Government Messes Up Building Reform

Victorian Builders Bear Brunt of Reform

In my article last month, I summarised the changes proposed late last year by the Victorian government for domestic building insurance. The legislation to introduce this and other changes is now publicly available.

Unfortunately, concern about these changes that I raised in the last article has been more than realised. In that article I mentioned that if “rectification orders are more readily available, then the cost increases would be dramatic; and especially so if homeowners and general insurers learn to routinely seek rectification orders to claim DBI insurance.” The point made here was the power for the new regulator to issue rectification orders needed to be balanced and limited to serious defects where a builder was failing to take responsibility for their work.

The government is establishing a system which not only favours consumers in an extreme way but also limits builders’ rights to pursue legitimate claims. The major problems with the new scheme include the following:

1. The power for the new regulator to issue a rectification order for any incomplete, non-compliant or defective work. The definition of defective is very broad and practically covers any consumer complaint against a builder. In theory at least, a consumer can demand that a rectification order can be made for very vague or minor defects.
2. A rectification order can be made up to ten years after building work is completed. But this ten-year period can be extended if VCAT decides it is appropriate. This means a builder can never know when they will no longer be responsible for a home they have built.
3. If a builder is seeking to recover payment for their work, the legislation seems to allow a consumer to make a claim to the new regulator to stay or delay the legal action to recover payment.
4. It is also unclear when and how a builder will be allowed to recover outstanding payments from the consumer in the future. The government is apparently changing the domestic building contracts laws but there is no certainty about what this means for the future of the current domestic building dispute resolution process.
5. If a builder wants to challenge a rectification order they have the right to appeal to VCAT. But they do not have the right, and VCAT has been banned from having the power, to prevent the order having effect until the appeal is finalised. This means that the right of appeal is almost meaningless.

If this legislation is passed in its current form, home builders will not only need to be prepared for more handover and final payment disputes but also expect that they may regularly encounter pressure to reduce or even forgo their final payment.

It is hard to see how we can attract and retain home builders when the legislation is so biased against them. The Victorian government’s vision to build more homes seems more remote than ever.

HIA members can contact us on 1300 650 620 for more guidance about these changes.