A developer who contracts one builder to do the work and take responsibility for the whole project has to make sure that builder holds home building compensation (HBC) cover for each dwelling before work starts. A developer who contracts two or more parties on the same project is coordinating it, is treated as the builder, and needs a builder licence from Building Commission NSW.
General informationThis page summarises NSW Government pages on the Home Building Act for developers and on insurance for building work, as at October 2026. The first says it is relevant to class 2 residential building work. It is not legal or insurance advice. Building Commission NSW answers questions on home building insurance on 13 27 00 on weekdays from 8:30am to 5pm, except public holidays.
Who the Act calls a developer
For these rules, a developer is the person, company or partnership the residential building work is done for, and the landowner if that is someone else. The definition applies where four or more of the dwellings in the building or development are, or will be, owned by that developer, or where every unit in a retirement village or in accommodation designed for people with disability will be.
Residential building work means doing, supervising or coordinating the construction of a dwelling, or alterations, repairs, additions or protective treatment. A dwelling, in turn, takes in a swimming pool or spa, a garage, shed, cupboards, driveway and fence, and other structures the Home Building Regulation 2014 lists when they are built for use with the dwelling. A developer usually has a licensed contractor do this work, unless the developer holds a builder licence.
Two ways to have it built
| How the work is contracted | What the developer is | What the page says the developer must do |
|---|---|---|
| One builder (the principal contractor) does the work and takes responsibility for the entire project | The builder’s client | Make sure the builder has HBC insurance for each dwelling before work commences |
| Two or more parties work on the same project under separate contracts | The one supervising and coordinating: taken to be the builder | Hold a builder licence, arrange HBC cover before starting, and attach the certificate of cover to the contract of sale |
Each contractor answers only for the work in its own contract. The line between the two rows can be fine. The page’s own example is a developer who hires one contractor to excavate for the foundations and another to build. If that excavation is part of the whole project, such as support for permanent foundations rather than a hole for temporary shoring, the developer could be seen as coordinating the project. The page adds that each situation turns on its own facts.
The “spec” builder
A developer who does the building work, or coordinates the contractors doing it, comes under the Act as a “spec” builder: the general term for a person, company or partnership doing residential building work on land it owns, usually meaning to sell when the work is finished. A spec builder is a licensed builder, so it may do its own work rather than contract it out.
Whether the plan is to sell or to keep the property as an investment, the page gives the spec builder two duties.
Before work starts, arrange cover under the HBC scheme for the residential building work.
When the property is sold, attach the certificate of cover to the contract of sale. Without it, the spec builder commits an offence and may be penalised, and the buyer can rescind the contract before settlement.
The NSW off-the-plan buying page puts the same rule from the buyer’s side: once building work has begun, the contract of sale must carry a copy of the builder’s proof of HBC cover, and the right to cancel for want of cover lasts only until settlement.
What HBC cover does, and who it leaves out
HBC cover, once called home warranty insurance, protects homeowners as a last resort when a builder cannot finish the work or fix defects. Licensed builders and tradespeople in NSW need it for each home building project over $20,000 including GST. It covers new houses and multi-unit residential buildings of up to three storeys; multi-unit buildings above three storeys have none.
icare’s page for builders on HBCF cover says cover is usually needed for residential work in NSW priced over $20,000 including GST where the builder contracts directly with a homeowner, developer or owner-builder rather than as a subcontractor. Cover must be in place before work begins or any money is taken, a deposit included, and in most cases the obligation sits with the principal contractor. A builder needs an active certificate of eligibility first, then a certificate of insurance for each job, and must give the homeowner evidence of cover before work starts or money changes hands.
The Act does not require an HBC policy to cover the developer the work is done for, and every policy now available lists developers as a standard exclusion. The page says developers should get “independent professional advice” on limiting loss if their builder dies, disappears or becomes insolvent. Measures it mentions include other insurance held by the builder, such as principal nominated contractor insurance, or an on-demand bank guarantee, letter of credit or performance bond the developer can call on if the builder defaults.
Licensing offences
Since 29 April 2005, the Home Building Act has made it an offence for a developer to employ a contractor knowing the contractor is unlicensed, or to refuse to tell a building inspector the names and addresses of the people working on site. The page gives the maximum penalty for these offences as $22,000 for an individual and $110,000 for a corporation. Since 1 March 2015, an individual convicted of unlicensed contracting for a second or later time faces up to $55,000, up to 12 months’ imprisonment, or both.
Registered building practitioners will need to be insured for their work as practitioners, as well as taking out HBC cover. Registered design practitioners and professional engineers already need professional indemnity insurance.
Those practitioners are the people a developer of an apartment building has to nominate before work begins, as the guide to apartment buildings explains.