Victoria is set to get a new building watchdog as a damning report has unveiled a litany of failures from the state’s current building regulator.

Last week, the Victorian Government announced a range of reforms to the state’s building and plumbing regulatory arrangements.

The reforms include:

• Replacement of the current Victoria Building Authority (VBA) with a new Building and Plumbing Commission that will consolidate all aspects of building quality control regulation into a single agency and will have expanded powers and resources.
• An inspection blitz to be led by the new watchdog to crack down on unregistered building and plumbing work.
• New protections for purchasers of new apartments by requiring developers of apartment complexes of three stories or greater to provide a bond to cover the cost of fixing poor building work as a first measure whilst the state develops a new 10-year insurance product for apartment buildings.
• Changes to dispute resolution process to ensure that these are more streamlined and provide greater certainty.
• Changes to rules for domestic building contracts to ensure that these are fair and provide clarity for all parties.

The announced changes follow the publication of a damning report into the culture and practices of the state’s existing regulator in the Victorian Building Authority (VBA).

Prepared by lawyer Bronwyn Weir, the report was ordered by Anna Cronin, who was appointed as CEO to the trouble-plagued regulator in June last year and was recently appointed as its sole Commissioner.

The report uncovered poor practices in several areas.

These include:

• A failure to identify serious breaches of legislation and unprofessional conduct during investigations.
• A lack of action in respect of those breaches/poor conduct when they are identified and a lack of effort to hold practitioners to account.
• Poor complaints management systems, with complaints being duplicated, lost or ignored for many months; few technical inspections being carried out in response to complaints and consumers receiving little by way of follow-through.
• Poor treatment of complainants. This includes complainants having to wait several weeks before receiving emails instructing them to provide more information within seven days or their complaint would be closed; referring to some complainants as ‘emotional’ and ‘stirring up trouble’ in internal documents; and putting those complainants who displayed challenging behaviours on ‘contact management plans’.

The report examined seven case studies in which consumers had unsatisfactory experiences.

One complainant who first complained about their builder and building surveyor in 2020 was told two years later in 2022 that the surveyor had done nothing wrong and that the builder would be ‘cautioned’.

Despite the VBA promising to investigate the inspector at that time, no such investigation has been completed at this point.

Another owner who complained about defective waterproofing among other alleged defects was told by the VBA to claim on the plumber’s insurance (the VBA declined to act against the plumber).

When the owner asked who the insurers were, she was told to make a Freedom of Information (FOI) request. After dealing with one plumbing insurer for 12 months, they told her that they were not the correct insurer.

The owners then had to make another FOI application to the VBA to find out who the correct insurer was.

In a statement following the report’s release, Cronin apologised to consumers, saying that ‘we can and will do better’.

Major Changes

A key part of the reforms involves the replacement of the Victoria Building Authority with a new building regulator.

Set to be known as the Building & Plumbing Commission, the new regulator will oversee building and plumbing across the state.

For the first time, the regulator will bring together all aspects of building quality control into a single agency. This includes regulation, insurance and dispute resolution.

The new regulator will also be equipped with greater powers.

These include:

• The ability to direct builders to fix work in cases where defects are uncovered after handover. At the moment, the VBA can only direct workers to fix defective work prior to completion and handover.
• New powers to prevent the issuing of occupancy certificates (and thus the completion of sales) in apartments which have serious building defects.
• Increased reporting requirements prior to the issuing of occupancy certificates on new builds.

The regulator will also have better resources, with 50 percent more auditors and frontline inspectors as part of a $63.3 million investment in this year’s budget.

Another change involves improved financial protection for owners of apartments.

As things stand, owners of apartments in complexes of four or more storeys have no protection against defective building work as they are not covered by the state’s domestic building insurance scheme.

As a first step, developers of these complexes will be required to provide a bond to cover the cost of fixing serious defects which are uncovered in these buildings after occupation.

This is likely to work in a similar manner to the strata bond and inspection scheme which is currently in place in New South Wales.

Under that scheme, developers are required to lodge a bond equal to 2 percent of the price page of all building contracts in respect of the development (increasing to 3 percent in November). The money is held as security in order to cover rectification costs for defects which are uncovered during specific post-occupancy inspections that are undertaken as part of the scheme.

The bond scheme will act as a first step whilst the government develops a 10-year insurance product for apartment buildings.

A similar scheme is now in place in New South Wales.

At the moment, the scheme remains voluntary in that state, with developers who elect to take out this insurance on behalf of apartment owners being exempt from the bond requirements referred to above.

However, the NSW Government is considering options to make the insurance mandatory – at which point it is envisioned that the insurance would replace the bond scheme.

Other changes involve improvements to dispute resolution processes and amendments to rules surrounding domestic building contracts.

The dispute resolution changes will aim to deliver more streamlined dispute resolution pathways and greater certainty for builders and consumers.

These will be implemented as part of the transition to the new regulator.

The changes to domestic building contracts will be worked through in consultation with industry and consumer groups and will aim to ensure that home building contracts are clearer and fairer.

Legislation to enact these changes is expected in 2025.

Reforms broadly welcome

The reforms have been broadly welcomed by both building industry lobby groups and consumer advocacy groups.

Stephanie Tonkin, CEO of the Consumer Action Law Centre, welcomed the announcement.

“It’s a good start for a sector renowned for the challenges it presents to Victoria’s consumers,” Tonkin said.

“Building disputes are complex and very challenging for a consumer to navigate, particularly due to the power imbalance and unavoidable information asymmetries between the consumer and builder, plus the large amount of money usually involved.

“Shifting domestic building insurance to first resort insurance and developer bonds are game changing reforms. The application of these protections to more consumers, including more apartment owners, is a welcome safety net and will avoid harms we see today.”

“Ensuring the strongest consumer protections through increased regulator powers, oversight and resourcing, and integration of different parts of the regulatory system and intelligence, will have a preventative and deterrence effect.

“This is key to rebuilding consumer confidence and making an effective building sector in Victoria. We look forward to working with the Government on implementing these policy reforms.”

On the building industry side, Housing Industry Association Executive Director, Victoria, Keith Ryan welcomed the announcement.

“Today’s announcements of proposed reforms to the Victorian building laws have the capacity to improve consumer confidence and provide the industry with a more contemporary set of rules,” Ryan said. (However, Ryan cautioned that the introduction of the ‘first-resort’ domestic building insurance scheme needed further detailed consideration and that the developer bond scheme in NSW has struggled in both operation and effectiveness.)

“The introduction of the Building and Plumbing Commission as an integrated regulator for the building industry would be the most significant change and how it exercises its powers will be critical to the success or otherwise of the reforms.

“The proposed reforms pave the way towards providing greater certainty for prospective homeowners looking to embark on a new building project and should in turn provide builders with capacity to deliver more homes for Victorians.

“The current system for regulating home building in Victoria has become increasingly fragmented, outdated and overly complex for builders and consumers to navigate …

“Today’s announcements provide some important initiatives to improve consumer and home builder confidence, though more detailed industry consultation is needed to ensure that the right balance is achieved.”

Meanwhile, Master Builders Association of Victoria CEO Micheala Lihou acknowledged the need to improve protection.

However, Lihou said that the state needs to do more to prevent problems from occurring.

She says a key measure would be to require more trades to be registered.

In waterproofing, for example, work is currently able to be performed by anyone irrespective of whether or not they are formally trained.

This is despite effective waterproofing being critical to the overall quality of the build.

Kerry Ould, one of the consumers whose case was referred to in the report, welcomed the reforms but expressed frustration about the current situation.

“I welcome the changes that will be made going forward,” Ould said.

“But still doesn’t help us our lives have been destroyed financially and mentally.

“VBA have gone after the wrong people this is set up to either make consumers go broke be financially ruined or commit suicide and they don’t care what comes first …I blame the State Gov on this I don’t blame Anna she just inherited this mess.

“8 years trying to navigate this shitshow with reports legal I just want my life back.”

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