We continually hear Australian Federal and State Governments stating how important it is to protect banks and protect private enterprise. Big business and the rich seem to have been extremely well protected for as long as I can remember as the gulf between rich and poor continually widens.
Recently small businesses were granted useful concessions for depreciating assets.
Yet despite these protections, many small businesses, and certainly sub-contractors, are not well protected in their contractual arrangements.
To achieve the protections thought necessary for business, governments have used hidden agendas including:
- The fewer consumer rights, the better
- The looser the rules, the better
- The fewer protection laws, the better
- The fewer official whistle blowers, the better
- The less auditing of business, the better
This is particularly true for the largest industry in the economy: the building industry.
But many small businesses are not being well looked after, because a substantial number of bigger building companies are holding back payment from their sub-contractors well past contracted time limits.
Based on what was revealed in the 2015 Senate Inquiry into Construction Industry Insolvency and recently by The Invoice Market, the amount held back for excessive times from sub-contractors at any given moment is at least $15.4 billion (close to $3 billion of which never gets paid). This is because more than 2,000 struggling building companies go into liquidation each year. That’s a way-too-high risk rate of nearly 20 per cent!
So why not simply require that all contracting businesses be audited more often or put money into trust funds to short-circuit most bankruptcies?
It would be so beneficial to so many businesses, not to mention consumers.
Governments have allowed the average excess in payment times to increase from 30 days to 50 days in a decade, and yet have not done anything to halt it -perhaps to be seen as not over-regulating enterprise?
After the 2003 Cole Royal Commission, state governments instituted the Security of Payment Acts to help smaller businesses combat this problem. Unfortunately, desperate sub-contractors are loath to employ these acts for fear of being black-listed and the large costs.
The result is that large building firms (quite often passing on the withholding of payment by their own clients) hold money back for unreasonable periods of time, just because they can. The higher up the chain you go, the easier it seems to be to break the rules.
In the residential building industry in 2014, about $3 billion was spent by new home owners in pursuing their builders, each attempting to make their builder rectify defects built into their homes.
I contend that at least an additional $3 billion was also spent by the aforementioned new home builders, in negating their ‘once valued’ home owner clients. I can only imagine that this was because these builders were (wrongly) advised by their solicitors that it would be a substantially more economical path to take with the motto ‘fight, and to hell with rectifying’ the defects they failed to stop being built into their homes.
Many such fights occur in VCAT (the forum for unfairnesses being played out to their bitter end) provided you get past the Victorian Government’s latest initiative: a compulsory first stop for disputes called conciliation. This step was introduced, it seems, solely to try to put off home owners going to VCAT at all.
What they are also creating is thousands of new homes with an array of defects waiting to fail prematurely and cost each of their owners thousands of dollars, courtesy of builders band-aiding instead of rectifying the defects.
The government’s motto to ‘expedite’ disputes (or simply make them go away for daring to attack businesses) works courtesy of just a few critical dumbing-down measures worked into the legislation, codes and standards.
Most VCAT results are also accompanied by ‘the deathly silence’ (gag orders) associated with any deal eventually accepted by home owners who didn’t win outright (well over 95 per cent of them in fact). And so the vast majority of outcomes are kept secret – even the favourable ‘wins’ because of wrong legal advice that it is more economical to bluff and fight.
And all of these disputes could have been simplified so much, if the residential building industry had not been dumbed down by just a few (I contend carefully considered) distortions:
- inadequate standard building contract definitions of defect and specification
- an incomplete definition of defective work in the Domestic Building Contracts Act
- a series of Codes for the Inspection of Buildings (AS4349) that makes a total of six separate attempts at definitions of various grades of defect. Even all together, they do not give the slightest hint of what a defect actually is as regards a new under-warranty home.
The result is that hardly any building consultant or building supervisor or certifier building inspector seems to know, what a defect actually is, what the difference between band-aiding and rectification is, or what maintenance consists of. This is because they do not even realize that the re-doing of a short-cut the same way (after it had already failed in a short period of time) is actually a band-aid.
The whole concept of time (the requirement that each component of building work is built so that it is able to reach a reasonable life expectancy) has been totally ignored by Victorian Government legislation and in Building and Consumer Authority publications. All have publicly failed to adequately define the word ‘defect.’
The reason that larger building companies have ‘maintenance’ teams is that it’s cheaper to band-aid the symptom of the underlying defect (even several times), than it is to actually rectify the defect. It gives a dumbed-down public the impression that builders care, when quite the opposite is closer to the truth.
That is what I call dumbing down. Hardly anyone knows what a defect actually is, and yet that is what virtually every dispute in the residential building industry is about.
Rather than create a fair playing field where everyone has a clear idea of what a defect actually is, governments have deliberately dumbed us down in order to protect enterprise, and at such an enormous cost to the community.
If there was a correct definition of defect and builders simply rectified what they stuffed up instead of fighting their clients, builders would end up financially better off.
What’s more, this dumbing down is increased further by the aforementioned codes stating that a series of ludicrous disclaimers are reasonable for building consultants to adhere to in the name of safety and reasonable access. These disclaimers virtually preclude building consultants actually getting to the locations where so many defects have been built into the homes they are ‘inspecting’ and these undiscovered defects will cause great future detriment, even economic blight.
It is imperative that consultants (where it is reasonably possible), carefully get inside and around the bulk of the roof space, get on and walk around on the roof and get under timber floors where clearances of 400 millimetres (not 600 millimetres) exist, or the structure of the house cannot be adequately reported on.
Since the public whistle blowing by the Auditor General and the Ombudsman (during 2011-13), both of whom were sacked soon after exposing as a total farce domestic building warranty insurance (DBI) and builder registration, there has been no urgent pressure by their successors, despite the problems continuing unabated since their predecessors’ revelations. Expect less criticism of general failures in the industry from now on.
And so the dumbing-down process continues.
As regards the so-called consumer protection authorities Consumer Affairs, the BPB, the VBA (and the Building Commission before it), it might actually have been better (for building consumers as regards building disputes), if they had never existed.
Home owners have for years been seriously dumbed down, led astray by the advice given by the authorities, and sworn to silence about their results in VCAT.
Would-be home owners, when signing contracts for new homes, will not be informed as to most of the possible pitfalls associated with building their dream homes.
And those who end up with many defects in their new homes will not be told that to win a dispute they must avoid the authorities and first obtain the services of an expert building consultant with a full definition of defect.
And building consumers will not be told that most will fail in their attempts to have the defects in their homes properly repaired because their building consultant had an inadequate definition of defect and because of this was not expert.
It’s outrageous that our governments and building authorities have done this to the Australian public.