We are doing a renovation and as part of this, the builder is obliged to take out Builders Home Warranty Insurance. We understand that as this is mandatory the builder may not make a profit on this. They must just pass on the charge to the client.
We have been charged a builders margin on home warranty insurance and would like to know. Can a builder charge a builder’s margin on Home Warranty insurance? Thanks in advance for any help.
Welcome to the Community @nlavitt
Not sure which state you are in. But in my state Victoria the builders insurance is normally taken out for works above a certain amount before anything else can start.
The client needs to get a copy of the policy, and until that nothing is paid. No deposit.
Now the builder can claim that cost to the client I suppose, or just include it in the overall cost of building works. They want to add a margin on top of that, well why not?
Builders try it on all the time, so the client needs to be awake to the try-ons.
Here is the relevant information in NSW. I don’t know if other states are different.
Note that the builder has to take out the insurance not the owner. These are the key paragraphs addressed to the builder:
You must state the cost of HBC cover in your building contract.
Your contract must disclose the total amount of money that you had to pay for the cover (which may include brokerage, fees and taxes).
If you want to charge a margin to arrange the cover, you should not include that in the ‘cost of cover’ item. You can include it elsewhere in the contract.
My house was designed by an architect, and the builder selected by tender.
As soon as the building contract was signed, the architect took out the builder’s warranty insurance and I paid the architect, not the builder. The architect also engaged the building inspector to verify each stage, not the builder.
Still, the builder tried to bill me for insurance until he realised I was not going to pay it and stopped the try-on.
