Owner Builder Warranty Insurance in Victoria Another Hoop, More Paperwork, Very Little Protection

Every few years the same question comes back around.

Do I need Owner Builder Warranty Insurance?

The short answer is yes, sometimes.

The longer and more honest answer is that this is one of those compliance hoops that looks good on paper, keeps policymakers happy, but does very little to protect the people it is supposed to help.

What this insurance is meant to do

In theory, Owner Builder Warranty Insurance exists to protect buyers where an owner builder has carried out works and then sells the property.

The idea is that if something goes wrong and the owner builder is no longer around, the buyer has a safety net.

That sounds sensible until you look closely at how it actually operates.

When the insurance is triggered

In Victoria, the insurance is required if all of the following apply.

The seller acted as an owner builder rather than engaging a registered builder.

The property is sold within six years of the building permit being issued.

The cost of the works exceeded $16,000.

Miss any one of those and the insurance is not required.

Tick all three and you are suddenly expected to locate reports, permits, certificates and an insurer willing to issue a policy, often years after the work was done.

Why the six year rule causes problems

The six year period runs from the date the building permit was issued, not from when the work finished and not from when anyone moved in.

This catches people constantly.

Owners who did a bathroom renovation five or six years ago often assume the issue has expired, only to discover the permit date says otherwise.

What the policy actually covers

This is where the gap between theory and reality becomes obvious.

The insurance does not cover poor workmanship in the ordinary sense.

It only responds if the owner builder dies, becomes insolvent, disappears, or fails to comply with a court or Tribunal order.

Even then, the buyer still has to jump through their own set of procedural hoops to make a claim.

For most purchasers, the policy exists more as a compliance document than as a meaningful safety net.

Who does it really protect?

It does not protect the owner builder, who bears the cost and administrative burden.

It rarely delivers practical outcomes for buyers, who often discover the limits of cover too late.

What it does do is allow regulators and policymakers to say there is a system in place.

From that perspective, the box is ticked and the requirement remains.

The real world impact on transactions

In practice, Owner Builder Warranty Insurance causes delay, stress and last minute scrambling.

Contracts are signed without the issue being properly understood.

Settlement dates are threatened while reports are ordered and insurers are approached.

Purchasers become nervous, not because of the works themselves, but because the paperwork is incomplete.

None of this improves building quality.

None of this fixes defective work.

Why it still matters

Despite its flaws, the requirement cannot be ignored.

If insurance is required and not provided, the sale may not comply with Victorian disclosure rules.

That can expose the seller to delay, cost, or the risk of the purchaser ending the contract.

Like many compliance obligations, it may be clumsy and inefficient, but it still has teeth.

Our practical approach

At Victorian Property Settlements, we treat Owner Builder Warranty Insurance for what it is.

A regulatory hurdle that needs to be identified early and dealt with calmly.

When acting for sellers, we ask the right questions upfront and check permit dates before contracts are issued.

When acting for buyers, we make sure the issue is properly disclosed so there are no surprises later.

This does not fix the policy itself, but it does stop it becoming a last minute crisis.

If you are selling a property in Victoria and there is any chance owner builder works were carried out, it should be raised early.

Waiting until settlement is looming is when this requirement does the most damage.

Victorian Property Settlements – Trusted for over 25 years by Victorian buyers and sellers.

Visit: www.victorianpropertysettlements.com.au