Due to rising costs of building, maintaining and repairing property, it’s not uncommon for homeowners to look for the most affordable contractor available to do the work. In some cases, they use the “I know a guy who knows a guy” mentality when contracting for jobs.
While this may sometimes be necessary, you must be aware of the risks you face by hiring unlicensed contractors or tradesmen.
Unlicensed contractors rarely apply and obtain the proper permits required for the work that they will be doing. Building permits are required to ensure buildings are constructed to comply with the Building Code of Australia, The Building Act 1993 and the Building Regulations 2006. It’s also meant to independently check that all documentation has been completed and meets with the regulations, to verify that building practitioners are registered and appropriately insured and to ensure key stages of the building works meet the necessary Building Legislation.
Not complying with this requirement could cause you to face some serious and potentially costly consequences.
Pitfalls of Illegal Builds Or Renovations
- You Would Have To Pay A Work Without Permit Penalty Fee
If town officials discover that you’ve been building or renovating without a permit, you may be required to obtain a town building permit and pay a “work without permit” penalty.
Under the Building Act 1993, the penalty for carrying out building works without a permit or in contravention of a permit is 500 penalty units for an individual, and 2,500 penalty units for a company. As of 1 July 2013, a penalty unit is set at $144.36, so a total maximum penalty for this contravention amounts to $72,180.00 for an individual, and $360,900.00 for a company.
- Work Is Delayed While Your Permit Application Is Being Processed
While waiting for your building permit to be issued, all of the work at your property would have to be stopped. This means that there could be a significant delay in the completion of your construction work.
- Your Home May Be Tough To Sell
When you sell your home, a municipal code inspector must inspect the building to issue the buyers a new certificate of occupancy. These inspectors can usually spot illegal construction and will demand some proof that the work which was done is up to code. Providing this proof can be very costly and time-consuming, especially if you have to remove walls for a proper inspection to be conducted. When homebuyers find out that work done on the property were done without the proper permits, it could raise suspicions that there are other problems with the home, which could either delay or even total jeopardize the sale.
- Insurance Troubles And Lawsuits
A licensed contractor must have workers compensation insurance for its employees and this is something that an unlicensed contractor doesn’t usually provide. So if a serious injury were to occur to an unlicensed contractor the person that hired the unlicensed contractor could potentially be liable for paying the workers compensation benefits. This could turn your simple $1,000 construction project into a bill for tens of thousands more.
If you later end up filing for insurance claims because of fire or water damage that result from poor-quality home renovations, your insurance company will typically pay for the claim but this will be noted on your file, which could have an impact on your policy in the future.
Also, if you sell your home and a buyer later discovers illegal work, the buyer may turn to litigation to recoup the difference in the home’s value if the town demands that the addition be torn down.
Now that you know the risk in hiring unlicensed contractors who work without the necessary building permits, make sure to take the steps it takes to make an informed decision. To further assist you in choosing the builder that will be right for you, you may check our article on how to choose a home builder here.