The Risks Involved in License Lending 2

Tuesday, April 5th, 2016
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The scenario where, for any number of reasons, a builder enables or allows someone else to use their registered builder number, though common, is fraught with risk. This scenario is often called ‘license lending.’

License lending is where a builder with a registered practitioner number enables someone – say a building company without a registered builder director – to use their registration details. Commonly, such use is for the purposes of completion of insurance documentation. It is of course the case that registered builder numbers are a matter of public record.

I was relatively recently involved in a case in VCAT where such a situation arose. Unfortunately, the outcome wasn’t great for the builder in this case despite the fact that the builder did not sign the contract or attend the work site at all. VCAT held that, as he had completed the application for insurance, the builder had made a misrepresentation to the insurance company.

In addition, the Tribunal held that the builder had ‘authorised’ the other party to sign the contract the contract on his own behalf and so the builder was the ‘real contracting party’ and ‘the real builder’ despite not having received any money in relation to the project.

The case illustrates starkly the risks involved for a builder of such a scenario. Of course, it is not always true, depending on the exact facts of a case, that the builder would be liable in the event of defective and or incomplete works in such a scenario. However, the risks are there.

If you are a builder involved in any way in such a situation, it is highly recommended that you seek professional advice. There are, as said, often hidden risks in such a case.

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  1. Paul Jolley

    This kind of practice is rubbish and should not be allowed.

    The whole purpose of the licensing regime is to make sure only those who possess the knowledge, skills and experience necessary to build property and safely are allowed to build. No one who is not prepared to go through the rigour of what it takes to learn how to build properly and safely should be allowed to build.

    Ban this practice and put in place serious fines for those who breach it.

  2. beverley-jane

    If this isn't the epitome of fraud, misleading and deceptive conduct, then what is?!!
    Imagine if a con artist was able to 'borrow' the license of a nuero surgeon.
    Nothing shocks me in this industry anymore.