Home Warranty - What is a speculative project? - NSW

Many licensed builders are undertaking speculative work whereby they construct homes on parcels of land they have purchased and sell them upon completion. A licensed builder wishing to carry out speculative work must own the block of land on which they propose to build on. The title to the land must note the builder as the registered proprietor only.

The block of land to obtain Home Warranty, eligibility must in the identical name as per the registered proprietor of the land; if it is under an alternative company name then the project will not be speculative.

As speculative Home warranty is only required if the home is sold within 6 years from completion.

As a sole trader individual you the builder have your own tax file number and ABN number.

Your company that you operate through has also its own tax file number and ABN number; it also has its own requirement for taxation returns lodged at the ATO where it is treated differently to the individual.

The builder as an individual and the director of the same company are separate legal entities and not deemed to be one in the same. Therefore if one owns the land and the other is building, then it is not a speculative job.

The insurer deems that the company is a separate legal entity to the individual. 

The individual being the owner of the land in their own right regardless if they are still the license building practitioner or the registered director of the company. 

They are considered in the insurers’ eyes as separate legal entities which then require all the necessary legislative requirements to be met such as entering into a Building Contract and taking out Home Warranty cover at the outset.

Also being separate legal entities this can impact your financial returns and you will need to refer such matters to your accountant to see how these will need to be treated in regards to your book-keeping requirements etc and returns lodged with the ATO.

When the time comes that you intend to undertake such development please refer to your representative broker who can assist you. MBA Insurance Services is a licensed insurance broker but can only represent you to the insurer if you have appointed us as your Home Warranty representative broker; no other time can we represent you to the insurer for Home Warranty.

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