Australia: QBSA licensing changes good news for landlords, developers and participants in PPPs

Last Updated: 16 November 2013
Article by Chris Slocombe

Key Points:

Industry participants will welcome the new exceptions to the licensing requirements of the QBSA Act.

The licensing requirements of the Queensland Building Services Authority Act 1991 (Qld) (the QBSA Act) have regularly caused complications for landlords, developers and participants in PPPs in Queensland.

Responding to calls from industry, the Queensland Parliament has passed amending legislation that removes many of these complications, and provides greater clarity as to when a person is required to hold a QBSA licence.

What was the problem?

Section 42 of the QBSA Act prohibits persons from "carrying out or undertaking to carry out, building work", unless that person holds a contractor's licence of the appropriate class under the QBSA Act.

The QBSA Act provides severe consequences for unlicensed persons, by way of statutory penalties and limits on the amounts that can be recovered for the carrying out of building work. Perhaps more significant still is the possibility that contracts entered into in contravention of the QBSA Act could be found to be unenforceable.

While the intention of the legislation was clearly to seek to prevent unlicensed contractors from performing building work, and thus protecting consumers from dodgy builders and deficient building work, the scope of the various defined terms used in section 42 of the QBSA Act broadened over the years, which gave rise to the possibility that persons who contracted to have a building constructed were required to hold a QBSA licence themselves, despite intending to have the work performed by a licensed contractor.

Parties such as landlords and property developers who entered into agreements to lease and agreements for the purchase of properties to be constructed, which agreements commonly contain undertakings to perform work, and who generally are not licensed under the QBSA Act (as they are generally not themselves builders), would strictly have offended the licensing requirements of the QBSA Act by entering into these agreements. SPVs created for PPPs were in a similar position as they would undertake to have work carried out on behalf of government bodies, but engage building contractors to perform the actual building work.

How is the problem solved?

Following an inquiry into the operation of the Building Services Authority, and submissions from industry participants on the issue of the breadth of the licensing requirements of the QBSA Act, Queensland Parliament passed the Residential Tenancies and Rooming Accommodation and Other Legislation Amendment Act 2013 (Qld) on 30 October 2013 which: 

  • replaces section 42 of the QBSA Act with a new, cut-down version of the previous section 42; and 
  • includes a new Schedule 1A to the QBSA Act, comprising a list of exceptions to the licensing requirements of section 42.

The new Schedule 1A contains an exception to the licensing requirements of section 42 which, at least in part, overcomes the issue described above, by providing that an unlicensed person who:

  • undertakes to carry out building work; or 
  • enters into a contract for, or otherwise directly or indirectly causes, building work to be carried out,

will not contravene section 42 of the QBSA Act where the actual building work is to be carried out by a licensed contractor.

This exception (the Head Contracts Exception), however, does not apply where the building work in question is "residential construction work" or "domestic building work", as those terms are defined in the QBSA Act.

The new Schedule 1A will contain all of the exceptions to the application of section 42 of the QBSA Act, including the pre-existing exceptions previously contained within the subsections of section 42. In addition to the Head Contracts Exception, additional new exceptions have been included for:

  • tenders and offers – unlicensed persons may submit a tender or make an offer to carry out building work in certain circumstances (previously such an activity would have been contrary to the QBSA Act);
  • public private partnerships – special purpose vehicles established for the purpose of a PPP are not required to be licensed in order to engage licensed contractors to perform building work (the PPP Exception); and
  • prescribed governments projects – unlicensed persons will not contravene section 42 where, for a government project prescribed by regulation, the unlicensed person undertakes to carry out building work and the actual building work is to be carried out by a licensed contractor (the Prescribed Government Projects Exception).

Noteworthy also is a carve-out to the Head Contracts Exception, the PPP Exception and the Prescribed Government Projects Exception. The relevant exceptions cease to apply to an unlicensed person if the person "causes or allows any of the building work to be carried out by a person who is not licensed to carry out building work of the relevant class" [emphasis added]. This suggests that a certain level of inquiry will be required of the person who seeks to rely upon the relevant exception, to ensure that the building work is actually carried out by a licensed contractor.

Welcome changes, but a note of caution

Overall many industry participants will welcome these changes to the licensing requirements of the QBSA Act. However those persons who wish to rely upon the new exceptions will need to ensure that they do not cause or allow the actual building work to be carried out by unlicensed persons if they wish to avoid the consequences of offending section 42 of the QBSA Act.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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