Recent changes to construction licensing requirements in Queensland should provide welcome relief from the unintended regulatory complications caused by section 42 of the Queensland Building Services Authority Act. [1]

The issue with section 42

Prior to recent amendments, the Queensland Building Services Authority Act 1991 (now the Queensland Building and Construction Commission Act 1991 or QBCC Act) required any contracting party who agreed to carry out or undertake to carry out “building work” (as defined in the Act) to hold a building licence. This effectively imposed an often unnecessary regulatory burden on certain parties, in particular developers, who were required to be licensed even where they engaged licensed building contractors to perform the actual building work.

The new exceptions to section 42

As of 1 December 2013, amendments to Schedule 1A of the QBCC Act remedy this situation by expanding the exceptions to the requirement to hold a building license. Provided the building work is entirely contracted to an appropriately licensed builder, specific exceptions now exist for:

  • head contractors (including developers);
  • tenderers;
  • special purpose vehicles established for PPPs; and
  • persons who tender for or contract to carry out building work for prescribed government projects.

This amendment removes the requirement for developers not engaged in performing actual building work to be licensed unnecessarily. Importantly, these exceptions relate only to commercial building work.

Caution still required

The new exceptions will not apply if a party "causes or allowsany of the building work to be carried out by a person who is not licensed to carry out building work of the relevant class".

The implications of this are twofold. First, it imports a responsibility on the head contractor/developer to ensure a licensed contractor carries out the relevant building work. Second, care must be taken that the work performed by any party who does not hold a license does not fall within the broad definition of 'carrying out of building work' under the QBCC Act, which includes the provision of 'building work services' (namely administrative, advisory, management and supervisory services). 

Concept of ‘special purpose vehicle’ and limits on retention money and security

The QBCC Act also now recognises the concept of a ‘special purpose vehicle’ (SPV), being an entity established for the purpose of carrying out a public-private partnership and declared by the Queensland Treasurer to be an SPV.

In addition to relief from the licensing requirements of section 42 of the Act, the recent amendments change the limits on retention money/security applicable to security provided under a contract to which an SPV is a party.

Under section 67K the QBBC Act, retention amounts and securities for building contracts other than subcontracts are limited to 5% of the contract price. Parties can, however, contract out of this limit by express provisions in the contract.

Section 67L limits the retention amounts and securities for subcontracts to 5% of the contract price for the subcontract.  Parties cannot contract out of this limit. 

The Amending Act provides that the section 67K limit applies to contracts involving an SPV and expressly states that section 67L does not apply to a subcontract if the contracting party is an SPV.