The Victorian domestic building industry is in crisis with disputes at an all-time high coupled with training at rock bottom, creating total misery for the participants of a dispute, and leaving the industry’s reputation and its confidence in tatters.

In Victoria, there is no avenue to settle a dispute other than to enter the legal arena, which is fraught with danger, as the VCAT system has become so expensive it now has the ability to deliver financial ruin to many without satisfactorily resolving the dispute for either party.

The current dispute procedure is determined by the Domestic Building Insurance regime (DBI), better known as Builders Warranty Insurance (BWI). Back in 2002, VCAT was established as a means of self-representation that aimed to deliver cost effective dispute and resolution, but over time this concept has been captured by the legal profession and self-representation is a thing of the past.

This public policy failure has again become the focus of an investigation by the Victorian Auditor General, who will report to the Government this month. Keep in mind that this will be VAGO’s third investigation in this area and if its findings are similar to the 2011 report, we can expect this month’s findings to be more robust, and even more scathing of the regime that has been in place since 2002.

It is also hopeful their findings will expose why such a failed regime has remained in place over such a long period when it has been so blatantly obvious to so many in the industry that this is a failed policy and should have been removed long ago.

The change in 2002 to a Corporations act has enabled secrecy surrounding the performance of the builders warranty regime by those who support and sell the product, and without formal data to measure performance, Government have been loath to remove the controversial product as much scuttlebutt is spread by the supporters in terms of its benefit to consumers and the need for the industry to provide a safety net to consumers.

Those who support the retention of Builders Warranty Insurance are those select few who benefit financially from the regime without considering the consequences to the intended recipients (the consumers), the builders or the industry itself.

It is these few that have successfully stalled every Government attempt to reform the management of our industry and provide consumer protection that most might find acceptable.

This regime has enabled questionable builders to operate freely and without accountability, as is the case for many in the allied professions and those such as non-regulated building consultants and the like.

The era of genuine four-year apprenticeships appears to be lost to the competing registered training organisations (RTOs) that now offer the chance to become a builder for a dollar fee and a number of hours and it appears time on a building site is not a requirement to achieve licensing.

Many long-term builders are openly discouraging our young people from entering into a trade’s qualification in the building industry due to the risks and the draconian regime of Builders Warranty Insurance that sees the builder and his personal assets exposed to the extent he can be financially ruined overnight and his livelihood removed with the stroke of a pen.

Governments have a responsibility to ensure our industry is managed appropriately and they must not abrogate their responsibility to private enterprises that see the industry as a cash cow when elements are mandated.

Governments are beginning to address the issues as the failures are now at extreme levels with confidence at the lowest ebb in the building industry history.

When one considers that the building industry is the barometer of the nation’s fiscal performance, it is hard to believe we can sink to such levels of despair in terms of our consumers and our builders.

While the top volume builders find the current arrangements tolerable, the vast majority of silent registered builders that make up the registrar of builders despair in light of the current circumstances and are unable to speak out for fear of losing their ability to operate.

Governments must find the courage to embrace total reform and the strength to resist the outcry from those who would insist on the status quo that gives them hold over the builders of the industry.

The building industry must be returned to its once proud status, confidence must be restored to the wider industry and our young must be encouraged to enter a profession that was once held in esteem.

Enough is enough!

  • Certainly it does appear that the building regulatory system in Victoria is a mess. Whilst opinions do differ, just about everybody seems to agree that the reforms the former government rushed in without effective consultation of anybody did not materially address fundamental systematic problems.

    With respect, however, the idea that overall confidence within the industry is 'in tatters' – whilst maybe true from a regulatory point of view – does not appear to be quite correct in terms of builders' view of the cyclical outlook for the industry. The most recent Master Builders Association of Victoria showed builder confidence throughout the state at its highest level in almost six years and builder intentions regarding the taking on of apprentices at its highest level since 2011. According to that survey, builder confidence was generally higher in Victoria than it was in most places.

    Confidence in the regulation system may be low, but at least confidence about the outlook is reasonably strong for now.

  • As a consumer battling for justice for almost 8 years, I have nothing but disgust & contempt for the industry, its so called regulator/ watchdog & the legal system. Leaving us with more than $200 000 in defects and non compliance as well as almost $75 000 in missing refunds, our 'builder' was found guilty on 140 + counts by the regulator. His slap on the wrist? His registration cancelled for two years plus pay hearing costs which were approximately 8% of the refunds due to us but never repaid, thanks to 'phoenix' liquidation! Additionally, he was found guilty on two criminal counts in the magistrates court but once again let off on 'good behaviour' bond. Despite the hearing being held early November last year, more than 6 months later, his name still doesn't appear on the regulator's disciplinary register! Very re-assuring for consumers attempting due diligence before RISKING THEIR LIFE SAVINGS to build their dream (nightmare) homes & security for their families. Absolute disgrace & betrayal by regulators and legal systems who time & again soft pedal when it comes to protecting innocent home owners. VCAT archives show we were not his first victims & probably not the last.

  • Phil, you have your finger on the challenge for consumers here. As a builder I find the current drift to industry standards, deemed to comply and in a number of instances engineers not wanting to conclude that a fellow professional's work is wrong very alarming. The situation is aggravated by the differing state jurisdictions who collectively underpin the shamble you describe. Industry associations call for less red tape and resolution but that means as long as their warranty horizons are diminished. Its a race to the bottom.
    Victoria is the worst performer in predictable built quality and accountability in my view. My observation of the work performed and administration of the Victorian Government's role out of the BER schools program offers stark evidence of all these issues. The regulatory authorities are simply out to lunch in their knowledge, governance and resolve to take on those letting the system down. The problem will not be solved by vested interests selling more low value insurance. Its a national problem.

    • David

      I believe you have nailed it in one and we do have a crisis in our industry. I believe you would be interested in the state of the nation at this time. I would ask you to focus on WA as its dispute and resolution method is based on our principle.

      It appears virtually every jurisdiction is struggling with consumer protection in the building industry, and while our trade associations have no desire to change the status quo the current regime is destroying confidence, and the reputation of our industry.

      The Northern Territory is in throes of assessing their regime.

      Victoria is expecting a new Auditor General Report the near future and are considering change.

      New South Wales are about to announce yet another inquiry due to warranty issues in that State. (Inquiry number 55)

      Tasmania rid itself of the Last Resort regime some 6 years ago. Replaced it with nothing and has never looked back.

      Western Australia adopted a new dispute and resolution process, and 80% of their 900 disputes last year were resolved by this process.

      Regards Phil

  • Phil,
    This topic does need airing and fixing. We all know the problems and its shortfalls, but it’s not just about the builder. What about the consumer? In all your articles over many years, you fail to mention that the home warranty scheme cost and liabilities lies directly with builders who fail to complete their project. But in all my time I cannot recall a push or initiative to improve business and commercial skills and monitoring of builders to ensure stringent cost management accountabilities or implementation of consumer protection or monitoring of safeguards. Unfortunately all we hear about is how unfair the system is for builders. In my view we need a broader discussion which focuses on protecting all Australians, and not just builders welfare.
    Sam Greco

    • Yes on the surface you are correct however all my writings and presentations centre around the consumer as it the the Builders Warranty Insurance (BWI) scheme that is the target that we want removed as it manages our industry and if a dispute arises it forces both consumers and builders down the litigation path as the only means of justice/recourse.

      We are all aware of the litigation process and its myriad of lawyers, consultants, and professionals that see each parties costs run into tens of thousands of dollars that far exceed any benefit obtained.

      BWI is the scourge of the building industry as people draw comfort from its being but are unaware it is only available under extreme circumstances.

      "Choice" have described BWI accurately by stating they are JUNK Policies making a mockery of consumer protection.

      We want a regime that genuinely delivers to consumers, a regulator who regulates, and private enterprise removed from consumer protection altogether as their efforts over the past 30 years have failed miserably.

      Regards Phil

  • I would say that most, if not all consumers who take the great leap into building are not aware of the lack of protection they have when making the biggest purchase of their life. We certainly didn't know we were completely unprotected. This may be why the numbers are favourable as far as new construction starting, people either are unaware, or are of the opinion 'it won't happen to me' when they sign the contract. The builders' warranty insurance is not worth the paper it is written on. Sadly this is only discovered once problems appear. How can I build a house and have repair costs come in at more than the contract price was, but I am forced to endure the expensive and lengthy VCAT system, and lengthy and frustrating building practitioners board system just to try and get what I paid for? Almost three years and counting, I doubt I will ever receive the product I signed a contract for. I look forward to the Auditor Generals report being released as I made a submission about my experiences. The big question is will any real reform come of it?

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