The Building Legislation Amendment (Consumer Protection) Bill 2015 was enacted into law in April and amends the Domestic Building Contracts Act 1995, the Building Act 1993 and the Victorian Civil and Administrative Tribunal Act 1998.
There are a number of amendments which will come into fruition on a staggered basis between the periods of July 4, 2016 and July 1, 2017.
These legislative changes are significant and will change and revolutionise the building industry. Some of the key changes involve the following:
- how building practitioners are registered and classified
- how building surveyors are to be regulated
- how domestic building disputes will be conducted in Victoria, including the introduction of a new body called the Domestic Building Disputes Resolution Victoria (DBDRV)
- how owner-builders are regulated
- the abolition of the statutory body of the Building Practitioners Board (BPB) with the powers being assumed by the Victorian Building Authority (VBA)
- the VBA will have greater powers of internal review of its decisions
- the VBA will have the power to prepare codes of conduct to becoming binding on all building practitioners and breach of the said codes of conduct by building practitioners will be grounds for disciplinary sanctions.
Amendments to the Domestic Building Contracts Act 1995 (DBCA)
- Builders need to give owners contract information statements (CIS) before entering into a domestic building contract (DBC).
- Section 5 of the Amendment Act will insert a new section being 29A into the DBCA which will come into effect on or about SEPTEMBER 1, 2016.
- Section 29A will state that a builder will not be able to enter into a major DBC unless the builder has first given the building owner a CIS.
- The CIS will emphasize the importance of the building surveyor exercising his or her statutory functions in an independent manner.
- The CIS will also provide information about the responsibilities of each party in the building process, including the builder, owner and building surveyor.
- The CIS is yet to be uploaded to the VBA website, but the VBA has the authority to prescribe the appropriate form and it is anticipated to be available prior to August 2016
Referral of domestic building work disputes to conciliation (changes to take effect in early 2017)
Section 6 of the Building Legislation Amendment (Consumer Protection) Act 2016 (Amendment Act) repeals section 3A of the DBCA and substitutes it for “Part 4 - ‘Domestic Building Work Disputes’”
Part 4 is a significant amendment to the DBCA and some of the changes include as follows:
Domestic Building Disputes Resolution
A new body called the Domestic Building Disputes Resolution Victoria (DBDRV) will be created which will operate in conjunction with Consumer Affairs Victoria.
It will be mandatory for a party to a domestic building work dispute to refer the matter for conciliation prior to initiating proceedings in the Victorian Civil and Administrative Tribunal (VCAT).
The reason behind this change is to provide incentives to parties to resolve their disputes more efficiently, and it is thought that mandatory conciliation will lower the amounts of disputes that will need to be initiated in VCAT.
The DBDRV will theoretically be able to conciliate matters that involve multi-party complex disputes, including those involving proportionate liability, without the need for parties to engage in lengthy interlocutory processes such as discovery of documents and expert reports as are common in litigation. However, this will remain to be seen.
Definition of ‘domestic building work dispute’
The Amendment Act will repeal Part 3A of the DBCA and substitute it with Part 4. Part 4 deals with domestic building work disputes (DBWD).
Section 44 will define a DBWD as arising between a building owner and a builder, building practitioner, subcontractor, or architect.
The DBWD must relate to:
- a DBC or the carrying out of domestic building work
- breach of warranties as per section 8 of the DBCA
- failure to maintain the standard or quality of work
- failure to complete within the specified time of the contract
- failure to pay money for works performed
Possible ambiguity in the DBCA following the introduction of the Amendment Act
Sub-paragraph 6(e) of the current DBCA states that ‘building work’ to which the DBCA applies “does not apply to design work carried out by an architect or a building practitioner registered under the Building Act 1993 as an engineer or draftsperson.”
Sub-paragraph 6(e) of the DBCA is in direct conflict with the Amendment Act's addition of section 44 into the DBCA as section 44 specifically lists architects as a party to a DBWD.
It may be that it was the intention of the legislative drafters to the Amendment Act that architects and engineers would be considered as parties to a DBWD. However, if this was their intention, there should have been an amendment by way of repealing section 6(e) of the DBCA which states that building work does not apply to design work carried out by an architect.
It is noted that 6(a) of the DBCA was repealed however 6(e) was not repealed and/or amended.
The Amendment Act will insert subsection 45(1) into the DBCA, which will state that a party to a DBWD may refer a dispute to the chief dispute resolution officer (CDRO).
A referral of a DBWD must:
- be in writing in a form (if any) approved by the director, and
- be signed by the referring party or their representative, and
- identify another party to the dispute, and
- identify the relevant DBC.
After making an initial assessment of a referral, the conciliation officer (CO) must recommend to the CDRO to accept or reject a referral and must give written notice to each party within 10 business days after making a decision.
If the CDRO accepts the referral, a conciliation conference will be able to be conducted. If the CDRO rejects the referral, some of the considerations that the CDRO has in forming the view that the referral should be rejected are as follows:
- if the referral is not made within time (10 years from the issuing of an occupancy permit or certificate of final inspection)
- if the matter is already before the VCAT or court
- if the referring party fails to take reasonable steps without reasonable excuse to resolve the dispute
If the matter is not resolved at conciliation, the CDRO will issue a Certificate of Conciliation, which must include a statement of reasons why the dispute was not resolved.
The Certificate may include a statement by the CDRO in their opinion that an identified party did not participate in the conciliation or did not participate in good faith.
If the matter is resolved at conciliation, the CO must prepare a written record of agreement for the resolution of the dispute.
Changes to the Building Act 1993 (BA)
Section 16 of the BA includes an amendment that an owner must not permit building work to be carried out on that land unless a building permit has been issued and is in force under the BA and the building regulations.
Currently, section 16 of the BA states that “A person must not carry out building work unless a building permit in respect of the work has been issued and is in force under this Act and the work is carried out in accordance with this Act, the building regulations and the permit.”
The amendment to section 16 of the BA makes it clearer that any owner who permits work to be carried out without a building permit on their property, despite the owner not having carried out the building works themselves, will be in breach of section 16.
Regulation of owner-builders
Changes to take effect on July 4, 2016:
- The VBA will have the power to inspect building works of owner builder projects in addition to just registered building practitioners by inserting the words “or owner-builders” next to registered building practitioners under sections 227B and 227C of the BA
- Just like registered building practitioners, owner-builders will be audited to ensure that their works are carried out competently and do not pose a risk of injury or damage to any person and that building regulations are complied with
- Certificate of consent – the amount at which an owner builder will be required to obtain the certificate of consent from the VBA before carrying out domestic building work without a major domestic building contract will be raised from $12,000 to $16,000 under section 25B of the BA
- Section 25E of the BA will be amended by way of raising the years with which an owner-builder can obtain a certificate of consent from the VBA from three to five years.
Regulation of building surveyors
Pursuant to section 47 of the Amendment Act, there will be a new section 30B inserted into the BA. This will require a relevant building surveyor (RBS) to lodge an approved checklist certifying the lodgment of documents with the relevant council. An approved checklist in accordance with section 30A of the Act has been developed and uploaded to the VBA website. This change is to take effect on July 4, 2016.
- Pursuant to section 78(1A), a builder who has entered into a major or who proposes to act as a domestic builder in relation to domestic building work must not appoint a private building surveyor on behalf of the owner of the land on which the domestic building work is to be carried out. This change is to take effect after September 1, 2016
- Pursuant to section 39 of the Amended Act, section 79(1A) will be inserted which states that a building surveyor is not permitted to act in certain circumstances when the private building surveyor has a conflict of interest. “Related person” is defined under section 79(4) as including “a building surveyor who prepared the design, is an employee of the person who prepared the design or is a financial beneficiary if the person carrying out the building work”. Change to take effect on July 4, 2016.
- Pursuant to section 37E of the Building Act, building surveyors will have greater power to issue directions to fix building work that fails to comply with the Act, the Regulations or the permit. A written direction to fix building work in accordance with section 37F(1) of the Building Act, has been developed and uploaded to the VBA website. Change to take effect on July 4, 2016.
Building Practitioners Board to be abolished and new registration requirement for building practitioners (changes to take effect after September 1, 2016)
Part 2, section 3 of the Amendment Act states that the BPB is being abolished and there will be a transfer of registration and all disciplinary functions from BPB to the VBA.
There will be a new requirement that all building practitioners apply and/or renew their registration with the VBA every five years.
Section 22 of the Amended Act will amend section 171 of the BA and registration of building practitioners will be limited to a period of up to five years.
Part 3, Division 3 of the Amendment Act will repeal section 170(1)(c) of the BA to substitute the old good character test to a ‘fit and proper person’ to practice as a building practitioner, having regarding to all relevant matters, including the character of the applicant.
While the process for re-registration is still to be determined, it will likely include a financial probity test and a police check and not be as extensive as the initial registration process.
Section 170A will be inserted into the BA and states that the VBA can impose any prescribed conditions on a building practitioner’s registration that it considers appropriate.
Section 170(1)(b)(ii) may result in the VBA implementing changes to the Regulations regarding each particular category or class for building practitioners.
It is likely that building practitioners will need to consult with their insurers regarding any increases in insurance premium as there is a likelihood that there will be increased legal costs potential for building registration renewal and a failure of building practitioners to comply with CPD requirements.
VBA internal review of registration
A current or prospective building practitioner will also be able to apply to the VBA for an internal review regarding any decision which is made by the VBA which imposes any conditions on the registration in the particular category or class.
See Division 4 of the Amendment Act – Review of decisions relating to building practitioners section 184 “reviewable decision.”
Section 186 will also be inserted to the BA which allows an internal review determination to be reviewed at the VCAT.
Code of conduct
Under the Amendment Act, there is provision for the VBA to develop codes of conduct for various building practitioner registration classes or to approve codes of conduct as will be developed by the industry bodies. Approved codes will be published in the Government Gazette and will become binding on all practitioners within the class to which the codes apply. Breach of an approved code will be a ground for disciplinary action under the BA.
New disciplinary actions can be taken by the VBA, including immediate suspension and the issuing of show case notices in circumstances where the practitioner is insolvent, has contravened the Act or Regulations, has been convicted of an indictable offence involving fraud, dishonest or the like.
Non-compliance with an adjudication determination under the Security of Payment Act (SOP) can also be classifies as a ground for inquiry. Inquiries can occur by way of the VBA issuing a show cause notice.
Section 23 of the Amended Act which will insert a new section known as 172AA which prescribes that building practitioners will have to demonstrate compliance with CPD requirements and any other renewal criteria or conditions prescribed by the regulations.
Renewal of registration of building practitioners for those already registered (for those who are registered prior to September 1, 2016, a transitional timeline begins on July 1, 2017)
Class of building practitioner
- Practitioners first registered in a year ending in zero or five will need to renew building practitioner registration in the financial year commencing July 1, 2017
- Practitioners first registered in a year ending in one or six will need to renew building practitioner registration in the financial year commencing July 1, 2018
- Practitioners first registered in a year ending in two or seven will need to renew building practitioner registration in the financial year commencing July 1, 2019
- Practitioners first registered in a year ending in three or eight will need to renew building practitioner registration in the financial year commencing July 1, 2020
- Practitioners first registered in a year ending in four or nine will need to renew building practitioner registration in the financial year commencing July 1, 2021.
Changes to the VCAT Act 1998 (changes to be enacted in 2017)
Pursuant to section 15 of the Amendment Act, new clauses 12B to 12D will be inserted into the VCAT Act.
To summarise those changes, for DBWD the tribunal must make an award for costs against an unsuccessful to the dispute if the dispute had been referred for a conciliation conference and the party, refused to participate or did not participate in good faith.
This new amendment prevails in light of section 109 of the VCAT which states that costs are discretionary.
The Amendment Act has introduced many game-changers into the way that the building industry in Victoria will be regulated. Some of the main game-changers that will become law on July 4, 2016 are those that involve the regulation of owner-builders and building surveyors.
Everyone involved in the building and construction industry will need to be ready for how the amendments will affect them.
Should you require further advice on how the changes will impact you then you should contact a qualified building and construction lawyer.