The Victorian government is currently proposing to make extensive amendments to the Building Act 1993 (Building Act) and the Domestic Building Contracts Act 1995 (DBCA).  The amendments are largely intended to improve consumer protection and relate to the following key issues:  

  • Registration requirements of builders   
  • Enabling the Victorian Building Authority to issue rectification orders in respect of defective or incomplete works  
  • Establishment of a new Domestic Building Consumer Protection Fund to replace the existing insurance scheme.  

It is anticipated the legislation will be passed in Spring 2014 to allow the government the opportunity to make what is understood to be some fine tuning amendments after further industry consultation.

Building Practitioner Registration Requirements

The registration requirements for all registered building practitioners will change.  In addition to the usual prescribed qualifications, skills and experience, after a transitional period, building practitioners will be required to satisfy:   

  • personal probity or 'good character' test, which will involve consideration of whether the person has been convicted of a relevant offence or relevant breach and will also take into account any disciplinary action taken against the practitioner; and     
  • financial probity test, which will consider issues like insolvency, failure to pay penalties or fines, or instances where that practitioner has had his/her insurance or fund cover declined or cancelled.    

All currently registered building practitioners will be "grandfathered' across to the new registration system without having to satisfy the new financial and personal probity tests.  New applicants for registration after 1 July 2014 will need to satisfy the new tests.

At present, once a building practitioner is registered, that registration will continue unless cancelled in accordance with the Building Act.  The new amendments will require that practitioners be registered for no more than five (5) years before renewal is required.  Providing for a periodic registration process is intended to also allow the VBA to require registered building practitioners to demonstrate ongoing competence, as part of the renewal of registration assessment process.  This is intended to give consumers greater confidence that registered building practitioners of Victoria are highly skilled and up to date with all building standards.

Victorian Building Authority

Various bodies including the Building Advisory Council, Building Appeals Board and the Plumbing Advisory Council will be abolished under the new legislation. The amendments will make the Victorian Building Authority (VBA) a "truly integrated regulator" for the building sector with the transfer of the powers and functions of the abovementioned bodies to the VBA.

Referral of Domestic Building Work Disputes and Rectification Orders

A new section 45 under the Domestic Building Contracts Act 1995 will entitle a party to a domestic building contract to refer a dispute to the VBA. As part of the dispute resolution process, the VBA will have the ability to issue a rectification order which may require the person to whom it is issued to:  

  • rectify defective building works;   
  • refrain from doing anything that would prevent or restrict another party (to the domestic building work dispute) from satisfying a term or condition of the domestic building contract;  
  • complete incomplete work; and/or   
  • pay money into trust or to any person (such as a building practitioner) on account of building works completed or to be completed.  

Where building work is so defective that the VBA considers it will not be reasonable to require a consumer to have the original builder back, there will be capacity for a rectification order to have rectification works be performed by an alternate builder with the original builder to meet the cost.

Rectification orders will also be able to contain a finding that work is not defective or incomplete, and that a building owner therefore has no grounds for withholding payment from a building practitioner on the grounds of defective or incomplete work.

Parties will be able to seek a review of such a decision, both internally at the VBA and subsequently at VCAT.

If a builder fails to comply with a rectification order they will be subject to disciplinary action by the VBA and the building owner will be able to terminate the domestic building contract and seek damages.  If a building owner is subject to a requirement under a rectification order and fails to comply, the builder may cancel the contract and seek damages against the building owner, including payment of any amount ordered to be paid under the rectification order.  

Domestic Building Consumer Protection Fund

The amendments to the Building Act establish the Domestic Building Consumer Protection Fund (Fund) which will replace the current Domestic Builder's Warranty Insurance Scheme from 1 July 2015.  The Fund will be centrally administered and will provide coverage to major domestic building contracts with a value greater than $16,000.

The Fund broadens the scope to make a claim with eligibility to make a claim against the Fund  triggered whenever the works are incomplete or defective and:  

  • the builder (or building entity) has died, disappeared or is insolvent; or  
  • a rectification order has not been complied with and the building contract has been completed or terminated; or  
  • the builder has been deregistered or suspended; or   
  • the builder is permanently incapacitated and therefore cannot undertake rectification works.  

The Fund will cover losses relating to the building work where the builder did not obtain the required coverage. The time bar on claims will mirror existing time limits - a claim may be made within two years after completion for non-structural defects and six years for structural defects.  Initially the fund will be managed by the Victorian Managed Insurance Authority, however after one year it is intended to be administered by the VBA.