The Complexity of a Simple Problem 2

Wednesday, September 2nd, 2015
liked this article
Dulux Exsulite Construction – 300 x 250 (expire Dec 31 2016)
FavoriteLoadingsave article

The overall building industry and its domestic consumer protection is at uncontrollable levels of detriment to consumers, builders, and our industry.

Some recent headlines in Victoria include:

  • Dodgy Surveyors exposed’
  • ‘Developer denies responsibility’
  • ‘Town houses at risk of collapse’
  • ‘Ombudsman finds waste and corruption in the Building Commission’
  • ‘Overcrowding, substandard building contributed to the Docklands Fire’
  • Docklands Lacrosse Building apartment Fire Class Action’

A myriad of others have appeared over the past 13 years since Last Resort Builders Warranty Insurance (BWI) was introduced in July 2002.

Reviews and enquiries have been undertaken by various Governments throughout Australia at a level no other product has ever produced as these Governments struggle to continually deflect criticism of an atrocious regime introduced by trade associations who directly benefit financially from the current arrangements as exposed by the Auditor General in May this year.

The BWI regime has been an unmitigated disaster for all concerned, yet it has managed to survive for all these years largely through a veil of secrecy and a view that it is a complex regime. The secrecy surrounding the performance data is due to a Corporations Regulation being changed in April 2002 that removed all oversight of the product known as Home Warranty Insurance, and that fact has allowed the trade associations to submit questionable data to ensure the need for its retention without any fear of  accountability.

The Auditor General has now changed the position in Victoria by virtue of the fact the Government insurer, the Victorian Managed Insurance Authority (VMIA) is the only provider of the product. This has allowed the Auditor General (VAGO) access to the performance data for the first time. However, it is still limited data as VAGO can only investigate Government agencies and not private companies such as the trade associations.

VAGO has found the premiums builders pay for the warranty insurance certificates on behalf of their clients are excessive, don’t deliver value for money, and have largely been wasted on fees, commissions and brokerage fees – a fact that has become blatantly obvious to our industry over the past few years.

Building consumers who have experienced buildings with defects in recent years have been exposed to the fact they have no consumer protection whatsoever and experience the merry-go-round of despair as they are pushed from pillar to post between the three Ministries responsible for consumer protection in Victoria.

Builders equally suffer from the same fate as they struggle with the regime, and as a result, many good builders can suffer a similar fate to those who flaunt the compliance and regulation.

It should be remembered that there is good and bad in all industries and the building industry is no exception. However, under this current regime it captures all, whether they are good or bad builders, or good and bad consumers.

The failure of the current regime has seen thousands affected, and the numbers are escalating to an astounding level as consumers try to achieve justice and find it does not exist within the building industry.

The legal system through VCAT is the only means to resolve a building dispute, which is the way the regime was structured originally. This has seen the self-representation aspect quashed by the legal fraternity to the extent the VCAT members themselves now directly promote the use of lawyers and barristers in every case. To run a case, the cost can exceed over $100,000 for each side.

This complex Builders Warranty Insurance regime that provides a warranty only under three extreme circumstances fails the greater majority of building disputes. The warranty eligibility for the builders is every bit as bad, as the insurance is more powerful than the builder registration itself.

The outcome we have seen for the past 13 years is an insidious warranty regime that fails both the consumer and builder. It has been kept in place by an illusion of benefit by trade associations who directly benefit through the mandatory insurance by holding sway over builders that garners membership, commissions, and brokerage fees, as exposed by VAGO only in May of this year.

Consumer protection is a complete shambles and has allowed our industry to be stripped of all credibility. It must be scrapped immediately and replaced with a new regime that delivers its intended purpose of consumer protection and professional industry management on behalf of our consumers and builders.

Simplicity is now the only answer for Victoria with a scheme that delivers real consumer protection and value for money, while satisfying the needs of Government in delivering their Public Policy. The current regime just makes a laughing stock of our consumers, Government, and our industry.

Compliance, regulation, and consumer protection must come under a one-stop shop entity, and one Ministry otherwise it will fail yet again. Our industry cannot survive further failure in this area.

Now is time for industry to play a role as we the builders fund all compliance, regulation and consumer protection, and it’s time we had a say in how our funds are deployed. Furthermore, many in our industry who know it so well should be at the coalface, and for those who have been at the helm for the past 30-odd years must be moved aside as their failures have been the ultimate failures.

The Government must demonstrate strength and brush aside the views of those who have been at the forefront of maintaining the current system, and dump this regime to the annals of history as the worst concoction of a self-interest regime ever devised.

A genuine consumer protection regime must be transparent and deliver the intended purpose while being aligned with the industry. It must also be fair and equitable to all involved. Then and only then will we see confidence returned to our industry.

Our regulator must change direction and work alongside our consumers and builders to build that confidence and be seen to be approachable and interested in our concerns for the overall good of industry.

A workable system is not difficult to achieve once the right people and levers are put in place, which can be done when the vested interest is removed.

FavoriteLoadingsave article


 characters available
*Please refer to our comment policy before submitting
  1. Anne Paten

    Phil, I think that the regulator changing direction is not a realistic possibility. The VBA managed in its first year to employ an extra 80 staff, spend an extra $15 Million and do no enforcement, less than the Building Commission. The officials' time is spent on frustration, obstruction and harming consumers.

    All rogues are still registered, whether they can speak English, read Plans, failed the test, etc. Consumers have not one of their 'consumer rights' as designated under Consumer Law, and most particularly they are denied any and all information on which they could base any informed decision. Not to mention not knowing about the scam DDI insurance, or the wicked VCAT where consumers have zero access to justice – all information is secreted away. As for Human Rights, animals have a better chance of protection and fair treatment than people. And although I am an animal lover, this is crazy!

    The new senior VBA personnel are from the same backgrounds as the old group and the same 'no touch' regulation applies – zero! The same culture pervades the 'system' and protection of the crooks remains the mantra.

    As for consumer detriment, $15 billion+ in 2014 a conservative guesstimate.

  2. Russell Jones.

    It might help if a few pollies and all department heads in the domestic building market held a meeting for people to have there say about the problems in the building industry but the building industry wouldn't allow change. R. Jones.