Property 101: Changes to Victorian residential building legislation

The Building Legislation Amendment (Consumer Protection) Act 2016(the Act) which was passed by the Victorian Government on 19 April 2016 imposes sweeping reforms in respect to a number of significant areas affecting residential construction in Victoria.

By reason of a Proclamation published in the Victoria Government Gazette No. S 194 dated 21 June 2016, certain sections of the Act are to commence and ‘become live’ on 4 July this year.

While the purpose of the Act is to strengthen consumer protection and improve the regulation of the residential building industry, it is quite clear that the Act and its operation will dramatically affect the manner in which builders go about their business and how they are accountable and operate within the legislative system. It will also dramatically change the way in which home owners, whether on private stand-alone titles of land or within Owners Corporations, make claims for defective and incomplete work.

The most significant provisions of the Act intend to:

• Improve conciliation of domestic building disputes;
• Enable the issue of dispute resolution orders;
• Improve information provisions for consumers;
• Strengthen registration requirements;
• Improve discipline of building practitioners;
• Provide additional powers to Building Surveyors and the Victorian Building Authority (the VBA)
• Direct builders to fix non-compliant building works;
• Increase the regulation of owner-builders; and
• Ensure greater oversight of building works.

The 4th of July 2016

The first tranche of changes are small in number but have a punch. The main changes which will commence on 4 July 2016 are as follows:

1. Investigations of owner-builders

Section 35 and 36 of the Act amend sections 227B and 227C(3) of the Building Act 1993 (“Building Act”) to close an apparent loophole where builders were purportedly using owner-builder provisions of the Building Act to avoid regulation and registration requirements.

The amendments to these section now enables a performance auditor appointed by the VBA to examine work carried out by an owner-builder including whether it has been carried out competently, whether it poses a risk of injury or damage and to ensure the work of an owner-builder complies with the Building Act and its regulations.

2. Building Surveyors and related persons

Section 39 of the Act amends section 79 of the Building Act to now restrict Building Surveyors from carrying out any functions in relation to which a “related person” has a conflict of interest. The introduction of a related person includes any partner in a partnership, any fellow directors or body corporates of which the Building Surveyor is a director and or any employer or employee. Building Surveyors will therefore need to be more aware of their surroundings.

3. New Directions to Fix Work

Section 49 of the Act substitutes sections 37 to 37K of the Building Act and introduces powers for the VBA and Building Surveyors, including Municipal and Relevant Building Surveyors and other authorised persons, for example a Plumbing Inspector, to issue directions to builders to “fix” building works.

A direction may be oral or written. If oral it can be given to the builder or the “person who is apparently in charge of the site”. A direction will require compliance within any prescribed timeframe and otherwise within 7 days.

A direction can be to carry out works, so that building works wholly or substantially comply with the Building Act, whatever substantially may mean, and or to stop works.

A builder can apply to extend the time for compliance and there is a right of appeal in respect to a direction to the Building Appeals Board. Non-compliance with a written direction is an offence with a maximum penalty in the vicinity of $75,500.

Section 51, which inserts a new section 118A into the Building Act, restricts a Building Surveyor from issuing a Building Notice, unless a direction to fix has been previously issued and it is clear that it will not be complied with, or it is not possible or appropriate to give a direction.

4. Further Regulations for Owners

Section 44 of the Act amends section 16 of the Building Act and imposes new offences against a person who carries out work without a Building Permit having been issued.

The amendments make it an offence for an “owner of land to permit building works to be carried out” without a Building Permit. The penalties are high; for a person – a maximum of 500 penalty units which equates to the approximate value of $75,500 and for a body corporate - a maximum of 2500 penalty units or approximately $377,000.

Penalties will not apply to an owner if they have engaged a building practitioner or an architect to carry out the work.

Section 45 of the Act also amends section 24A of the Building Actincreasing the value of works from $12,000 to $16,000 in respect to the consideration to be made by a Building Surveyor for issuing a permit for owner- builder works.

5. A new Checklist

Section 47 inserts a new section 30A and 30B into the Building Actand will require Building Surveyors to comply with and tick off a checklist of documents to be provided to the Council and also certify compliance such documents have been provided to Council. The details of the checklist are not yet known, but a failure to do so carries a financial penalty for Building Surveyors.

6. Undertakings

Section 54 inserts a new Division 2A into the Building Act and introduces the concept of builders providing a written undertaking to the VBA to do or not do something further or again.  A subsequent failure to comply with an undertaking will expose the builder to the VBA making an application for a court order to comply with the undertakings or pay money for a failure to comply. Any undertakings given will be maintained in a register and perhaps surprisingly, the register “may be inspected by any person at any reasonable time, without charge”.

Other reforms yet to come

Other significant legislative reforms set out in the Act which are expected to commence operation later this year, and at the latest by 1 July 2017, are more dramatic.

Domestic Building Dispute Resolution Victoria (DBDRV)

These include the establishment of the Domestic Building Dispute Resolution Victoria (DBDRV) and a new dispute resolution system. A party to a “domestic building work dispute” will need to make an application to DBDRV before any form of application can be made to the Victorian Civil and Administrative Tribunal (VCAT) or the Courts.

DBDRV once created, is intended to be the first stop for all “domestic building work disputes” which includes any dispute between an owner, a builder, a building practitioner, a subcontractor or an architect in relation to a “domestic building work matter”.

A domestic building work matter can include for example, a claim for a breach of a warranty set out in section 8 of the Domestic Building Contracts Act 1995, a failure to maintain the standard required of building works in a contract and or an alleged failure to pay money.

DBDRV will provide a conciliation service which may include the facilitation of without prejudice communications by a conciliation officer. Broad powers will come into force and penalties are available for non-participation.

The chief dispute resolution officer of DBDRV will also be given significant powers including to:

• issue a stop works notice;
• appoint an assessor to assess the domestic building work and to report on whether the work is defective and or incomplete;
• issue a dispute resolution order requiring the builder to complete or rectify building work;  or
• order an owner or builder to pay money.

Conciliation will be mandatory for parties before an application to VCAT or the Courts can be made.

Regulation of building work and building practitioners

The Building Practitioners Board will be abolished and its regulation and disciplinary functions will be transferred to the VBA which will become responsible for the regulation, registration and discipline of building practitioners.

Registration of building practitioners

The registration system for Builders will be ramped up and the previous test of “good character” will be replaced with a “fit and proper person” test. Registration will also be limited to a period up to 5 years, at which time a building practitioner will be required to make an application for renewal.

New disciplinary processes and sanctions

A streamlined disciplinary process will be introduced. If the VBA reasonably believes there are grounds for taking action against a practitioner and proposes to take action, the VBA will issue a ‘show cause’ notice which will invite the practitioner to respond and explain why the disciplinary action should not be taken.

The VBA will also be given increased flexibility to impose sanctions including the power to suspend or partially suspend registrations. Practitioners’ rights are said to be safeguarded via a right of review to the VBA, followed by VCAT.

The engagement of Building Surveyors

The current system will change and will include a prohibition against a builder appointing a private Building Surveyor on behalf of an owner in relation to domestic building work. The owner will be required to do so instead.

Conclusion

Whether the intended changes will assist builders and owners avoiding disputes and reaching resolutions in building disputes in a more timely and costs effective manner is yet to be seen. What appears clear, however, is the proposed changes will introduce more cogs into ‘the system’, and most likely bring with it more litigation, not less.

Andrew Whitelaw, is partner and Melanie Hogg is solicitor Tress Cox Lawyers. They can be contacted here.