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:
- The builders don't listen because simple negation will not work
- The building consultants don't listen because they must admit they were inept to their past clients
- 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:
- A proper and full definition of defect
- 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:
- Make VCAT a fair playing field for owners and builders alike, possibly removing the need for VCAT altogether
- Lower drastically for both owners and builders, all costs associated with mediations (and VCAT hearings)
- Restore knowledge of workmanship to the industry
- Make builders improve supervision as a top priority
- Restore quality and pride to the residential building industry
- Get rid of band-aids and restore quality to (far less) rectifications
- 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.