After a 2 year review and consultation process, the Victorian government has introduced to parliament the most significant changes to the building industry since the Building Act in 1993 and the Domestic Building Contracts Act in 1995. Anyone practising in this area must be aware of these fundamental changes.

The Building Legislation Amendment Bill 2014 passed its First Reading on 6 May 2014, with the Second Reading on 8 May.  It is anticipated that some parts of the Bill will commence operation on 1 July 2014, and others on 1 July 2015 (Press Release 7.4.14).  In summary the changes include:

Changes to statutory bodies

  • Architects will be brought under the control and regulation of the Victorian Building Authority (VBA), with the abolition of the Architects Registration Board
  • The abolition of the Building Appeals Board with, inter alia, its protection works functions being referred to the VBA and its technical decisions being referred to a new Technical Advisory Committee (TAC)
  • The abolition of the Building Practitioners Board with its disciplinary functions being referred to VBA
  • Appeal rights to VCAT
  • The abolition of the Building Regulations Advisory Committee
  • The abolition of the Building Advisory Council and the Plumbing Advisory Council
  • There will be transitional provisions so that the BAB and the BPB will continue to hear matters currently before them

Increased role of Victorian Building Authority

 

  • For consumers, the VBA will have a much enlarged and integrated role:

“from responding to consumer complaints, to providing cover if a builder defaults through to deregistering dodgy builders” (Press Release 7.4.14).

  • For builders, the VBA will both manage their registration and the coverage for their projects – meaning they do not have to satisfy both an insurer and a regulator.
  • The VBA will have a detailed claims handling and assessment process, including powers to:
  • There are rights of appeal from decisions of the VBA to VCAT
    • order conciliation
    • inspect and provide reports
    • issue stop work notices
    • issue rectification orders
    • order payment of monies by an owner into a trust fund pending resolution of the dispute
    • provide certification as a pre-requisite to claims being be made to an insurer or the new Fund 

A centrally administered Consumer Protection Fund

  • The private insurance scheme in place since 1998 will be abolished and replaced with a Consumer Protection Fund from 1 July 2015
  • the Fund will be administered by VMIA for the first year, then the administration will be transferred to the VBA
  • the Fund will provide indemnity for up to $300,000 instead of the current $200,000
  • The Fund may still accept claims even if a builder has failed to register the job with it (solving one of the major problems of the present scheme where many consumers find themselves without insurance because of a builder’s deception)
  • It will apply to domestic building contracts with a contract price of $16,000 or more (currently $12,000) and to owner-builder works with a value of $16,000 or more (currently $12,000)
  • Indemnity will be extended from the present events of the builder or owner-builder being dead, disappeared or insolvent (DDI)
  • The new triggers for domestic building contracts will be a certification from the VBA as to the occurrence of one of the following events:
    • if a rectification order has been issued and not complied with and the domestic building contract has been completed or terminated; or
    • if the builder’s registration has been wholly suspended or cancelled or suspended to the extent that the builder cannot lawfully complete or rectify the building work; or
    • if the builder is a natural person, the builder is permanently incapacitated to the extent that he/she is unable to complete or rectify the building work within 30 days and no arrangements have been made for another appropriately qualified builder to carry out the works on his/her behalf; or
    • if the builder is a body corporate, the director who is a registered builder is permanently incapacitated to the extent that he/she is unable to complete or rectify the building work within 30 days and no arrangements have been made for another appropriately qualified builder to carry out the works on his/her behalf.
  • Similar new triggers will also apply for owner-builder works if the owner-builder was also a registered builder (except that no rectification order process will be available).
  • Note that it is anticipated that the new triggers will also apply to insurance policies issued from 1 July 2014 and a new Ministerial Order in relation to Domestic Building Insurance will be implemented to amend the 2003 MO

Conclusion

  • Readers with long memories may be thinking that the new system is reminiscent of the Housing Guarantee Fund scheme.  The Attorney is to be congratulated on listening to the many submissions recommending the HGF model (including the Bar’s own submission, available on the Bar website).
  • Of course the Bill throws up many questions and there will undoubtedly be potential issues to be resolved.
  • One such example is that a dispute may be referred to the VBA up to 10 years from the completion of a job. That may well contradict the anticipated rulings in relation to time limits under s.134 of the Building Act currently before the Supreme Court.

Nevertheless it is this author’s view that the reforms are long overdue and will be a major improvement for consumers.  It is crucial that the VBA employ appropriate resources and competent staff to implement them.