The powers of the Queensland building industry’s regulator, the Queensland Building and Construction Commission (QBCC), have recently been the subject of significant legislative reform. (See our April 2015 publication here).
In addition, the QBCC’s policies for implementing its legislative powers have been overhauled. This includes the new Rectification of Building Work Policy (effective 10 October 2014) which established new timeframes for consumers to notify the QBCC of defective building work.
On 1 June 2015, the Accountability for Subcontractor Defects Policy (Policy) took effect.
The Policy reflects an intention from the QBCC that there should be a shift in accountability for defective building work performed by subcontractors.
Traditionally, although the QBCC has always had the power to direct subcontractors to rectify defective work, the QBCC has held main contractors accountable for defective building work performed under their supervision. The Policy now specifically requires consideration of the subcontractor’s responsibility for the defective building work and provides for subcontractors to be directed to rectify such work.
This has numerous practical implications for main contractors and subcontractors.
PROCESS UNDER THE POLICY
The QBCC will investigate a consumer complaint in accordance with the QBCC’s Rectification of Building Work Policy.
If the QBCC determines that defective building work exists and that a subcontractor is responsible for the defects, the subcontractor may agree to perform the necessary rectification work.
If the subcontractor does not rectify the defects and the main contractor agrees that the defects exist, the QBCC may issue a Direction to Rectify to the subcontractor and the main contractor to rectify the defects.
If the subcontractor fails to comply with the Direction to Rectify, it will be noted on the subcontractor’s public record and the subcontractor will be liable to prosecution by the QBCC. The main contractor is likely to be required to rectify the defects at its cost.
TIPS FOR MAIN CONTRACTORS
The Policy is a welcome development for main contractors in the industry. Defect rectification is expensive. Previously, many main contractors felt that the QBCC unfairly targeted them when subcontractors were unwilling or unable to correct their own defects.
Main contractors should ensure that they can actually benefit from the change in the QBCC’s approach.
The Policy will not assist main contractors if they fail to take some simple steps to clearly show a subcontractor’s responsibility for defective building work. This will facilitate the QBCC issuing a Direction to Rectify to the subcontractor at the outset.
These simple steps include ensuring:
- That subcontract documentation identifies the correct entity and licence number for the subcontractor and ensuring that the subcontractor is appropriately licensed for the work it is contracting to perform.
- That the subcontract documentation clearly sets out the scope of work and the subcontractor’s responsibilities, including for defect rectification and warranties.
- That contract administration processes also support the main contractor’s position in the event of a complaint, for example contractual directions to rectify, variation directions and certifications of progress. Any certification of subcontract work should be qualified to exclude any defective work which is apparent at the time of certification.
It is also important to note that the Policy does not alter a main contractor’s responsibility to properly supervise building work and main contractors are likely to remain liable to disciplinary action if a Direction to Rectify is not complied with.
Accordingly, where a subcontractor has failed to rectify the defects, a main contractor is likely to have to perform rectification works at its own cost. Subcontract documentation should be prepared to allow main contractors to recover the costs incurred in performing rectification works for which a subcontractor is responsible (with recourse to security if necessary).
TIPS FOR SUBCONTRACTORS
Subcontractors should also take steps to ensure they can clearly identify their scope of work (through subcontract documentation and contract administration processes), to respond to any allegations of defective building work.
As subcontractors have not traditionally been the focus of Directions to Rectify, they should familiarise themselves with the QBCC processes, the implications for non-compliance with a Direction to Rectify and the options for reviewing Directions to Rectify which are improperly issued.