NT Emerges as a Model for Building Industry Regulation 5

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Thursday, November 19th, 2015
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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.

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Discussions
5
  1. Barry S.

    Welcome moves – the building industry throughout Australia is rife with shady operators, while the warranty system is still extremely defective and provides barely sufficient coverage.

  2. Chris Bovill

    So no builder has faults in their building work after one year?

    This sounds like a system designed by and for the benefit of builders with little real thought for proper consumer protection.

    What happens when a slab heaves after 18 months because of dodgy fill by the builder? Who steps in to protect the consumer? What stops the builder from doing this again if they are not held responsible.

    I am so sick of hearing that the current system does not pay claims – if they don't then why is nearly every jurisdiction in Australia talking about increasing premiums to pay for the increasing claims?

  3. Anne Paten

    Andrew, as a long-time advocate for genuine consumer protection, this scheme appears to have little to recommend it. As for working “magnificently”: “For whom?” The answer: “Not for consumers!”
    Requiring 'registration' provides no safeguards. In fact, in Victoria the 'registration' regime functions so as to provide 'protection' for all in the 'registered class’ – regardless of their shocking misconduct! Only proper registration, with only those holding real qualifications, technical expertise and ethical principles, allowed to be ‘registered’ could make any difference. And this must be combined with punishment of the thousands of cowboys, and serious penalties applied for serious offences. Not ever contemplated!
    Consider Victoria. With nearly 50,000 'registered' building and plumbing practitioners, there is virtually no punishment, and consequently no deterrences. Added to this woeful ‘cocktail’, we have zero enforcement, junk insurance and a large ‘building dispute’ industry. Now the latest Mark 2 legislation has been devised to grow the 'building dispute industry'. Deregulation of the building industry will continue, with the ‘solution’ to zero consumer protection to compel consumers into ‘disputes’- to 'regulated disputes'! And extracting more money to grow the ‘building dispute industry’!
    Don’t be fooled by the rhetoric. Instead of preventative 'strategies' like regulation, no regulation, 'registration of rogues’, zero enforcement of compliance – and information asymmetry, consumers disadvantaged on a scale unlike any other consumer market sector.

    No, the NT ‘model’ does not offer any ‘magic’ for consumers, but I am sure it will work “magnificently” for builders – as do all schemes and everywhere.

  4. Mark Whitby

    I'm not convinced Andrew. How will this system make builders supervise the works adequately with an experienced eye to better existing poor workmanship? And how will it make more certain that builders remain responsible for their buildings after one year has elapsed. To me it seems better for 'tradies', but considerably worse for most consumers, although I do agree that some consumers will be better off where gross breaches of contract and regulation occur.

  5. Brett Bates

    "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"
    Whilst there is no specific proposal of how this will be done I would strongly argue that the first part of the statement is the absolute foundation to achieve improvements to the issuance of occupational certification of any kind, particularly within the area of builder licensing. Establishing rigour in the education, training and assessment of builders so that only truly competent persons are ever given a building licence and you might start to fix the problems at the source rather than trying to fix it retrospectively. Unfortunately, we seem to be moving in the exact opposite direction.