes Tribunal, but contractual issues were heard in another jurisdiction.
The prescribed ‘minimum amount’ for requiring Home Indemnity Insurance will be increased from $12,000 to $20,000.
Changes mean that builders entering into contracts of less than $20,000 will not be legally required to take out Home Indemnity Insurance to cover bankruptcy or other factors that might prevent the completion of the work. CAWA believes this change will not benefit consumers.
Section 25 D (1) (a) (i)
The prescribed ‘limit’ under the Home Indemnity Insurance policy for loss of deposit will be increased from $13,000 to $20,000 or to 6.5% of the contract value if less than that amount.
Increasing the prescribed ‘limit’ means that consumers who enter into a building contract and pay the deposit to a builder who subsequently goes bankrupt will be entitled to compensation up to $20,000 or to 6.5% of the contract value if less than that amount. Currently, consumers pay 6.5% of the contract price as a deposit.