Tasmania releases home warranty scheme draft legislation

30 January 2023

The Tasmanian state government has released draft legislation to reintroduce a home warranty insurance scheme to cover consumers if their builder dies, disappears or becomes insolvent.

Tasmania is the only state without some form of home warranty insurance after a previous scheme was abolished in 2008, but an increase in builder failures has prompted the Government to develop a new arrangement.

“The bill will mandate home warranty insurance for residential building work in Tasmania and ensure homeowners are covered for loss caused by incomplete or defective work should unforeseen circumstances occur,” Workplace Safety and Consumer Affairs, Elise Archer said.

“It also complements other changes already being implemented by the Tasmanian Government to strengthen consumer protections within our building regulatory framework.”

The proposed scheme will be underwritten by an insurer regulated by the Australian Prudential Regulation Authority with the Tasmanian Government fully reinsuring the risk.

The Government will pay the scheme operator commission to underwrite policies, administer the scheme and manage claims.

Caps for claims payable include 20% of total contract value for incomplete projects, subject to a maximum of $200,000, while the warranty period will apply for six years from the date of completion.

A regulatory impact statement says financial eligibility requirements should reduce the number of builder disappearances and insolvencies that affect consumers, as only financially sound builders will be able to operate in the market.

It’s expected builders will require assistance from brokers to collate information to meet the financial eligibility requirements and obtain insurance.

Submissions on the consultation documents are due by the end of March. More information is available here.