If residential building contracts for new homes, units, apartments and home additions are unfair, then the Domestic Building Contracts Act 1995 got it very wrong.
And because new home owners have to fight their builders - first at compulsory conciliation, and then following a less than desirable outcome, in VCAT - over workmanship issues (their basic rights), then the Domestic Building Contracts Act 1995 (DBC Act) needs to change.
The changes needed are so simple, it is hardly believable that they have not been incorporated long ago.
The first and most important thing needed is to define "defect" sufficiently via the implied warranties listed in Section 8 of the DBC Act, so that there can be no doubt as to what all the implied warranties associated with a domestic building contract are. This definition will need to embrace manufacturer minimum requirements, inferior substitutes to what was contracted, and time related issues. This is something the Act fails miserably to do.
Then the status of each defect will be clear. No more arguments.
The scope of works necessary to rectify each defect (as distinct from band-aiding each defect) will also be adequately catered for, because every portion of work carried out will need to be likely to reach a reasonable life expectancy.
We also need to change just one more thing, and with this one more alteration, we will virtually remove the need for home owners to visit VCAT at all, particularly over workmanship issues.
We just need to add a correct definition of specification to embrace workmanship clauses that include the intricate work of each trade - the work that tradespeople need to perform to comply with minimum standards and manufacturers’ minimum requirements. This will ensure everyone knows what has been short-changed or poorly done simply by reading the specification.
Specifications used to be in the realm of architects 30 years ago, but now for over 99 per cent of house projects, that is no longer the case.
Now builders are in control of specifications, and they were sick and tired of being pulled up by architects and owners over what they considered to be trivialities.
These specifications can include a variety of issues. Here are some examples:
- the sub-floor vents in the brickwork are over 1,500 millimetres apart
- there are quite a few timber off-cuts left under the timber floor
- supports are missing under the lead flashings around the chimney
- the brick joints are too fat in several locations
- there is no soil over the rubble in the agricultural drain trench
- the mesh for the front verandah concrete is too close to the formwork
- the top and bottom edges of the front and back doors are not painted or primed
During the 1970s, 1980s and early 1990s, builders were made to supply three full copies of the standard project specifications (including the workmanship detailed small-print clauses), before municipal building surveyors would stamp the permit documents.
The "Painting" section in these specifications in 1977 ran to 67 lines (including headings). In 1985, it was 53 lines. By 2005, it was just 11. Now all you are told is that painters have to carry out their work in a tradesmanlike manner.
The now-missing detailed clauses in Standard Specifications were reduced from about 1982 onwards, because the writers were being pressured to whittle down the detail in the workmanship clauses. Was this done mainly to dumb down home owners, so that builders were no longer pestered?
When building surveyors were privatized and the revised standard building contract appeared in 1993, contracts defined specification as fully describing the materials to be used, without any requirement regarding workmanship. So workmanship clauses continued to dwindle until virtually no specific detailed workmanship clauses remained.
What the signatories to Standard Specifications didn’t realise was that the removal of the detailed clauses that defined difficult work would result in today’s commonplace scenario where inexperienced supervisors unknowingly accept what tradesmen do as ‘standard.’
Shoddy tradesmen are quite happy to short-change materials and skimp over detailed difficult sections of work (but keep it neat), because they have had their hourly rate whittled down by the large-scale builders in exchange for continuous work. The jobs may be completed a little faster, but at enormous cost.
Governments notice that prices are not escalating out of control due to fierce competition between large building firms. Privatized relevant building surveyors and privatized (certifier) building inspectors do their bit by not kicking up a fuss about the poor workmanship or the increased number of mistakes, so as not to slow the works. It’s in effect quasi-cronyism.
How else can you explain the fact that on well over 100 houses built between 1996 and 2006 - houses that I inspected soon after the issue of certificates of occupancy - those houses averaged over $ 80,000 worth of defects in them at today’s prices. More than a handful of those approved houses were lemons with well over $150,000 worth of defects. And all were approved by the supervisors, certifier building inspectors, and astoundingly by building consultants. Lemons, once a rarity in the 1980s, are fairly commonplace today.
Builders only like changes that free up their world. The two minor changes to the Domestic Building Contracts Act proposed here will do more than that. They will save builders billions of dollars each year in Victoria alone; they just don’t realise it.
And these changes will only require builders to change one thing. They will only need to improve their supervision to what it was 30 years ago. We need to get the message out there.
This one change by builders will virtually stop disputes over poor workmanship and inferior substitutes, saving Victorian builders most of what they spend fighting their home owner clients each year. These are savings in the order of an estimated $2.5 billion (having deducted the cost of improved supervision). This amount is just a little less than the amount paid by home owners fighting for what they perceive is their right to have their defect-riddled homes brought to a reasonable standard.
For the Victorian Building Industry alone, that’s a total savings of $5.5 billion dollars per year - money that could be put to good use elsewhere.
Recent compulsory conciliation reforms are simply going to put off even more home owners than did its predecessor, the BACV, causing more defect-riddled homes to be left in a decrepit state. The change requiring owners (not the builders) to employ relevant building surveyors seems very likely not to advantage home owners if the builders tell their clients that their price is conditional on getting their preferred building surveyors.
Without these minor changes, defects in new dwellings will be left to create considerable future damage to the economy - something governments have not given much thought to.
Governments will have seen a ‘band-aid’ industry spring up and marvel at all the extra work created in the building industry. But along with the enormous dispute costs, it may virtually double the price of housing, and we simply cannot afford that.
One could argue that these changes will give new home owners too much knowledge (which has denied them for decades) and that this will make life inordinately more difficult for builders.
But the experienced supervision will actually give owners more faith in their builders. And we shouldn’t forget that it is the duty of every builder to supervise to the extent necessary to ensure that defects are not built into their homes.
And think of the advantages: by increasing experienced supervision at critical stages, defects will not be covered over by subsequent layers, which compounds those defects (from cheap or free to redo at the time) into issues that are quite expensive tasks to rectify later.
If builder associations would get their collective heads around these two simple changes, it would become very clear that from then on, builders would be far better off, because disputes on workmanship would no longer be necessary.
Even for existing disputes, builders would still be better off rectifying their clients’ houses - as opposed to band-aiding them - than they would be paying the enormous fees charged by their negating experts and negating lawyers.
Talk about great for the economy.
And talk about an enormous benefit to the community with the virtual removal of disputes over poor workmanship and alternative solutions. There would also be much less wastage of materials, increasing the building industry’s overall sustainability.
Once this message has sunk in; why would anyone besides negating lawyers, negating building consultants, and band-aid specialists want it any other way?
These are two crucial reforms for new home owners and builders. It’s a win-win situation.
Let’s make it happen before thousands more home owners and builders get hurt.