Kit homes |
The popularity of kit homes has increased in recent years due to factors including affordability, lack of suitable home sites, steep and sloping blocks, design improvements and the lack of availability of tradespeople.
Buying a kit home and involving yourself in the construction process can be both rewarding and profitable for the average homeowner. However, the process is not without risks and homeowners must fully understand these risks before committing to their own home building project.
In Queensland, an Owner Builder permit is required when carrying out building work on your land where the value of the work is $11,000 or more (including GST). The Building Services Authority (BSA) issues Owner Builder permits for eligible applicants. Any building work in excess of this amount, without the appropriate permit, is considered unlawful building work in Queensland.
An alternative to owner building is to engage a BSA licensed builder to coordinate the building work on your behalf. Refer to the BSA website to check your builder is appropriately licensed to perform building work in Queensland.
Shed kits and installations continue to be a popular addition in the home improvement market. Many large sheds are now valued in excess of $11,000 and therefore an Owner Builder or BSA licensee would be required to complete the installation.
Kit homes and sheds are primarily designed for the owner builder market. The kit home supplier will supply building materials, owner builder support and construction manuals to help with the process for building your kit home.
Buying a kit home
When buying a kit home you will need to do the appropriate research to ensure it meets your budget and your design specifications. It is important to consider exactly what will be included in your kit home purchase.
For example:
- Does it come with council plans and specifications?
- Who is responsible for paying council fees and lodgement of plans?
- Does it come with engineer´s certification covering all structural aspects of the building?
- Is a concrete slab required or does the kit home come with a steel floor system?
- Does it come with an owner builder construction manual?
- What support or assistance is provided during the process?
- Are transport and delivery charges included?
- How many deliveries will be made and is there a separate charge for each delivery?
- Who is responsible for site work, including site clearing and disposal of rubbish?
- Will the materials be delivered pre-cut to your specifications, or do you have to cut the materials to size yourself?
- What is the timeframe for the company to make the kit?
- What construction materials are included?
- What product warranties are in place?
- What costs are incurred to make changes or amendments to the plans?
- Do you have access to appropriately licensed tradespeople in your local area to perform the building work?
You should consider:
- selecting a company that has a proven reputation in the industry over a period of time
- selecting a company that is familiar with your local council rules and regulations
- contacting your kit home supplier and requesting the names and contact details of customers in and around your area
- using a company that is a member of a well known housing association such as the Housing Industry Association or Master Builders Association Australia
- checking with your local council to make sure you are aware of your statutory obligations
- researching owner builder magazines or websites for recommendations and referrals
- selecting a company that provides extensive owner builder support.
Contracts and deposit amounts
The kit home supplier will ask you to sign an agreement or contract for the supply of the kit home or shed. A contract is a legally binding agreement between two or more people. Contracts can be verbal or written. We recommend that you seek your own independent legal advice before entering into these contracts.
When signing a contract, the kit home supplier will generally request a deposit from you in order to process the order. Kit home suppliers are not regulated in relation to the deposit amount they can request or receive. You should exercise caution when dealing with kit home suppliers who demand excessive deposit amounts before any materials have arrived on site. The Office of Fair Trading is aware of some kit home suppliers who have requested 100% of the contract price as a deposit.
We recommend that you use extreme caution when committing to pay the full price up front.
Traditional home builders and project builders are regulated in relation to the percentage amount of the contract value that they can request or receive. A builder is limited to charging a 5% deposit for domestic building work in excess of $20,000, or a 10% deposit for amounts between $3,300 and $20,000. A kit home supplier can legally request more than these amounts.
We recommend that you contact your local council and the BSA to check the requirements for domestic building projects, before entering into any contract.
Examples
You enter into a single contract for both the supply and installation of the kit home. The total cost is $350,000. The company can only ask you to pay a deposit of up to 5% of the total price (in this case $17,500). Later payments will be required at the completion of each stage of building.
You enter into a single contract with a company for $150,000 for the supply of a kit home and choose to owner build. The company may ask you to pay the full $150,000 up front for the kit home.
You enter a contract with Company A for $150,000 for the supply of a kit home and you enter into a separate contract with Company B for $190,000 for the kit home´s installation. The total cost is $360,000. Company A may ask you to pay the full $150,000 up front for the kit home. Company B can only ask you to pay a deposit of up to 5% of the total price (in this case $9,500).
Insurance
You should make sure that you are aware of the insurance conditions attached to both the purchase of the kit home and the installation of it.
The BSA´s Queensland Home Warranty Scheme provides consumers with access to an insurance fund when:
- a licensed contractor does not complete the contracted residential construction work
- there is defective work
- the building suffers from subsidence or settlement (movement in the soil under the house, which can result in structural damage).
The scheme only applies to work carried out by BSA licensed contractors. You cannot access it for compensation if your contract is only for the supply of a kit home, or if you are an owner builder.
If you are considering owner building your kit home, we strongly recommend that you obtain independent advice from an insurance professional.
Examples
You enter into a single contract for both the supply and installation of the kit home. The total cost is $350,000. If you experience problems, the maximum amount you could claim in compensation would be $350,000.
You enter a contract with a company for $150,000 for the supply of a kit home and choose to owner build. If you experience problems with the supply of the kit home, you cannot make a claim from the BSA scheme for any compensation.
You enter a contract with Company A for $150,000 for the supply of a kit home and you enter into a separate contract with Company B for $190,000 for the kit home´s installation. The total cost is $360,000. If you experience problems with the supply of the kit home, you cannot make a claim from the BSA scheme for any compensation. If you experience problems with a BSA licensed builder, the maximum amount you could claim from the BSA scheme in compensation would be $190,000.
Building and construction
Under the Queensland Building Services Authority Act 1991, a person involved in the construction of a residential building must hold certain licenses.
These licensing requirements are administered by the BSA.
If you choose to construct your home or shed yourself, you may be required to apply for an Owner Builder licence. As the owner builder, your role will be that of head contractor, therefore should any disputes arise regarding the work carried out, you will need to consider obtaining your own independent legal advice.
BSA is unable to assist owner builders in relation to the rectification of defective building work. As the head contractor you assume the responsibility for ensuring that the work carried out is to standard and complies with all plans and specifications. As an owner builder you do not have access to BSA's dispute resolution process and should seek other resolution methods (such as applications made through the Queensland Civil and Administrative Tribunal). You may wish to consider seeking independent legal advice.
Should you choose to employ a builder to construct your kit home or shed, they may be required to hold a Builder´s licence. Should any disputes arise regarding the work carried out under the contract of your domestic building project, the BSA may be able to assist. For more information about licence applications or help regarding building disputes, contact the BSA.
Selling the property
If you sell your property within six years of the completion of your owner builder work you must, before signing any contract of sale, provide the prospective purchaser with a written notice.
The notice should contain the following:
- details of the domestic building work performed
- the name of the person (permit holder) who performed the work
- a statement confirming the work was performed under an owner builder permit
- the following notice: "Warning - The building work to which this notice relates is not covered by insurance under the Queensland Building Services Authority Act 1991".
Resolving complaints
If you have a complaint about a kit home or shed you purchased, write to the manager of the company and try to resolve it directly with them first.
If, after reading the below, you are unsure where to direct your complaint, please contact us.
Delays in delivery and non-supply
You are entitled to expect that stated delivery dates for your kit home or shed will be honoured.
If, at the time of entering into a contract, the delivery date was a specified condition which influenced your decision to purchase, and it is not honoured, you may be entitled to seek redress from the trader such as a refund of your deposit.
At the time you ordered the kit home, if the trader was aware, or should have reasonably been aware, that the goods could not be delivered as ordered, the trader may be in breach of the Fair Trading Act 1989.
If you have a problem like this, you can lodge a complaint with us.
Misleading or deceptive conduct
You are entitled to expect that the goods supplied to you are what you ordered.
If, at the time of entering into a contract, goods are described or represented as being of a certain quality, standard, grade or model, this is what you should expect to receive. In circumstances where the trader did not intend or could not supply the products to you as ordered, they may be in breach of the Fair Trading Act 1989 for misleading or deceptive conduct.
If you have a problem like this, you can lodge a complaint with us.
Complaints to the BSA
The BSA can only assist when a BSA licensee was responsible for the coordination, supervision and construction of your kit home or shed.
If you have dispute with a BSA licensee, contact the BSA.
A BSA insurance certificate should be provided to the homeowner before any building work commences.
All other issues may be considered contractual and homeowners are encouraged to seek their own independent legal advice for these matters.
Payment and contractual issues
BSA does not provide assistance in relation to payment issues. As an owner builder and head contractor for your project, the subcontractors and suppliers working for you are able to use the Building and Construction Industry Payments Act 2004 and may lodge an adjudication application to obtain payment.
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Last reviewed 22/03/2013 |
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