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Significant Building Legislative Change is on the way

Newsflash 29 February 2016

In December 2015, the Victorian State Government introduced the Building Legislative Amendment (Consumer Protection) Bill 2015 into Parliament which seeks to significantly alter aspects of the Building Act 1993, the Domestic Building Contracts Act 1995, provisions affecting VCAT, the Building Practitioners Board, building contracts and the resolution of building disputes.

This Bill is not to be confused with The Building Legislation Amendment Bill 2014 which was introduced by the previous government but failed to get off the ground. That said, there are many similarities in the two pieces of proposed legislation.

The new Bill also proposes sweeping reforms in respect to a number of significant areas of practice affecting residential construction in Victoria. It also will affect the manner in which Builders are accountable and operate within the legislative system.

The Explanatory Memorandum which accompanied the Bill states the key reforms are, amongst others:

  • 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 (VBA) to direct Builders to fix non-compliant building works; and
  • Ensure greater oversight of building works.

Each of these areas will have a profound impact on residential builders and owners entering into contracts with Builders and also the rights and obligations of builders and owners (including Owners Corporations) in respect to defective works claims and other areas of potential disputation.

The Bill contemplates the establishment of ‘Domestic Building Dispute Resolution Victoria’ to deal with dispute resolution between an owner, a builder, a building practitioner, subcontractor or architect in relation to domestic building work. The concept is to provide parties to a dispute with “greater incentives to resolve disputes earlier and more costs effectively”. It appears this may include the introduction of several large sticks to whack builders as a method of conciliation.

If the Bill becomes law it proposes:

  • The registration system for Builders being ramped up and the pervious test of “good character” will be replaced with a “fit and proper person” test. The VBA will be able to impose conditions on registration it thinks appropriate. Registration will be for a period up to 5 years at which time an application for ongoing registration will be required to be made;
  • A new Code of Conduct for Building Practitioners is to be introduced;
  • New disciplinary action is to be imposed, including on Builder’s whose license may have been suspended. This may include the introduction of a ‘show cause’ notice system against builder if the VBA believes there are grounds for taking disciplinary action against a builder;
  • A builder may also receive a reprimand, a direction to “do a specified thing” including to rectify or complete specified building works or complete a specified course in addition to a financial penalty or the variation of a condition of registration; and
  • A licence can be suspended, cancelled or disqualified.

There are also proposed changes which will allow Building Surveyors to give directions in relation to building works and ensure various orders are more effective processed and followed.

The Building Practitioners Board will also become defunct with its functions transferred to the VBA.

There are also significant changes proposed to the consumer side of disputes.

A party to a domestic building dispute, which includes the traditional disputes relating to contracts, payments, defects and the like, may, as an alternative to issuing proceedings in VCAT, refer the dispute to the chief dispute resolution officer. This may lead to the appointment of a conciliation officer to make an initial assessment to determine the nature of the dispute and whether the referral ought to be accepted and dealt with. This officer may make enquires, ask for information and require a party to “give evidence”. If the referral of the dispute is to proceed, a further decision may be made to refer the dispute for conciliation which at this stage seems to be a form of without prejudice meeting. There are proposed powers for non compliance with this process. Sections of the Act also deal with the appointment of an ‘assessor’ in certain circumstances who will have a right to gain automatic access to properties in certain cases, make further enquiries and provide a report with recommendations - the red tape is getting longer and thicker.

The powers given to the chief dispute resolution officer, the conciliation officer and the assessor are already considered by some as being too far reaching; including the power to make an order requiring a builder to take action, including to rectify defective works, or complete building works, and or the power to force an owner to pay money.

There is already much debate about a number of these proposed provisions, their practical application and the appeals and litigation which may result from the same. What the Bill seeks to do is shake up the current system for builders, and introduce an alternative beefed up dispute resolution mechanism. Whether the proposed changes will assist builders and owners in resolution of disputes is yet to be seen but I expect this Bill brings with it more litigation, not less.

The Bill had its Second Reading Speech on 11 February 2016 and is likely to be proclaimed an Act in the very near future.


Andrew Whitelaw, Partner
Melbourne

Newsflash 29 February 2016
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