The Hidden Risks of Using an Unregistered Builder

Ensure Your Builder is Registered

Home building in Victoria is heavily regulated and taxed. The situation is only getting worse with additional compliance costs and burdens required by the Buyer Protection legislation and new contract requirements.

For reputable (i.e. registered) home builders, the burden of over-regulation and excessive charges is compounded by the need to compete with unregistered builders. Unregistered builders can undercut registered builders by avoiding the costs associated with registration, insurance and maintaining up-to-date compliance obligations.

Their clients are not protected by statutory insurance, and when defects arise, these builders may be difficult to locate or may refuse to accept responsibility. They often seek to avoid regulatory oversight by operating under the guise of “owner-builders” or by presenting their work as home renovations or improvements. When the media reports on these “dodgy builders”, it often fails to distinguish them from hardworking, compliant builders who are registered and doing the right thing.

Some may argue that those who engage unregistered builders should simply accept the consequences on a “buyer beware” basis. However, the reality is that everyone is affected. The original owner may not understand the distinction between registered and unregistered builders or may have been misled about the builder’s credentials. Future homeowners may be unaware that the home was built by an unregistered person and may not have the benefit of appropriate insurance. In addition, the quality of the building work is likely to be substandard and may require significant and costly rectification.

Sadly, a history of lax enforcement by the former building regulator and lack of interest by Government has allowed these practices to flourish. Thankfully, though, the Building and Plumbing Commission (BPC) (the current building regulator) appreciates the threat posed by unregistered builders and has started to clamp down on them.

The number of actions taken by the BPC is on the rise and includes a recent high-profile criminal prosecution of an unregistered pool builder in Mildura. The BPC’s disciplinary register is getting filled up with details of prosecutions and other regulatory action against unregistered builders.

So, before carrying out home building work without checking to ensure your builder is registered, consider the following:

1. Home building work that does not need a building permit is not automatically excluded from the need for the builder to be registered.
2. If the value of the home building work exceeds $10,000 the person carrying or managing the building work must be a registered domestic builder.
3. If the value of the home building work exceeds $20,000 the registered domestic builder also has to provide first resort home warranty scheme cover.
4. Finally – these rules apply even if you are working for an owner-builder named as the builder on the building permit.

If you are in doubt and a HIA member, don’t hesitate to contact us on 1300 650 620 for more information.