Victoria has recently enacted amendments to the Building Act 1993 (Vic), which will commence on 1 July 2017. The reforms apply to building practitioners operating in all building sectors (domestic, commercial and industrial) and are directed at increasing consumer protection by strengthening practitioner registration requirements, improving the discipline of building practitioners, increasing building surveyor independence, and giving building surveyors the power to direct builders to fix non-compliant work. There have also been amendments to the Domestic Building Contracts Act 1995 (Vic), which we summarised in our previous update published on 2 May 2016.

  1. Building practitioner registration

The amendments to the Building Act 1993 (Vic) (Building Act) change the registration requirements for building practitioners. Once the amendments take effect, all practitioners will need to reapply to the Victoria Building Authority (VBA) for registration every five years and the assessment of applications will be more rigorous. Practitioners must pass a new "fit and proper person" test when applying for registration. A Continuing Professional Development (CPD) regime has also been created, and compliance with the regime is a requirement for registration renewal.

Government regulations will in due course prescribe mandatory conditions applicable to each registration class and the VBA will be empowered to impose additional discretionary conditions.

Practitioners can apply to the VBA for an internal review of a decision refusing registration or imposing a licence condition. If the practitioner remains dissatisfied with the VBA's internal review decision, the practitioner can apply to the Victorian Civil and Administrative Tribunal (VCAT) for a further review.

Building practitioners and their insurers will need to consider whether their current insurance policies will provide cover for the legal costs associated with challenging VBA registration decisions.

  1. VBA development and approval of Codes of Conduct

The VBA is given powers to develop codes of conduct for the various registration classes, or to approve such codes developed by industry bodies. The VBA must consult with industry bodies when developing or approving codes of conduct. Approved codes will be published in the Government Gazette and will then become binding on all practitioners within the class to which the code applies. As discussed below, a breach of an approved code is grounds for disciplinary action under theBuilding Act.

It is anticipated that the VBA will aim to develop or approve a code of practice for builders that is similar to the Victorian Government's 2014 "Victorian Code of Practice for the Building and Construction Industry" that currently applies to all public building projects.

Most design practitioners already have professional codes of conduct that are binding on their members. The professional bodies representing design practitioners will need to consider whether they should ask the VBA to approve their codes of conduct under the Building Act.

  1. New "disciplinary action" regime

The disciplinary inquiry process previously prescribed by Division 2 of Part 11 of the Building Act has been abolished and replaced with a new "disciplinary action" regime. Registered building practitioners will be held to a much higher standard of conduct.

Grounds for disciplinary action

The new regime preserves the existing grounds for disciplinary action, which include: unprofessional conduct; gross or repeated negligence or incompetence; not being a fit and proper person; working outside the practitioner's registration class; a breach of the Domestic Building Contracts Act 1995 (Vic); failure to maintain required insurance; failure to comply with a reasonable direction of a home warranty insurer; false registrations; and a breach of the Building Act or associated regulations.

The grounds for disciplinary action have been extended to include a failure to comply with the following:

  • Conditions of registration;
  • A direction or order given by a building surveyor, the VBA or VCAT;
  • A dispute resolution order issued under the new conciliation regime;
  • An adjudication order under security of payment legislation;
  • An approved code of conduct; or
  • Applicable CPD requirements.

Procedure

The VBA, in place of the abolished Building Practitioners Board (BPB), retains the discretion to commence disciplinary action. The disciplinary action process now commences with the VBA issuing a "show cause" notice to the building practitioner which must state, among other things: the proposed disciplinary action; the grounds for the proposed disciplinary action; and an outline of the relevant facts

Next, the practitioner is given an opportunity to provide the VBA with an oral or written response to the show cause notice. The due date for the practitioner's response will be specified in the show cause notice, and must be at least 14 days from the date the notice was issued.

The VBA must then decide, within 28 days after the show cause period ends and having regard to the practitioner's response, whether a ground exists to take disciplinary action.

Under the old regime, the BPB commenced the inquiry process by issuing a Notice of Inquiry, which would ordinarily state the allegations and particulars in summary form. The practitioner would then have an opportunity to file written evidence in reply, after which the BPB would conduct a formal hearing. It appears the new provisions do not require the VBA to conduct a formal hearing in each instance – the practitioner is only required to provide an oral or written response to the show cause notice then the VBA decides if a formal hearing is required.

The VBA has been given a new power to immediately suspend a building practitioner's registration before a show cause notice is issued (and thus before hearing from the building practitioner concerned). Immediate suspension can be imposed where the practitioner becomes insolvent, contravenes a prescribed provision of the Building Act or associated regulations, ceases to hold required insurance, breaches a registration condition, or is convicted of specified indictable offences.

Penalties

If the VBA, after reviewing the practitioner's response to the show cause notice, believes that no grounds exist to take disciplinary action, the VBA must take no further action (and cancel any immediate suspension imposed before the show cause notice was issued). If the VBA believes that a ground exists, then it can take the disciplinary action proposed in the show cause notice, or lesser disciplinary action if the VBA considers appropriate.

The disciplinary action that can be taken by the VBA remains substantially unchanged. The VBA can take disciplinary action in the form of a reprimand; the imposition of a financial penalty of up to 100 penalty units (currently $15,167); the imposition of conditions on registration; requiring the practitioner to attend a training course; and suspension or cancellation of registration. In addition, the VBA has new powers to direct the building practitioner to do a specified thing, including to rectify or complete building work. The VBA can accept an undertaking from the practitioner, in place of or in combination with other disciplinary action.

Under the old regime, the BPB could make an order requiring the practitioner to pay the BPB's costs of the inquiry. The amending Act contains no equivalent provision, suggesting an intention that the VBA cannot claim its costs from a practitioner under the new regime where disciplinary action is taken.

Review of decisions

The VBA must give reasons for taking disciplinary action. Practitioners can apply to the VBA for an internal review of a decision to impose immediate suspension or to take disciplinary action. If the practitioner remains dissatisfied with the VBA's internal review decision, the practitioner can apply to VCAT for a further review.

  1. Changes to duties and powers of building surveyors

Building surveyor independence

New provisions have been inserted into Part 6 of the Building Act, which are intended to promote greater building surveyor independence.

Builders engaged to carry out domestic building work will be prohibited from engaging a private building surveyor on behalf of the owner. Building surveyors are similarly prohibited from accepting domestic appointments through the builder. Owners of domestic projects will therefore need to engage the building surveyor directly. Presumably domestic builders will now facilitate the engagement of their preferred building surveyor by referring the owner to that building surveyor. No such restrictions are placed on building surveyors engaged for industrial and commercial projects.

Section 79 of the Building Act has been amended to expand the circumstances in which a building surveyor cannot accept an appointment under Part 6. Once the amendments take effect, building surveyors will be prevented from accepting a private appointment under Part 6 where the building surveyor, or a person related to the surveyor, is in a "conflict of interest".

The amendments to the Building Act do not attempt to define the circumstances that constitute a conflict of interest, thus the Courts will need to interpret the new provisions as appropriate cases arise. The decision of Colonial Range Pty Ltd v Victorian Building Authority [2014] VSC 272 provides an example of a situation that is probably a conflict of interest within the meaning of the new provisions. In Colonial Range it was alleged that a developer should not appoint a substitute building surveyor, in circumstances where the developer had previously retained the substitute surveyor to provide expert evidence in support of a disputed decision made by the original building surveyor.

Issuing directions after Part 4 inspections

A new Division has been inserted into Part 4 of the Building Act which requires building surveyors to issue directions as part of the mandatory inspection process.

Under the new provisions, a building surveyor who detects non-compliant work during a mandatory inspection must issue a written direction to the builder to fix that work within the prescribed time. The direction to fix work must be issued before a Building Notice can be issued.

The building surveyor must notify the owner and the VBA if the builder fails to comply with a direction to fix work. A failure by a builder to comply with the building surveyor's direction is an offence and grounds for disciplinary action. A builder cannot charge the owner for work done complying with a building surveyor's direction to fix work.

The builder can apply to the Building Appeals Board for a review of a building surveyor's direction to fix work.

Getting ready for the changes

All Victorian building practitioners will need to ensure they are prepared to meet the more rigorous registration requirements and participate in mandatory CPD programs. They will also need to familiarise themselves with the additional regulation of building work and the higher standards of conduct imposed by the new disciplinary regime.

Building practitioners who are issued an immediate suspension or show cause notice should notify their insurers immediately and seek legal advice on how to participate in the disciplinary process.

Building surveyors will need to avoid conflicts of interest and, in the case of domestic building works, ensure they are appointed directly by the owner. Building surveyors will also need to be aware of their new obligations to issue directions after mandatory inspections to fix non-compliant work.

Design practitioners and their professional indemnity insurers should review their policy wordings, premiums and excesses to ensure consistency with the new regime. It is expected that the standard "inquiry costs" cover provided by most professional indemnity insurance policies will provide the same cover for the new disciplinary regime as was provided for the old regime.

Please click here for our previous update on the Victorian building law reforms.