Introduction

This article highlights some of the key changes resulting from the Victorian Domestic Building Consumer Protection Reform (Reforms). The Reforms have been proposed following findings of the Victorian Auditor-General’s Office, the Victorian Ombudsman and government discussion papers that more transparent and accountable regulation was required of the building industry.

The Reforms will improve the consumer protection framework and provide greater incentives for the early settlement of disputes. Changes to legislation and insurance arrangements will be required as a result of the Reforms.

Victorian Building Authority

The new Victorian Building Authority (VBA) commenced operations on 1 July 2013. The VBA replaces the Building Commission, the Plumbing Industry Commission and the Architects Registration Board of Victoria and essentially creates a one-stop-shop for building practitioner regulation and domestic building consumer protection.
Two key functions of the VBA are:

  • building practitioner registration and licensing; and
  • building practitioner discipline.

Building practitioner registration and licensing

New application requirements: One of the preconditions that applicants for registration were previously required to demonstrate was that they were of good character. The Reforms will change this so that the good character test is replaced by tests of personal probity, such as criminal history, financial probity, insolvency or bankruptcy issues and failures to pay licensing law fines or penalties.

Registration period: The Reforms propose that rather than indefinite registration, a fixed registration period will be introduced. The registration period is expected to be five years, or possibly a shorter period. On the expiry of that period, renewal of registration will be required.

Company and partnership registration: Under the previous regime only an individual could be a registered building practitioner. The Reforms will change this so that corporations and partnerships operated by building practitioners can also be registered. Where an individual is suspended, then any business, corporation or partnership in which the relevant individual is a director, partner or nominee may also be suspended.

Building practitioner discipline

VBA: The VBA will be responsible for building practitioner discipline and will have the power to impose disciplinary sanctions and immediate suspensions. A decision of the VBA may be internally reviewed and ultimately appealed to VCAT.

Disciplinary Action: The Reforms will broaden the grounds for disciplinary action to include failure to pay a fee, failure to adhere to insurance requirements, failure to comply with a direction of a disciplinary body and breach of a Rectification Order issued by a VBA inspector. The VBA will have the power to impose disciplinary sanctions such as demerit points, direct a registered person or body to do or not do something, require a registered person or body to give an undertaking, and impose a condition on registration.

Immediate Suspension: The VBA will have the power to immediately suspend the registration of a building practitioner on grounds such as insolvency, contravention of a relevant law, misappropriation of funds held on trust and charge or conviction for certain offences.

Dispute management

The Reforms seek to minimise the occurrence and ensure the efficient management of domestic building disputes. The VBA will have the power to appoint a VBA inspector to examine any domestic building work or any aspect of domestic building work that is the subject of a domestic building dispute. VBA inspectors will have the power to issue Rectification Orders (RO) to resolve disputes as to building standards or contractual requirements. A RO can be issued on the spot at site following an inspection or following failure by the parties to reach agreement. A RO can direct the rectification of a defect, remedying of other work, require a consumer to pay money into trust to secure the performance of such work or direct a consumer to make payments to a builder.

A RO will be binding on the parties. Parties may seek review by VCAT of a RO within a specified time period. Judicial review will only be available in limited circumstances, such as where a party considers the VBA acted unlawfully.

Victorian Civil and Administrative Tribunal

As noted above, the types of matters that can be disputed in VCAT will be changed by the Reforms. For example, a disciplinary sanction issued by the VBA may be appealed in VCAT or specific disputes with respect to the issue of ROs may be heard by VCAT.

In addition to these changes, the Reforms will also amend the cost rules applicable in VCAT. VCAT will now be given the power to award costs against a party that has refused to participate, or participate genuinely, in dispute resolution of domestic building matters and also where a determination by VCAT with respect to a disputed RO results in an outcome that is no better for the applicant than the RO itself.

Domestic Building Insurance

The domestic building insurance regime will be changed in two major ways:

  • grounds on which an insurance claim may be made; and
  • relevant thresholds.

Grounds on which an insurance claim may be made

Previously, a claim under domestic building insurance could only be made where the builder was insolvent, dead or had disappeared. The Reforms will include additional grounds on which a claim may be made, as follows:

  • the VBA has certified that a RO has not been complied with;
  • the builder has been suspended (including partially) or deregistered; or
  • the builder is certified as permanently and significantly incapacitated and no substitute arrangements are available.

Relevant thresholds

Domestic building insurance will be mandatory where the contract amount is above $16,000. This amount will be indexed to reflect increases in domestic building costs.
Furthermore, the maximum payout under domestic building insurance will be increased to $300,000.

Going forward

The first raft of changes has been introduced and is operative as of 1 July 2013. These changes largely relate to the establishment of the VBA. Further legislative changes for the total package of reforms are expected to be implemented by July 2014, assuming they are brought before and passed by the Parliament later this year.

As a result of the Reforms, registered building practitioners should be aware of the need to renew their registrations at the end of the registration period, as well as the additional requirements for registration, and building companies may wish to consider applying for registration. Registered building practitioners should be alert to the expanded disciplinary regime under the VBA and the effect of ROs. Builders engaged in domestic building work should also review their insurance arrangements, as products offered by insurers may change after the implementation of the Reforms.