What is a Section 137 B Inspection.

Section 137 B of the Building Act 1993 refers to building works that have been carried out by an Owner Builder and the owner wants to sell the home within 6.5 years of the works being completed.

Under the Act, an owner builder who carries out building works on their property and then decides to sell the property within 6 years and 6 months of the works being completed must obtain a 137 B Defects Inspection Report.

One then needs to know what an owner builder is.

An owner builder is defined as someone who “constructs or renovates a domestic building on his or her own land, and who is not in the business of building”.  Genuine owner builders do not intend to sell or rent the property out immediately and must reside or intend to reside in the dwelling upon completion of the works.  The Owner Builder must also be the title holder or owner of the property.

In relation to an owner builder, the building works can be anything. I had for many years misconstrued the Building Act and believed that if a building permit was not required for the works then a 137 B defects report was not required, which to me is common sense.  I have recently received information to the contrary that any building works whether a permit is required or not will need a  137 B defects report if you are selling within 6.5 years.  This can be the removal of a window and replacing it with a door, renovating a kitchen, building a barbecue, even though no structural works are conducted.  If there are building works that an owner builder has carried out, then a Section 137B building inspection report is required.

When is a 137 B Inspection Required?

A 137 B Inspection Report is required only if you sell the home within 6 years and 6 months of the works being completed. If you sell the home 6 years, 6 months and one day after the building works were completed, you don’t require one.  The value of the works does not matter.  The value of the works only matters in relation to warranty insurance. If the value of the works is over $12,000, the owner builder has to get house warranty insurance.

What is included in the 137 B defects inspection report?

This report is basically a description of the building works for which the owner builder had built – could be deck, garage, carport, extension or entire home – and describes any defects including incomplete works, decay, deterioration, footings issues, roof defects and the list goes on depending on the structure to be inspected. It can range from 50 pages for an entire home built by an owner builder to 2 pages for a garage.

What happens to the 137 B Inspection report?

The inspection report gets attached to the Section 32 Contract of Sale for all potential buyers to see.  If you have carried out works on your home that required a building permit, most banking institutes now require Section 137 B defects reports before they will lend money to a potential purchaser.

What happens if Defects were noted in the report by the Building Inspector?

The 137 B defects inspection report places no obligation on the owner builder (person selling the home within 6.6 years) to rectify the defects.  It just makes the potential buyer aware of the defects.

The only problems that could arise if you do not fix the defects is you may lose a potential buyer and from the buyers perspective the insurer may refuse to cover the building works carried out if defects were found.

Who Can carry out 137 B house Inspections?

Only Registered Building Inspectors or Surveyors, Builders, Architects, Structural Engineers and Drafts persons engaged in the Building Industry.

Helpful Scenario

Betty decides she wants to build an extension onto the rear of her Sandringham home. She engages Bob the Builder to build the extension and Bob tells Betty it will require a building permit.

Betty then applies to the Building Authority to act as an “Owner Builder” and receives consent to do same. She received her permit to build and the extension gets built and the Building Surveyor who issued the building permit issues a certificate of occupancy.  6.6 years now starts.

Betty now decides that she wants to sell the home 6 years and 5 months after the extension was constructed.  Being within the 6 years and 6 months Betty now has to obtain a Section 137 B Defects Report.

She employs Mr Inspector Building Inspectors in Melbourne to conduct the Defects Inspection and defects are noted but predominately due to age and lack of maintenance. She then attached this report to the contract of sale and prospective buyers can peruse same.

Contact

If you have any queries about owner Builder defects reports or building inspections in general, please do not hesitate to call Mr Inspector and he will be able to assist.