Victoria’s troubled building regulator is undergoing significant transformation in order to become an effective organisation that delivers positive consumer outcomes, the regulator’s leader says.

Speaking at an industry breakfast hosted by the Housing Industry Association (HIA) in Melbourne last week, Anna Cronin, Commissioner and CEO of the Victoria Building Authority (VBA), described how the regulator is changing in order to be more effective and to deliver better results.

“The VBA is active again,” Cronin said.

“It is now being an effective regulator.

“It’s been a long, slow journey and we’ve got a long way to go. But nonetheless you are starting to see differences in your regulator.”

A Regulator Under Fire

Cronin’s comments come as the VBA’s performance has come under intense scrutiny over recent years.

Following the tragic suicide of long-serving VBA inspector Rob Karkut in 2022, the regulator was charged by WorkSafe last year  after it was revealed that inspectors were under pressure to inspect as many as three building sites each day.

Last month, the VBA released a damning report which Cronin had commissioned lawyers Bronwyn Weir and Frances Hall from legal consulting firm Weir Consulting to prepare.

The report looked into concerns raised by consumers about the regulator’s practices. It examined seven case studies where consumers had appalling experiences.

Conduct which it uncovered included:

• 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, and
• Appalling treatment of complainants, including some who waited for years without hearing back from the VBA after lodging complaints.

Cronin was appointed as CEO last year and was recently appointed as its sole Commissioner.

A key task facing her and her staff is to turn the regulator’s performance around.

The comments also come as the Victorian Government last month announced a range of reforms which are designed to improve consumer protection and to restore confidence in the building industry (see below).

Change Already Underway

Even before the announced reforms come into effect, Cronin says that the VBA has been transforming its operations and practices.

She says that the report has served as a wake-up call – as have other interactions which she has had had with consumers and staff since being appointed.

Upon her appointment, one of Cronin’s early actions was to clearly establish the VBA’s policies, mission and priorities.

This was done through the Regulatory Policy Statement. Aimed at both the VBA’s own staff and its external stakeholders, this document outlines the role and functions of the regulator as well as why its role is important.

As a result of this document, change is being made in several areas.

First, the regulator is becoming more focused on consumers and placing consumer outcomes as its top priority.

This is important as the aforementioned report shows that the regulator’s efforts in this area have been lacking in the past (see above).

This is not about targeting or punishing good, honest builders. Rather it is about ridding the industry of lazy or unscrupulous operators and better supporting those builders who are trying to deliver positive, compliant outcomes.

Next the regulator is making full use of its existing powers.

Previously, there have been areas in which the VBA has not fully used powers that have been available to it. Upon enquiring about why, Cronin learned that there has not been any good reason for this – its just simply something that the regulator had not been doing.

Now, things are changing.

For one thing, the regulator is making greater use of maximum penalties and issuing show-cause notices against builders who repeatedly do the wrong thing.

In the past, Cronin says that the VBA’s most common form of enforcement was to send a non-threatening letter to the builder indicating that a mistake may have been made. Whilst this may have worked with good builders who had made an error, those who were unscrupulous would simply throw their letter in the bin.

Now, the regulator is getting serious.

On August 30, it issued an immediate suspension of the licence of Diamond Builders Pty Ltd after a complex investigation uncovered that the builder had allegedly committed more than 100 breaches of building laws – though the company has received a temporary reprieve from its suspension after appealing to the Victoria Civil Appeals Tribunal.

The company – which was behind three of the seven cases that were reviewed in the report – also received fines totalling $200,000.

In April, the license of Aycon Constructions & Building Services Pty Ltd was immediately suspended for three years after a VBA investigation found that the company had allegedly issued more than 150 false certificates to consumers for domestic building insurance.

After gathering intelligence that this was occurring, the organisation undertook a dawn raid (with the assistance of police) – the first time the VBA has exercised its power to do this.

In July, the builder received the maximum penalty of $250,000.

The third area of change is that the VBA has altered its approach to building inspections.

In this regard, it has moved away from a one-size-fits-all approach and toward a more targeted, risk-based method. General inspections are still performed, but the regulator is also focusing on particular areas of risk that are identified.

Two such areas are unregistered builders and water ingress from balconies into apartments in low to medium-rise dwellings.

In terms of the first area, unregistered builders are responsible for around one in ten complaints which are received by the VBA.

As part of a recent blitz which is taking place in three phases across greenfield metropolitan, regional Victoria and urban infill areas, the VBA recently went out into the field and inspected about 1,000 sites. Of these, 33 unregistered builders where uncovered.

In terms of water ingress into apartments from balconies, this was a particular area that was highlighted in a Cladding Safety Victoria report into non-cladding defects which have been uncovered in the course of stripping back flammable cladding.  The report found that this is particularly prevalent in lower-rise (2-5 storey) apartments.

Accordingly, the VBA conducted a blitz in this area during September and early October. This focused mainly on the northern suburbs in metropolitan Melbourne.

As part of this inspection, the VBA has issued specific verbal directions on the spot. This has been appreciated by builders as it has enabled them to rectify issues quickly and easily.

The VBA is also sharing key learnings from its inspections with industry.

The fourth major development has been the appointment of former Melbourne municipal building surveyor Steven Baxas as State Building Surveyor in June.

Baxas is filling an important statutory role by acting as a single source of truth to provide builders and building surveyors with clarity on important areas of compliance with regard to the National Construction Code and state building regulations. He is putting out significant information on critical areas where there are concerns or confusions.

Finally, the VBA is beefing up its resources and strengthening its systems.

The regulator is employing 27 new inspectors. These will be trained in relation to specific risk areas such as those identified above.

It is also strengthening its systems relating to information technology and data to enable more seamless interaction and to improve industry communication and education. As things stand, Cronin says that the regular has some old systems which are ‘held together by band-aids’.

(Anna Cronin presenting at the HIA breakfast in Melbourne. Image source: Victoria Building Authority via LinkedIn)

Major Reforms Announced

All this is happening amid the recent announcement of significant regulatory reforms.

Announced on October 24, the changes cover four areas.

These include:

• Transformation of the VBA into a new regulator known as the Building and Plumbing Commission. This will amalgamate the current VBA, the current Domestic Building Dispute Resolution Victoria, and domestic building part of Victoria Managed Insurance Agency. Three entities merged into the new Commission, which will consolidate all aspects of building and plumbing quality control – regulation, insurance and dispute resolution – into a single regulator.
• Improved financial protection for owners. This includes moving from a last resort to first resort system of insurance for domestic building insurance (which applies to buildings of three storeys or less) along with the creation of a ten-year decennial liability insurance scheme to provide insurance in respect of defective building work for owners of apartments of four storeys or greater. (As an interim measure whilst the decennial liability scheme is being created over the next few years, a new developer bond scheme will provide more a more limited form of protection for apartment owners.)
• More powers for the VBA and the new regulator. This includes a new ability to issue directions to builders to fix defective building work after an occupancy certificate has been issued. There will also be a new requirement for developers to notify the VBA six months before they intend to apply for an occupancy certificate.

The reforms are expected to come into effect during the first half of 2025.

According to Cronin, benefits will be substantial.

The establishment of the new building regulator will provide a simpler and more effective regulatory experience for builders and consumers alike. Particularly for consumers, the new integrated regulator will prevent them from needing to be ‘ping-ponged’ around the various regulatory systems.

In addition, the new powers will deliver better outcomes.

As things stand, the current VBA is only able to issue directions against builders to rectify defective building work before an occupancy certificate has been issued.

One an occupancy certificate has been issued, the VBA at the moment is only able to issue rectification orders against consumers rather than builders.

In other words, when a consumer makes a complaint about a building defect, the best the VBA can do is turn around and order that consumer – not the builder – to fix the defect at the consumer’s own expense. The consumer is then left to seek compensation for costs associated with this either through VCAT or through the courts.

Under the new rules, the regulator will be able to order the builder to rectify defects at the builder’s cost irrespective of whether or not an occupancy certificate has been issued.

In addition, the requirement of builders of apartments to notify the VBA six months before they intend to seek an occupancy certificate will provide the regulator with important visibility about occupancy certificate applications which may be imminent.

Depending on the level of risk involved, the regulator may then wish to afford greater attention to these projects. This could occur, for example, where previous disciplinary action has been needed in relation to the particular project or in relation to practitioners who have been involved with the project. It could also occur if the project was in a bushfire prone area or was within the two to five storey range which has been a focus of problems for water ingress from balconies.

She says the impact of the changes should not be underestimated.

“The new Building and Plumbing Industry will be a single-entry point,” Cronin said.

“It’s the biggest game changing model that we have had in the Victorian building system since 1993 when the Building Act first came in.

‘It will yield significant benefits to consumers and the industry, and improving our performance as far as industry is concerned is something that is very important to us.

“But the fundamental role of this is to boost consumer confidence. I think we all know that that is sorely needed.”

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