On 14 December 2022 icare HBCF issued a Statement on Elderton Homes to policy holders impacted by the voluntary administration of Elderton Homes Pty Ltd, ACN 138 413 902 (Elderton).
Operation of the HBCF and your Policy
The Home Building Compensation Fund (HBCF) stands ready to support homeowners with HBCF policies where they suffer a loss in accordance with the terms of their policy.
However, before the HBCF can assist, certain steps need to have occurred. These are set out in your Policy wording and depend on your individual facts, circumstances and contractual arrangements.
Subject to the date of issue of your policy (noted on your Policy Certificate), you can find a link to your policy's relevant wording on our Making a claim webpage.
Under each policy, there are a number of matters that must be considered in order for any claim to be assessed and the correct Policy response determined by icare.
The following is intended to help homeowners understand their position and possible next steps and cannot replace the actual wording or effect of your relevant policy in your individual circumstances.
First, icare HBCF accepts that "insolvency" is defined so as to include external administration, such as in the case of Elderton at the present moment.
Secondly, the HBCF covers certain losses and damage where compensation cannot be recovered from the builder or where rectification by the builder is not possible due to certain circumstances – including the insolvency of the builder.
Sometimes, determining that loss can be difficult without a detailed analysis because it may depend on individual homeowner rights against the builder or the builder's status at the time.
For example, if a homeowner lodges a claim but icare HBCF determines that the builder may be ready, willing and able to complete the building work, icare HBCF may not necessarily find that there is a loss in relation to completion or rectification of building work (although it is possible that costs may be covered under the policy).
Any claims may be subject to limits, including depending on whether they are for defective or incomplete works and when they are notified and claimed.
Broadly, claims will be assessed by icare HBCF on a case-by-case basis.
Deed of Company Arrangement
A Deed of Company Arrangement (DOCA) to allow work to recommence on projects has been proposed, according to the Administrators, and is expected to be the subject of a vote by creditors at the adjourned second meeting in due course.
Each homeowner's circumstances will likely differ and each should seek their own independent advice on the effect of the DOCA if and when considered appropriate.
Homeowners should come to an informed position considering how any proposal would impact how their contracts are to be dealt with, any possible effect on their Policy entitlements, and their rights in relation to any incomplete works and/or breaches of statutory warranties.
icare HBCF cannot advise homeowners on the DOCA and cannot take any position in relation to it. icare HBCF does not intend to vote in any decision.
Questions and answers
On 31 January 2023, the Administrators sent the following issues it proposes to discuss with the proposed DOCA proponents to icare HBCF seeking comment. By way of reply and for the assistance of homeowners, icare HBCF's responses are included below:
a) How the HBCF policies will respond to claims for compensation made by clients on acceptance of any variations by the third-party builders?
The Policy wording will be applied to the particular factual circumstances of claims lodged by policy holders.
b) How the HBCF policies will respond to claims for compensation made by clients on the rejection of variations proposed by the third-party builder resulting in the engagement of an alternate builder who may charge more for completion than the variations proposed by third-party builder?
The response is the same as a), above. Unfortunately, icare cannot offer a definitive position, as to do so would be to suggest limiting or expanding a homeowner's rights. Those entitlements remain the same.
c) Whether there is a streamlined process for dealing with compensation claims to be brought by clients who accept the variations proposed by the third-party builder?
Any claims will be assessed as quickly as possible if homeowners provide all relevant information and documentation reasonably requested.
If the claims information includes variations from a builder the homeowner proposes to take over their contract, regardless of whether this is the third party builder participating in discussions with the administrator or otherwise, this may assist icare HBCF in assessing the claim promptly.
Insurance Guidelines issued by the State Insurance Regulatory Authority establish comprehensive requirements and timeframes for claims management. Within that framework, claims can still take quite some time to assess, determine, consult with owners and make any offers of settlement.
The legislation requires icare HBCF to determine the claim within 90 days or such other time as agreed between icare HBCF and homeowners. Sometimes, due to complexities in individual claims, icare HBCF will approach homeowners to seek consent to extend the time required for determination.
d) How icare HBCF intends to respond in cases where the Company ought to have taken out HBCF policies but failed to do so?
Where the policy had not been taken out for work under contract, these are not covered and the affected homeowner will need to raise this matter with SIRA and Fair Trading, as well as consider their rights as a creditor.
It is an offence under the Home Building Act 1989 to demand or receive a payment under a contract for residential building work or undertake residential building work under a building contract unless a contract of HBC insurance is in force in relation to that work.
e) Whether icare would care to address creditors of the Company directly, either in writing or at the next meeting of creditors, so as to provide some certainty and confidence around the process and the information against which they act to determine the future of the Company and completion of their projects.
To assist policy holders at this time, icare HBCF has provided the above responses addressing the questions and issues raised by Elderton's Administrators. We will continue discussions with the administrator and respond to inquiries from any affected homeowner.
Contracts not insured at the time of insolvency
On 13 January 2023, the Administrators asked the following three questions of icare HBCF concerning a number of particular properties where Elderton had submitted the application for HBCF insurances but had not paid the premium for an HBCF policy prior to entering into voluntary administration.
For the assistance of owners that may be affected by this, icare HBCF's responses to Elderton's Administrators on 24 January 2023 are included below:
1. "Are the policies effective for the customers to claim on?"
icare HBCF will honour the policies subject to the premium being paid.
2. "Will iCare issue certificates without payment of the premiums, noting that iCare is a creditor for these unpaid premiums?"
No, the certificates will not be issued until the premium is paid.
3. "If the policies are not effective, what steps are required retrospectively to make them so?"
As mentioned above, icare HBCF will honour the policies subject to the premium being paid. Otherwise, no cover can be provided.
icare HBCF must note these answers only reflect the position for a specific set of properties where the application had been submitted and the premium not yet paid.
For any other circumstance where the policy had not been taken out for work under contract, these would not be retrospectively covered and the affected homeowner would need to raise this matter with SIRA and Fair Trading, as well as considering their rights as a creditor.
Different outcomes of upcoming creditor meetings
Unfortunately, icare cannot give specific advice on the effect of different possible outcomes of creditor meetings because individual claim outcomes may ultimately depend on the specific detail of any process implemented (be it a DOCA or liquidation) and each Policy holder's individual circumstances.
icare can say that a liquidation will likely trigger the typical full claims process for icare HBCF. That process is quite detailed and involves many stages of assessment, consultation and determination before a settlement can be reached.
If a DOCA is approved at a creditors' meeting, which ultimately binds creditor/homeowner rights to the extent that they are unable to recover from the builder or have the builder do completion/rectification work, they may also be able to claim on the HBCF.
It is possible, however, that whatever arrangement is proposed under the DOCA could lead to faster completion/rectification of work for homeowners (although this will depend on the arrangement proposed and agreed).
If the policy holder enters into a new contract with a new builder to complete/rectify the work or if a new builder takes on building contracts pursuant to a DOCA, the new builder will need to obtain fresh HBCF cover for the remaining completion/rectification work.
If Elderton completes work under a DOCA, that work would still be covered under the existing HBCF policy in respect of that work.
If you think you need to claim, you should complete the Claim Form for Homeowners to allow us to provide further assistance.
You can also find helpful general claim information on our website, including the following:
For any additional enquiries, please contact icare HBCF at firstname.lastname@example.org.
If you have concerns outside the scope of Home Building Compensation insurance, you may contact Fair Trading on 13 32 20.