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.