How to Make Victoria Building Disputes Fair 7

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Tuesday, March 15th, 2016
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The writers of the Building Act 1993 and the Domestic Building Contracts Act 1995 planted the seeds for a gross lack of protection for home owners (and builders), and should hang their heads in shame for not making VCAT a much fairer playing field.

Now the writers – perhaps even the same ones – are attempting to cure the problem they created by over-legislating, when a few basic tweaks would work so much better. Are there too many legal people and not enough caring thinkers?

The BACV and Consumer Affairs worsened the dispute situation for many home owners by luring them into mediations when they didn’t have the power to enforce what they advised.

Now such mediations (outside VCAT) are soon to be made compulsory via the recently tabled Building Legislation Amendment (Consumer Protection) Bill. Another level of (so-called) protection to consumers has been added which the government claims will further expedite disputes that the current legislation was already supposed to. But the decisions of the proposed conciliators (who are immune from prosecution) can also be ignored, because they also have no power of enforcement. So it cannot cure the trauma.

The optional BACV is to be replaced by compulsory conciliation…with costs!

These proposed more repressive changes regarding disputes are not just an extra hurdle for homeowners; they will also slow down and deter actions headed straight for VCAT. The reports of each side’s expert will be presided over in mediation by a so-called independent (government-employed) conciliator who may, but is not required by statute to, be expert in building matters, let alone required to have a definition of defect. And his/her decision will be made whilst removing both experts from further participation in the mediation; which will unfairly pressure building consultant-client relationships.

If home owners with defect-riddled homes (in Victoria at least) just knew that their best chance was to avoid building and consumer authorities, but to go straight to VCAT with a real expert, a lot of heartache and considerable costs may have been avoided for a large number of them and many builders too.

This is all complicated by the fear factor, where authorities all say “avoid a hearing in VCAT because of the large associated costs.” For those with a poor case and/or those with an inexpert building consultant, I fully agree.

But the alternative easier paths, where homeowners first take their woes to the authorities, have not stopped the ever increasing trauma where home owners paid out over $3 billion in 2014 alone. Several VAGO reports by the Auditor General have detailed this fiasco. Many builders who fought these clients also paid a small fortune.

Adding to building consumer woes, those authorities with the power to remove gross offenders chose not to act. The Victorian Building Authority (there because its predecessor the Building Commission was disbanded due to corruption), and the Building Practitioners Board (soon to be removed) both failed to de-register building surveyors guilty of gross breaches of regulations and builders guilty of breaching regulations or building abysmal quality homes.

Building surveyors should be answerable to home owners, not builders, thus removing a potential conflict of interest. If this is to be made law, that’s excellent news!

The authorities may have taken no action because of an unwritten over-riding government tenet that business must be protected at all costs.

Builders and insurers simply fight because most home owners give up. But negating still costs a lot, and results in a blight of homes left full of defects.

Most building consultants sent out by the authorities to mediate a solution have no definition of defect, and they only look at those alleged defects the owners come up with (quite a small list when compared to what a building consultant with few disclaimers and a full definition of defect would discover).

Homeowners’ building consultants are often so inept in defining defect (and have so many disclaimers) that they very often find less than 30 per cent of the actual defects in new homes, units and additions, making it very difficult to win costs, even if they win arguments. This is because of one of the three VCAT Act 1998 requirements that for costs to be awarded to the successful party: ‘the amount of damages awarded must be substantial.’

The most common scenario is where neither side has a building consultant that you could call expert, and so the homeowner’s (so-called) expert fails to cut through all the nonsense thrown at them by the negating (so-called) expert, in the process failing to expose the negator’s distortions of the word defect.

That’s how simple it is, but to date virtually nobody has listened:

  1. The builders don’t listen because simple negation will not work
  2. The building consultants don’t listen because they must admit they were inept to their past clients
  3. The authorities don’t listen because they won’t risk infuriating governments by harming even those businesses which play a major role in serious breaches of regulations or build lemons.

With just two tweaks to The Domestic Building Contracts Act and The Building Act, fairness would reign in mediations and VCAT almost immediately. Those two tweaks are:

  1. A proper and full definition of defect
  2. A full definition of specification to force the inclusion of a comprehensive set of workmanship clauses

All that is needed is for a handful of building consultant experts (with a full definition of defect) to represent a dozen or so homeowners with lemons is owners who are determined to go the whole distance in VCAT without accepting any gags, so that their poor quality builders are named and shamed.

Almost immediately, to avoid being found guilty of gross distortions, the negators would have to advise their builders that they must basically agree with correctly alleged lists of defects at mediation, plus agree to rectify (instead of band-aid) those defects. The result: no more negating!

Builders would then realize that they have to supervise properly with an experienced eye (many for the first time in decades) and good quality would rapidly return to the residential building industry.

Homeowners want to trust their builders. So let’s make it happen.

This defect definition scenario is so simple that it would result in lower priced new homes despite the more costly experienced-eye supervision, because there would be far fewer defects in their houses.

The legal costs would be vastly reduced for many homeowners and builders, resulting in more savings to builders generally, and the trauma would virtually cease.

You need only look at the different current definitions of defect to realise that an unfair level of protection has been afforded to builders by default, at the expense of most homeowners and often their builders. Talk about a gross lack of caring throughout the industry.

All current definitions are severely under-stated, with most (including the Domestic Building Contracts Act 1995 section 8) failing to mention the inherent right that ‘what is installed must last as long as can reasonably be expected.’ For new homes, the six definitions in the Codes for Building Inspections AS4349- 0 and 1 are pathetic. The writers seemed more interested in creating disclaimers.

The VBA (which already has a history of inaction) will soon be the only authority that can act. Let’s hope that from now on, the VBA will now rid the industry of past gross offenders who are still operating despite the trauma they caused, and of future gross offenders, without multiple cautions. Otherwise, new homeowners will continue to be hung out to dry.

Our abysmal system must change regarding disputes, but not as proposed.

It would actually be quite easy to fix what we’ve already got if the Victorian Government would just listen to the following basic reasoning.

In just a short time frame, proper definitions of defect and specification could:

  1. Make VCAT a fair playing field for owners and builders alike, possibly removing the need for VCAT altogether
  2. Lower drastically for both owners and builders, all costs associated with mediations (and VCAT hearings)
  3. Restore knowledge of workmanship to the industry
  4. Make builders improve supervision as a top priority
  5. Restore quality and pride to the residential building industry
  6. Get rid of band-aids and restore quality to (far less) rectifications
  7. Restore consumer confidence in builders

And those guilty of distorting the definition of defect could be de-registered.

We could also tweak Building Warranty Insurance, by removing all but the walk-away-builder option and the bankrupt-builder during contract option.

In 2012, the Victorian ombudsman stated that Building Warranty Insurers paid out less than one per cent of the total premiums paid. So building warranty insurance is useless unless the rules are changed back to the insurer (not the homeowner) being required to chase the builder. All defects should also be covered for the full warranty period of 6.5 years.

Let’s make these minor changes instead of compounding the unfairness.

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Discussions
7
  1. Dr Sharon Harrison

    You rightly acknowledge the problem of the Victorian Building Authority/Building Commission's failure to regulate the industry. The dodgy builders are not, unfortunately, in a minority. There are far too many building practitioners who are not suitably qualified to hold a registration. These practitioners are wolves in sheep's clothing with the Building Practitioners Board seal of approval. When describing his approach to carrying out restumping work at a Building Practitioners Board Inquiry, our restumper confirmed that knew how to do the job properly in the first place. The moron did not even understand basic arithmetic, i.e. if you excavate 150-200mm of soil to ensure clearance between natural ground level and the underside of a bearer you must then excavate your stump holes by a further 150-200mm. The BPB Inquiry Panel member stated: 'The last thing we need is a practitioner learning the Act on the run. We can’t afford to have people out there not knowing what they’re doing'. Unfortunately, there are countless Registered Building Practitioners who don't know what they're doing. And having received a slap on the wrist from numerous breaches of the Building Act and Domestic Building Contracts Act and carrying out defective work, the restumper concerned continues to work in the industry to this day. The Victorian Building Authority and the Building Practitioners Board are intent on protecting the Registered Building Practitioner and their business at all costs. How can we trust them with greater responsibilities? No wonder so many Registered Building Practitioners believe they have a right to rip off consumers, the authorities have encouraged a sense of entitlement.

  2. Branko Mladichek

    Good start Mark but I think you under estimate the depth of the problem and what is required to fix it.
    Fundamentally Victorian Government is in bondage to vested interests and there is no political will to fix problems that are well known and articulated because there too many fat snouts feeding off the system.
    I would recommend(if anyone was really serious) that:
    1 We have Building Control Police ( in the same way we have traffic police,water police and transport police) with powers of arrest for contractual fraud and powers of issuing on the spot hefty fines for non compliance with BCA.together with demerit points system leading to suspension and de registration. Teams of police inspectors should be cruising sites and veryfying compliance.
    2 Change the legal system where the onus of proof is on the builder for a house under warranty. It beggars belief that homeowner has to spend thousands of dollars on expert reports to prove why is the home defective when it is patently defective and a mere presence of the defect should be compelling builder to fix it.
    3 VCAT should be told to enforce the law ( objective of DBCA1995 is the maintenance of proper standards) that means that it is necessary and reasonable to enforce demolition of non compliant work regardless of economic loss to the builders.
    4 VCAT should be directed to report builders misconduct, failure to comply and or fraud each and every time.

    Nothing works faster that a hit in the pocket and builders will learn quickly.

  3. beverley-jane

    Three plus, ineffective, time wasting years of Consumer Affairs, 7 years after completion, our builder walked away without paying a cent towards rectification or unpaid refunds. The protracted process rewarded our 'builder' with years of unchallenged delivery to other victims.
    Then you begin the whole debilitating process again, forced to choose another builder to fix the mess of the first REGISTERED builder. Constant financial fodder to a pack of wolves.
    Unbeknown to us, while quoting on our project, our 'builder' was actually in VCAT, for the second time, in regard to successful warranty claims against his defective work! Both insurers and regulators allowing this destructive individual ongoing insurance cover and registration to continue wreaking havoc on other vulnerable families.
    No wonder this offender felt invincible suffering no consequence for repeatedly substandard delivery!
    Complaining to a prominent industry player re this builder's ongoing membership, I was advised by their Executive Director, that the reports of Building Inspector's, (those same reports used to bring about VCAT decisions!) were merely individual opinions with, quote: "two equally qualified persons inspecting the same element can often conclude differently." and "Any report prepared by a consultant who is paid by an individual (whether consumer or builder) cannot be regarded as independent."
    Is he exposing fundamental VCAT flaws if subjective, biased opinions are considered viable options in costly VCAT determinations ?
    Does this massive construction industry wrecking ball, raise too much revenue to be sincerely challenged?
    Meanwhile family's lives and their financial security are destroyed for the sake of a dollar today.

  4. Joy Hewson

    I am a having a new home built. To build for the first time was a huge decision for me. As a single mother on a part time wage I always new it was a risk to build but I put five years of research and time into making this happen. Now I am left unable to sleep at night with the stress of a half built house that is so defective I don't know what to do. My builder will not communicate with me and will not acknowledge there is major structural problems. I do not have the resources to fight him in court but I do not want to end up at VCAT like so many others and the builder and the building inspector getting away with not only bringing me into financial hardship and destroying my dream but for having such disrespect for others and thinking that they are untouchable. Is there any reputable law firms that would take my case on with a no win no pay fee. And is there any chance I can win…my evidence is very strong against defective workmanship. For example the mortar I can pull out with my fingers and crumble it!

    • Branko Mladichek

      I wish you luck with finding no win no fee lawyer but if you cannot afford one then you could be your own. It is not impossible to get a good outcome in VCAT if your case is strong, you are well prepared and have very good expert report and expert to give evidence. There is also a chance that VCAT mediation could flush out an offer from builder that you don't necessarily like but can live with. Several of my clients have taken on builders and contractors in VCAT and with assistance of my report got a good outcome, in one case even against a barrister on the other side.

  5. Anne Paten

    Mark, you are right about consumers having zero protection – biased legislation, unfair contracts, information asymmetry, the insurance swindle and the “let’s increase disputes” scam. As for the emphasis on creating disputes, a lawless industry has delivered the ever-increasing number of disputes for decades and at great expense to all con-sumers. Consider that under Government ‘policy’, the 35,000 disputes in 2002 (when the CAV-controlled BACV was introduced) grew to a staggering 256,000 by 2011! Clearly, CAV’s real objective was never to 'reduce disputes’!

    Now the latest version of BACV is to create a second serve of swindling: through regulating owners, compelling them into ‘disputes’ and illegally extracting money from these innocent victims, we will now have the mega ‘deluge of disputes’. This new ‘authority’ and its partner VCAT lack any independence. Both ignore all principles of fairness and justice, both are pro-builder and anti-consumer, and both are staffed by many 'builder advocates' – some of these illegally To say the ‘arrangement’ is “stitched up” would be a gross understatement.

    I do not think that ineptitude is the reason for con-sultants’ defective defect analysis. Rather it is about ‘builder protection’, maintaining jobs and profits for the lawyers and all beneficiaries. The strategy has been perfected over time – 'delay, drag on and drag out' for years until the owners have lost any money not already stolen by the builder! Why change it now? Let’s just keep on robbing the disenfranchised, roll out a new 'old' scamming scheme and roll on rewarding the crooks!

    This 'system' truly delivers. Not a tad of fairness in the frame – defective works the key to the illegal, Govt endorsed profiteering.

  6. mark whitby

    Our legal system makes it very difficult to beat cheating businesses. Gag orders are part of this unfairness.

    For those of you who contract to build, you simply must alter the basic definitions contained in the contract, to update the inadequate Domestic Building Contracts Act (in keeping with its intent of course) 'specification', 'defect', 'reasonable life expectancy', or any future arguments will have to force through the grey areas that, unfortunately, the opposition negators exploit.

    This means that you need to go forward with capable experts (barrister / solicitor / building consultant / soil report writer / structural engineer / specialist trades), or you weakest link will let you down, just as the lack of adequate definitions of the basics in your contracts will also let you down.

    I should point out to you all that VCAT is not what I consider a fair playground with its accrual of precedents seemingly not on the side of the consumer, but rather on the side of business. These are based on the legislation in place that the rectification must be a fair cost in keeping with the degree of the defect being rectified.

    But even with these precedents in place, there are ways of ensuring that the replacement of what was inadequately installed, can be made to be a reasonable substitute, with a consultant who is able to test all warranties of the materials and workmanship proposed as a substitute… in relation to life expectancies of each component or system.

    As to regulation breaches, BWI and VBA must indeed get tough particularly whist jobs are in progress, and remove the puerile and ineffective points system so that consumers get redress appropriate to the possible outcome of misdemeanours of builders.