Builders in Victoria who fail to purchase domestic building insurance on behalf of clients despite taking insurance deposits are set to be prosecuted under new reforms announced by the Government in that state.

And the state has appointed a new CEO at its building regulator and has announced that adoption of new National Construction Code requirements for accessible housing and energy efficiency may be delayed.

In the wake of the Porter Davis debacle, the Victorian Government has announced that it will reform the Domestic Building Contracts Act to introduce new regulatory powers that will ensure that builders who take insurance deposits from their clients do indeed take out the required insurance on behalf of such clients.

Under the reforms, a new offence with a significant penalty will apply to any builder who takes insurance deposits and fails to purchase the appropriate domestic building insurance policies on behalf of their clients.

The reforms will also enable the Victorian Building Authority to audit builders regarding the collection of deposits and purchase of domestic building insurance.

In other measures, the government has announced that:

• The reform package will also provide opportunities to review the role of all regulators and to improve the information that is provided to consumers about a builder’s obligation to take out domestic building insurance.
• The state will consider providing an extended transition for new National Construction Code requirements relating to accessible housing and energy efficiency that are currently scheduled to commence in October.

The government has also announced that the Anna Cronin has been appointed as the new CEO of the Victoria Building Authority after the resignation of former CEO Sue Eddy.

Cronin – who has previously served as Victoria’s Commissioner for Better Regulation and Red Tape Commissioner – will serve a two-year term.

The latest developments follow the collapse of large home-building firm Porter Davis, which left around 560 families without domestic building insurance despite having paid a deposit for their homes.

Under the state’s Domestic Building Contracts Act, builders who undertake work of greater than $16,000 in value are required to have purchased domestic building insurance on behalf of the property owner before taking a deposit.

The insurance covers property owners for defective or incomplete work in cases where the builder dies, disappears or becomes insolvent.

In the case of Porter Davis, however, the company did not purchase the insurance until obtaining the building approval for the project – something which often did not occur until weeks or even months after the deposit was paid.

This was despite the company’s staff having falsely told customers that their insurance was in place at the time of paying the deposit.

When the builder collapsed in March, as many of 560 property owners were therefore left without the compulsory insurance for which they had paid.

Last month, however, the Victorian Government announced a special intervention to ensure that the relevant owners concerned would get their five percent deposits refunded under a $15 million government support package.

The reforms also come as the VBA has been in a state of turmoil.

Last month, a joint report between 60 Minutes and The Age revealed that VBA inspectors had been conducting virtual audits through ‘inspections by iPhone’ rather than physically attending construction sites.

This follows an earlier WorkSafe report which found that the organisation was running an unsafe workplace as managers had been pressing inspectors to tick off construction sites in order to meet ambitious targets set by the Victorian Government in 2020.

That report followed the suicide of inspector Rob Karkut.

There has also been a general sense that the regulator had lacked the resources to effectively perform its function.

Finally, the latest move also comes amid a sense that reform efforts in Victoria’s building industry have been too timid thus far.

More than five years after the publication of the Building Confidence Report prepared for the Building Ministers Meeting by Professor Peter Shergold and lawyer Bronwyn Weir, the Victorian Government has only recently introduced the first stage of reforms into Parliament.

Michaela Lihou, CEO of Master Builders Victoria, welcomed the new measures.

Speaking of the penalties, Lihou said it was important to ensure that consumer safeguards are as robust as possible.

“We know, by far and away, the overwhelming majority of our builders do the right thing for the sake of their clients and their hard-earned reputations,” Lihou said.

“However, for the small number who don’t, it is clearly appropriate that there should be tough penalties and stringent enforcement to make sure everyone understands their obligations and the consequences of not meeting those obligations.”

Lawyer Bronwyn Weir, who co-authored the aforementioned Building Confidence Report, welcomed Cronin’s appointment.

Despite the recent challenges at the VBA, Weir said that Eddy made a significant contribution to the organisation during her tenure.

Weir also called for the Victorian Government to courageous in its approach to reform.

“I believe Sue Eddy made a significant contribution to the VBA during her five years as CEO,” Weir said.

“Sue enjoyed the support of most key stakeholder groups earned through her hard work and dedication to improving outcomes for consumers and the building industry. Sue conducted her role as CEO with the highest levels of integrity. There have been many improvements made to the VBA and its operations under her leadership and she was highly regarded by her executive and staff.

“Anna Cronin is well placed to take on the role of CEO having been advising government on planning and building matters for the past four years and having been the Commissioner for Better Regulation since 2015. She has a strong reputation within government and is already well connected with key stakeholder groups. I expect she will be very capable and effective.

“Meaningful reforms to Victoria’s legislative framework and the various government entities involved in the regulation of the building industry are long overdue. I hope the events of the past few weeks inspire the Victorian Government to have the courage to make bold decisions and bring forward reforms without further delay.

“They are investing significant money in new housing in Victoria and have funded $600 million towards cladding rectification. It is essential that we have a well- functioning building regulatory system that is properly funded to oversee the delivery of safe, compliant buildings for all Victorians and for the building industry to thrive.”

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