A Western Australian residential builder has been fined for lodging completion notices that did not match the actual progress of works, leading regulators to restate expectations around home indemnity insurance (HII) practices and documentation.
The Building Services Board imposed a $5,000 fine on Balcatta-based Sovereign Building Company Pty Ltd after determining the contractor had engaged in misleading conduct under Western Australia’s builder registration regime. An investigation by the Department of Local Government, Sport and Cultural Industries’ Building and Energy division found that, between 2021 and 2024, Sovereign submitted 25 notices of completion to QBE Insurance for building work at six development sites, despite the projects not having reached practical completion at the time the notices were lodged.
QBE required those completion notices as evidence that each site had reached practical completion before it would extend additional HII capacity to Sovereign for further projects. By filing the forms early, the company’s notifications did not reflect the real stage of construction, and QBE issued HII policies on a basis subsequently found to be inaccurate. In determining the sanction, the board noted the company’s cooperation during the investigation, its acknowledgement of the conduct, and the absence of prior disciplinary matters.
Building and Energy executive director Daniel Kearney said the conduct was inconsistent with the standards expected of registered building contractors in the state. “Builders must only submit completion notices when works have genuinely reached practical completion. This enables the insurer to accurately assess the home indemnity insurance facility available to the builder. The integrity of this insurance arrangement must be upheld to maintain important protections and peace of mind for consumers when contracting for residential building work. The conduct of Sovereign in these instances has fallen short of the board’s and the community’s expectations,” Kearney said. For insurers, the matter shows the extent to which builder declarations are used when underwriting HII exposure, and how incorrect information can influence risk assessment across multiple projects.
Under the Home Building Contracts Act 1991, builders in Western Australia are required to obtain HII in the name of the owner for most residential building work valued at more than $20,000 before accepting a deposit or beginning construction. The requirement applies throughout the state, with specific exemptions set out in legislation and regulations.
HII is intended to protect owners, and subsequent owners within the cover period, if a builder cannot complete or remedy residential building work because a “relevant circumstance” exists. Those circumstances include where an individual builder dies, disappears, or becomes insolvent, or where a corporate builder ceases to exist or becomes insolvent. A relevant circumstance can also arise where the State Administrative Tribunal cancels, or the Building Services Board declines to renew, a contractor’s registration on financial grounds under the Building Services (Registration) framework. In most cases, HII is required to cover both the construction phase and six years from practical completion. Practical completion is generally the point at which the dwelling, extension, or renovation is finished and ready for occupation.
The obligation to obtain HII applies to contracts for new home construction, extensions, and renovations, placing a dwelling on land for the first time, and relocating an existing dwelling where associated works are carried out. The requirement also extends to many grouped housing projects, with exceptions for certain multi-storey multi-unit developments, leased retirement villages, and some Specialist Disability Accommodation buildings as defined in regulations.
HII is not required where residential building work is valued below $20,000, where a building permit is not needed, or where the work is limited to separate associated or non-structural activities such as standalone swimming pools, fences, pergolas, landscaping, tiling, or painting that do not constitute a prescribed building service and do not require a registered builder. Where a relevant circumstance arises, HII generally responds to completion and defect claims up to $200,000, or the contract value if lower, for claims made within six years from practical completion. Loss of deposit is usually covered up to $40,000, with insurers able to apply an excess of around $500 to claims.
Builders are responsible for arranging the HII policy, paying the premium, and providing the property owner with a certificate of insurance before any work is carried out or any payment is taken. A copy of the certificate must also be lodged with the permit authority as part of the building permit application, and a permit can be refused if HII evidence is not supplied. HII in Western Australia is issued by approved private insurers. Builders may choose their insurer, subject to the insurer’s underwriting criteria. A failure to obtain required HII can result in prosecution, financial penalties of up to $50,000, and potential consequences for a builder’s registration status. The enforcement action involving Sovereign Building Company demonstrates the regulator’s approach to documentation within the HII framework and indicates that completion notices and related declarations may be subject to scrutiny where they are relied on to support access to ongoing warranty facilities.
