Proposed reforms to building industry regulation in the Northern Territory are sensible and should serve as a model for all other states to follow, a key construction industry commentator says.
Builders Collective of Australia president Phil Dwyer says proposed changes – which were outlined in a review to building contractor licensing, residential warranty insurance and payment protection for contractors and subcontractors throughout the NT – represent a comprehensive list of reforms which if adopted will deliver better and more effective outcomes for both the construction sector and the consumers it serves.
Describing the recommended changes as the ‘holy grail’ of industry regulation, Dwyer says the holistic nature of the proposed reforms stands in contrast to what he sees as a failed builder’s warranty insurance scheme in Victoria and a messy system involving different a hodgepodge of different departments doing different things around various parts of the country.
“This is a holistic system of consumer protection and industry management which we see and which Territory builders see as being the holy grail of the way it should be,” Dwyer said. “There is no doubt that the system will work magnificently and provide genuine consumer protection and genuine industry management that will weed out people who do misbehave in our building industry.”
Released by the Minister for Lands and Planning Dave Tollner, the proposed changes aim to expand the scope of the building industry registration system, beef up consumer protection and improve the certainty of contractor and subcontractor payments.
Under the recommendations:
- All builders and trade contractors will require registration, the only exemptions being civil engineering contractors and handymen performing work of less than $12,000 in value. Registration will be for a ‘reasonable period’ which the report suggests should be three years.
- The number of registration classes will be expanded to accommodate the various types of subcontractor.
- While all contractors will be required to demonstrate substantial levels of competency in order for registration, residential builders will be forced to provide substantially more financial information compared with other financial classes.
- In order to better protect consumers, residential builders will be forced to pay a five per cent levy which will go toward a retention trust scheme, which will provide cover for ‘last resort’ insurance (where the builder dies, disappears or becomes insolvent) as well as limited ‘first resort’ protection under certain circumstances. Half of the money will be refunded to the builder upon completion of the works while the other half will be retained until one year after the issuing of the occupancy certificate. The recommended model extends to cover unit holders and bodies corporate of high-rise construction in addition to low-rise construction.
- Progress payments made to subcontractors will be held in separate trust accounts, from which the contractor would only be able to draw cash after subcontractor payment has been made.
Tollner said the review was prompted by concerns about the effectiveness of a scheme set up to protect residential consumers in 2013.
He said the government was seeking advice for a model which could deliver simpler yet more comprehensive protection for home owners, extend protection to purchasers of units and high-rise apartments and deliver a more effective licencing regime.
The reforms come amid growing levels of dissatisfaction with the effectiveness of consumer protection regimes around several other parts of the country.
In 2012, a University of Sydney survey of apartment owners, for example, found that defects were reported in 85 per cent of new apartments in New South Wales.
In Victoria, meanwhile, an Auditor General’s report earlier this year found the consumer protection system to be overly complex and confusing, adding that deficiencies in the registration and discipline scheme for building practitioners mean the system does not ensure that all practitioners who are registered are qualified, competent and of good character.
Consultation on the proposed reforms is open until January 2016.
Tollner says there is no firm policy stance in relation to the recommendations, and that the government would consult extensively with all stakeholders.
More detail on the recommendations can be seen in the full report associated with the review.