BUILDING INDUSTRY REGULATION

VICTORIA



Commercial and domestic building work | Commercial and domestic registration requirements | Contract formalities | Statutory warranties | Insurance | Remedies


In Victoria the primary legislation regulating the building industry is the Domestic Building Contracts Act 1995 (Vic) (DBC Act) and the Building Act 1993 (Vic) (Building Act).


Commercial and domestic building work



There are significant differences in the requirements of the regulatory framework depending on whether the relevant work is classified as 'domestic building work' or other (commercial) building work.

Domestic building work includes:

  • the construction, renovation, improvement, repair or demolition of a home;
  • work carried out in conjunction with the renovation or repair of a home, such as landscaping, paving and the provision of utilities;
  • site work (including work required to gain access, or to remove impediments to access a site) related to the work; and
  • the preparation of plans or specifications for the carrying out of work.

A 'home' is any residential premises and includes any part of a commercial or industrial premises that is used as a residential premises.

Given this definition, developments which might appear at first to be commercial developments, may upon closer examination fall within the definition of domestic building work. For example, high rise residential towers and serviced apartments forming part of a hotel complex have been held to be a home for the purpose of the DBC Act.


Exemptions and exclusions



The DBC Act excludes several types of works from the scope of domestic building work. For example, farm buildings (other than a home) and buildings intended only for business purposes or to accommodate animals are excluded under the Act.

Further, the
Domestic Building Contracts Regulations 2007 (Vic) stipulate that a number of trades (for example, electrical work and glazing), when forming the entire scope of work under a contract, are exempt from the application of the DBC Act.

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Commercial and domestic registration requirements



Who needs to be registered?



The Building Act requires certain 'disciplines' involved in the building industry to be registered.

These include:


  • building inspectors;
  • draftspersons; and
  • erectors or supervisors.

An application for registration must be in writing, specify the category of registration sought, comply with the regulations and be accompanied by prescribed information relating to the character of the applicant, proof of insurance (where required) and the requisite fee.


What behaviour will be a breach of the registration requirements?



It is an offence for an unregistered person to:

  • hold themselves out as a building practitioner, building surveyor, building inspector, engineer, draftsperson or quantity surveyor;
  • practice as a building inspector or building surveyor; or
  • hold themselves out as registered under Part 11 of the Building Act.

Additionally, it is an offence for an unregistered builder to carry out domestic building work under a major domestic building contract (see next section), or enter into a major domestic building contract.

Any builder who enters into a major domestic building contract must be registered. However, there is no corresponding requirement for domestic building contracts which are not major domestic building contracts.

A 'builder' is any person who carries out, manages or arranges the carrying out of domestic building work.


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Contract formalities



Commercial building contracts



There are no formal requirements in the Building Act for commercial building contracts.


Domestic building contracts



Under the DBC Act there are a number of mandatory requirements for the nature and content of domestic building contracts.

The requirements differ depending on whether the contract is a domestic building contract or a major domestic building contract (where the contract price is greater than $5,000).

The requirements applying to all domestic building contracts include:


  • a prohibition against a builder demanding or receiving an excessive deposit (depending on contract value);
  • restrictions on the use of 'cost plus' clauses;
  • the prohibition of arbitration clauses;
  • restrictions on the use of cost escalation clauses;
  • a requirement that the builder be insured;
  • a prohibition against the builder seeking more than the contract price; and
The additional requirements which apply only to major domestic building contracts include:

  • a prohibition against unregistered builders entering into contracts;
  • a requirement that builders obtain foundation data;
  • limits on progress payments;
  • the inclusion of a cooling off period (five clear business days); and
  • other formal requirements.

Failure to comply with any of these mandatory requirements attracts a penalty.

Further, if the domestic building contract does not comply with the mandated contract formalities:


  • it may not be enforceable by the builder against the building owner; or
  • the building owner may avoid the contract at any time before its completion.

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Statutory warranties



The DBC Act implies various statutory warranties in every domestic building contract including warranties regarding the manner in which the work will be performed and the materials to be used.

These statutory warranties cannot be excluded and apply for the benefit of successors in title. They are enforceable for a period of six years after completion of the work to which the warranty relates.



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Insurance



The Victorian Minister for Planning may require certain specified building practitioners to hold prescribed insurance. This requirement is set out in a Ministerial Order. It is an offence to carry out work as a building practitioner without the prescribed insurance coverage, with the exception of work under a domestic building contract.

The control in relation to insurance, in the context of a domestic building contract, is achieved through a dual mechanism:


  • a builder is not able to be registered unless it has insurance in place; and
  • a builder is prohibited from entering into a domestic building contract unless that builder is registered.


Different categories of warranty insurance



There are a number of Ministerial Orders for various classes of insurance. The coverage provided under the various Ministerial Orders differs. Accordingly, it is important to be certain that you are reviewing the correct Ministerial Order when considering what the entitlement under the relevant policy might be.


Insurance requirements for domestic building work



For domestic building work, the Ministerial Order of 23 May 2003 requires that a builder must have an indemnity insurance policy that indemnifies the builder against liability to the building owner in respect of loss or damage resulting from:

  • defective or incomplete work;
  • breach of statutory warranties, or failure to maintain specified standards;
  • conduct contravening a trades practices provision;
  • loss of deposit; or
  • costs of alternate accommodation.

The insurance cover must cover losses for structural defects for six years from the completion of the work and for non-structural defects for two years.


Insurance requirements for commercial building work



For commercial building work, the Ministerial Order dated 12 May 2005 requires commercial builders to be insured by an indemnity policy which indemnifies the building practitioner against civil liability from claims arising from the building practitioner's conduct as a builder, as well as claims for misleading and deceptive conduct.

The policy may exclude indemnity for:


  • penalties or damages awarded by a court in the settlement of a claim;
  • liability to pay compensation regarding any indirect or consequential loss, or bodily injury; and
  • claims arising out of any work undertaken on domestic buildings.

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Remedies



A number of regulatory bodies are empowered to deal with various complaints about building work.

They include:


  • the Building Practitioner's Board;
  • the Victorian Building Authority;
  • the Director of Consumer Affairs Victoria; and
  • the Victorian Civil and Administrative Tribunal.

These bodies are empowered to deal with issues such as behaviour, quality of works and contractual disputes.

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Updated 11 October 2013