Australia: Victorian domestic building reforms: increased insurance payouts, on site dispute resolution and a new disciplinary regime

In brief - New Victorian Building Authority (VBA) and domestic building industry reform strategy

The Victorian Government has released details of changes to domestic building regulation to be implemented under the proposed new industry authority, the Victorian Building Authority (VBA).

Domestic Building Consumer Protection Reform Strategy (Strategy)

The Department of Treasury and Finance released its Strategy on 27 May 2013. The Strategy outlines the role of the VBA, which was announced in November last year to subsume three regulators: the Building Commission, the Plumbing Industry Commission and the Architects Registration Board of Victoria. The reforms are to be progressively implemented throughout 2013 and 2014. (For more background, please see our earlier article Ombudsman finds overspending and corruption in Victorian Building Commission.)

Easier access to insurance and higher maximum payouts

Changes to the mandatory insurance for domestic building projects will mean that:

  • maximum payouts will increase from $200,000 to $300,000, and
  • homeowners will be able to claim without necessarily having to first prove that the builder is dead, disappeared or insolvent.

Under the current regime, insurance policies are "last resort" and only respond where the builder has died, disappears or is insolvent.

  • Under the reforms, insurance policies will also be required to cover claims where:
  • the VBA has certified that a Rectification Order (discussed below) has not been complied with or successfully appealed to the Victorian Civil and Administrative Tribunal (VCAT) and the building contract has been completed or terminated
  • the builder has been partially suspended, suspended or de-registered and thus cannot complete the project, or
  • the builder is certified as permanently and significantly incapacitated and no substitute arrangements are available.

Binding Rectification Orders to issue on site

Inspectors appointed by the VBA (including on request, for a fee) will have authority to:

  • examine any disputed domestic building work, and
  • issue a binding Rectification Order:
    • requiring the performance of building work, and/or
    • requiring the payment of money to the builder, or into a trust account for release upon completion of work, and/or
    • otherwise determine matters in contention.

Rectification Orders may be appealed to VCAT.

Increased costs orders at VCAT

Parties bearing their own costs will remain the starting position at VCAT, except that under the reforms:

  • a refusal to participate genuinely in dispute resolution will become a factor VCAT may take into account in deciding costs, and
  • the presumption is that costs will be awarded against a party which unsuccessfully appeals against a Rectification Order.

The Strategy includes that VCAT orders should be directly enforceable without any longer having to be converted into court orders first.

Stricter registration and disciplinary regime for builders

Building practitioners will become more closely regulated, including that:

  • a new disciplinary system will be introduced, under which:
    • the VBA will have power to issue new disciplinary sanctions including demerit points and conditions on registration
    • grounds for disciplinary action will be wider, and
    • the Building Appeals and Building Practitioners Boards will be abolished.
  • a publicly accessible register will be established showing building practitioners' disciplinary history
  • the role of building surveyors is to be refined and clarified for consumers and building surveyors alike
  • broader powers to suspend builders will be granted to the VBA to tackle fraudulent phoenix company trading, and
  • registration for building practitioners will no longer be indefinite:
    • renewal will be required after five years, and
    • strict requirements will apply both on registration and renewal, including personal and financial probity tests.

Impact of Strategy

The Victorian Government describes the Strategy as a "wide-ranging package of reforms to give better protection to consumers... and to provide fairer, quicker and cheaper resolution of disputes."

Undoubtedly, the Strategy includes a number of important improvements in protection for homeowners. If Rectification Orders are also able to be reliably made, they may well deliver fair, quick and cheap dispute resolution for both homeowners and builders.

It remains to be seen whether the reforms will ultimately reduce domestic building disputes at VCAT. The answer depends upon whether the Strategy and the package of reforms can drive changes in the behaviour of builders, insurers and homeowners to change the culture of the domestic building industry.

Nathan Abbott Belinda Nisbet
Construction and engineering
Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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