Building and construction contractors who repetitively perform work for which they are not licensed or do not have the required insurance could now face jail under new laws in New South Wales which aim to beef up consumer protection and reduce the compliance burden on the building sector – albeit with financial penalties for unlicensed building work having been cut in half.

Under the Home Building Amendment Act 2014 which came into force on January 15, builders within the state who are convicted of performing unlicensed building work for which they do not have home warranty insurance will be subject a non-mandatory sentence of up to twelve months in prison.

But the maximum financial penalty for this type of behaviour has been cut from $110,000 per offence for individuals and $220,000 for companies to only $55,000.

Meanwhile, licensing laws have been tightened to allow Fair Trading NSW to take into account any actions or behaviour of those who have previously been involved in corporate liquidations (i.e. company directors and associates) for up to three years prior to the liquidation when assessing licensing applications.

The government believes this will help reduce the instances of ‘phoenixing’ – company owners and directors avoiding liabilities by stripping assets from companies and opening up and operating new business entities leaving liabilities such as unpaid taxes and superannuation stuck in the old companies with no assets from which to pay them – as it will make it more difficult for those involved in such conduct to obtain a license to operate under the new legal entity.

The laws will also:

  • raise the threshold for building and general trade work for which a licence is required from $1,000 to $5,000, consistent with other states
  • eliminate the need for a licence to complete stand-alone contract work for internal paintwork or work on tennis course, ponds and water features
  • clarify the definition of major defects and
  • raise the threshold for detailed contract requirements from $5,000 to $20,000 (for contracts between $5,000 and $20,000, contracts will be required but less detail will be necessary).

Around Australia, and including New South Wales, the problem of unregistered builders has been a considerable headache for authorities, consumers and the construction sector, with problems ranging from outright scam activity (such as tradespeople taking up-front deposits and disappearing without completing any work), the performance of incomplete or shoddy work, or the performance of work by contractors or tradespeople who simply do not have the skills and experience required to perform the work properly and safely.

One such case in Hunter’s Hill, for example, saw an elderly victim pay a large upfront cash sum to a group of travelling conmen offering to do gutter cleaning and restoration work – an inspection by a neighbour after the men had left revealing that little work had been done and that the men had left a mess behind them.

In a more extreme case, unlicensed building, fencing and landscaping contractor Matthew Rixon was fined convicted of contempt of court and given and 18 month suspended sentence last September after breaching orders issued in 2013 to discontinue trading on more than 24 occasions after earlier being found guilty of new fewer than 29 breaches of the Home Building Act 1989 for conduct involving accepting large upfront deposits and leaving work either unfinished or completed to a very poor standard.

Despite the reduced financial penalties for unlicensed work, the government says harsh financial penalties (maximums of which are rarely imposed) have not proved a significant deterrent to unlicensed builders in the past, and that prison time would be more effective.

Commenting on the overall reforms, State Fair Trading Minister Matthew Cox said the new laws were about modernising the system and bringing New South Wales into line with other states.

“At its core, these new home building laws are about ensuring NSW consumers are appropriately protected without creating unnecessary red tape and regulation that will stifle industry growth and investment,’’ Cox said.

The new laws came into effect on January 15.

  • If NSW is anything like Victoria, it is not only unlicensed builders who are the problem. So called licensed and supposedly competent builders are causing enormous financial and emotional damage to consumers (families) who mistakenly put their faith in the licensing system when risking their life savings to build their homes and thereby security for their families. It is not only consumers who are damaged and disillusioned – dodgy builders are burdening decent and reputable contractors with growing mistrust from homeowners who have been detrimentally affected by the substandard, often downright dangerous 'homes' they are left with. If they have the fortitude, they are facing literally years and huge financial implications when seeking compensation and accountability from builders and the regulators. With 'Phoenix' liquidation and the pathetic penalties, it is no surprise that this shocking behaviour proliferates in this industry and is the all to frequent subject of audits, investigations and media coverage.

  • Sound amendments – prison time is a better deterrent than those fines, which in any case were unfairly exorbitant.

  • On the face of it, these new provisions might appear to provide further disencentive for unlicenced builders. If the legislation specified realistic minimum fines as well as maximum fines instead of just maximum fines, I believe you would see a big change in this industry pracitce. Has anyone ever heard of maximum fines being imposed by the courts in relation to domestic building work carried out by unlicenced builders? Too often fines for such offences are just a slap over the wrist. Up to 12 months prison? Not sure we will ever see that. This also needs to be looked at as a National wide issue as rogue builders can move from one state to onother.

  • Lots of coverage about new rules for contractors and others in the Home Building Industry – does anyone care that most trades do not require licensing for all other types of construction, such as schools, hospitals, offices, factories (electricians & plumbers being the key exceptions)? There are myriad faults going undetected and unpunished in the non-dwelling construction game in NSW, and those contractors and subcontractors are free to continue their unsafe and unlicensed businesses without fear of retribution. About time NSW Government turned its sights on licensing ALL trades and contractors (as in some other States) and institute a penalty regime to back it up.

  • Having licensed contractors is a good thing. The system will be a lot better when subcontractors are policed just like the builder is! Especially in Queensland, subcontractors are not regulated and are getting away with murder!

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