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INQUIRY INTO BUILDING QUALITY S TANDING C OMMITTEE ON E CONOMIC D EVELOPMENT AND T OURISM J ULY 2020 REPORT 9
INQUIRY INTO BUILDING QUALITY
S T A N D I N G C O M M I T T E E O N E C O N O M I C D E V E L O P M E N T A N D T O U R I S M
J U L Y 2 0 2 0
REPORT 9
I N Q U I R Y I N T O B U I L D I N G Q U A L I T Y
THE COMM ITTEE
COMMITTEE MEMBERSHIP
Mr Jeremy Hanson MLA Chair
Mr Michael Pettersson MLA Deputy Chair
Mr Deepak Raj Gupta MLA
SECRETARIATMr Hamish Finlay Secretary
Ms Frieda Scott Senior Research Officer
Ms Alice Houghton Senior Research Officer
Ms Jindriska Coufalova Senior Research Officer
Ms Lydia Chung Administrative Support
Ms Michelle Atkins Administrative Support
CONTACT INFORMATIONTelephone 02 6205 0129
Post GPO Box 1020, CANBERRA ACT 2601
Email [email protected]
Website www.parliament.act.gov.au
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RESOLUTION OF APPOINTMENT
At its meeting of 13 December 2016 the Legislative Assembly resolved to create:
A Standing Committee on Economic Development and Tourism to examine matters relating to economic and business development, small business, tourism, market and regulatory reform, public sector management, taxation and revenue, procurement, regional development, international trade, skills development an d employment creation, and technology, arts and culture.
On 26 October 2017 the Legislative Assembly resolved to amend:
Omit the words "market and regulatory reform, public sector management, taxation and revenue", substitute "Access Canberra".
TERMS OF REFERENCE
On 28 March 20181 the Standing Committee on Economic Development and Tourism agreed to the following terms of reference:
1. The certification regime for the building and construction industry including;
a. Review by certifiers of the initial building plans;
b. Compliance by builders with the building’s approved construction plans;
c. The adequacy of regulatory mechanisms to ensure compliance with approved construction plans;
d. The role of inspections and audits in the regulatory process; and
e. The appropriateness of current practices for appointing certifiers, including addressing the potential for conflicts of interest.
2. The merits of standard contracts or statutory requirements in contracts covering build quality.
3. Industry skills accreditation and ongoing professional development including;
a. The breadth of the occupational licensing regime in the ACT; and
b. The suitability of ongoing skills education and practices within the industry.
1 http://www.hansard.act.gov.au/hansard/2018/pdfs/20180321a.pdf p. 105 [p. 881]
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4. Processes and practices for the identification and rectification of defects including;
c. Current mechanisms available for defect identification and redress;
d. The effectiveness of those mechanisms to ensure rectification in instances where standards have not been met;
e. The adequacy and accessibility of those mechanisms especially for individuals or body corporates; and
f. The effectiveness of efforts to address “phoenixing” – the transfer of assets from an indebted building company to a new one to avoid paying its liabilities.
5. The cost effectiveness of current building compliance and defect rectification practices for industry, government, individuals or body corporates and the potential for the introduction of alternative dispute resolution mechanisms.
6. The role of Access Canberra.
7. The regulatory setting or practices in other jurisdictions that could inform consideration of any of the above.
8. Personal experiences that could inform consideration of any of the above.
9. Any other relevant matter.
.
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ACRON YMS
ABCB Australian Building Codes Board
ACAT Administrative and Civil Appeals Tribunal
ACTPLA ACT Planning and Land Authority
ADR Alternative dispute resolution
AIA Australian Institute of Architects
AIB Australian Institute of Building
AIBS Australian Institute of Building Surveyors
AMCA Air Conditioning and Mechanical Contractors Association
BCA Building Code of Australia
BCR Building Confidence Report
BMF Building Ministers Forum
COAG Council of Australian Governments
DIN Director Identification Number
DTS Deemed to Satisfy
EC Executive Committee
EPSDD Environment, Planning and Sustainable Development Directorate
HIA Housing Industry Association
MBA Master Builders Association
NCC National Construction Code
NSW New South Wales
OC Owners Corporation
PCA Plumbing Code of Australia
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TABLE OF CONTENTS
T H E C O M M I T T E E ..............................................................................................................ICommittee Membership......................................................................................................................... i
Secretariat.............................................................................................................................................. i
Contact Information............................................................................................................................... i
Resolution of appointment.................................................................................................................... ii
Terms of reference................................................................................................................................ ii
A C R O N Y M S .....................................................................................................................I V
R E C O M M E N D A T I O N S ...................................................................................................V I I
1 I N T R O D U C T I O N .........................................................................................................1Conduct of the inquiry........................................................................................................................... 2
Structure of the Report.......................................................................................................................... 2
Acknowledgements............................................................................................................................... 3
2 B U I L D I N G Q U A L I T Y I N T H E A C T ..........................................................................4Building Quality in the ACT: an Overview...............................................................................................4
Improving the ACT Building Regulatory System 2016..............................................................................7
Shergold Weir Report.......................................................................................................................... 14
3 C A U S E S O F B U I L D I N G Q U A L I T Y I S S U E S ............................................................2 2Cost and time pressures....................................................................................................................... 22
Building material issues....................................................................................................................... 24
Builder training.................................................................................................................................... 25
Involvement of experts........................................................................................................................ 26
4 T H E R E G U L A T O R ...................................................................................................2 8Access Canberra................................................................................................................................... 31
5 C O N S U M E R A D V I C E A N D P R O T E C T I O N ..............................................................3 9Phoenixing........................................................................................................................................... 45
6 C O N T R A C T S A N D D I S P U T E R E S O L U T I O N ..........................................................4 9
7 L I C E N S I N G ..............................................................................................................5 5Architects............................................................................................................................................ 59
8 C E R T I F I C A T I O N ......................................................................................................6 1
9 D E F E C T R E C T I F I C A T I O N .......................................................................................6 8
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1 0 A D D I T I O N A L M A T T E R S .........................................................................................7 3Balcony Safety..................................................................................................................................... 73
Cladding.............................................................................................................................................. 75
1 1 C O N C L U S I O N ..........................................................................................................7 6
A P P E N D I X A - W I T N E S S E S ........................................................................................7 710 April 2019....................................................................................................................................... 77
1 May 2019.......................................................................................................................................... 77
8 May 2019.......................................................................................................................................... 77
22 May 2019........................................................................................................................................ 77
29 May 2019........................................................................................................................................ 77
24 July 2019......................................................................................................................................... 78
7 August 2019...................................................................................................................................... 78
28 August 2019.................................................................................................................................... 78
4 September 2019................................................................................................................................ 78
A P P E N D I X B – S U B M I S S I O N S ...................................................................................8 0
A P P E N D I X C : R E C O M M E N D A T I O N S F R O M S H E R G O L D W E I R R E P O R T B U I L D I N G C O N F I D E N C E – I M P R O V I N G T H E E F F E C T I V E N E S S O F C O M P L I A N C E A N D E N F O R C E M E N T S Y S T E M S F O R T H E B U I L D I N G A N D C O N S T R U C T I O N I N D U S T R Y A C R O S S A U S T R A L I A ...........................................................................8 5
A P P E N D I X D : S U M M A R Y O F P R O P O S E D A C T B U I L D I N G R E G U L A T O R Y S Y S T E M R E F O R M S , J U N E 2 0 1 6 .........................................................................................8 9
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RECO MMEND ATI ONS
R E C O M M E N D A T I O N 12.36 The Committee recommends that the ACT Government implement the outstanding
recommendations of the 2016 Improving the ACT Building Regulatory System report and the Shergold-Weir report.
R E C O M M E N D A T I O N 22.37 The Committee recommends that the Minister for Building Quality, as part of the ACT
Government response to this report, continue to publish:
a list of all recommendations in the 2016 Improving the ACT Building Regulatory System report and the Shergold-Weir report;
the action taken by the ACT Government to date to implement those recommendations; and
the timeline for further action on those recommendations.
R E C O M M E N D A T I O N 34.10 The Committee recommends that the ACT Government establish a Building Commissioner as an
independent statutory officer with a remit to ensure building code and standards compliance by:
performing audits;
enforcing site inspections during the various phases of a build;
managing license compliance of professionals;
managing the allocation of certifiers to developments; and
managing the Notices of Dispute and Arbitration processes and make decisions enforceable on both parties.
R E C O M M E N D A T I O N 44.17 The Committee recommends that the ACT Government and/or Building Commissioner establish
a comprehensive audit scheme that:
applies to all who hold a license or registration;
underpins the accreditation and licensing system which applies to all professionals and other practitioners;
deals with processes, procedures, and work performed;
includes all trades, practitioners, and professionals involved in the building and construction process; and
include both randomised audit inspections and scheduled inspections of high-risk work.
R E C O M M E N D A T I O N 54.18 The Committee recommends that the ACT Government, noting that plumbing, electrical,
waterproofing and drainage works are frequent sources of building quality issues, review the current level of inspection of these works and report back to the Assembly.
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R E C O M M E N D A T I O N 64.22 The Committee recommends that the ACT Government review funding for enforcement staff
within Access Canberra, so that all building, design and development complaints can be responded to, and disputes resolved, in a timely and consistent manner.
R E C O M M E N D A T I O N 74.23 The Committee recommends that the ACT Government have an appropriately staffed shop front
for Access Canberra’s building regulatory activities, with sufficient staff for a mobile/response unit able to enforce regulatory actions at short notice.
R E C O M M E N D A T I O N 84.27 The Committee recommends that Access Canberra continue to promote and work on the “build,
buy or renovate” website to make it easier for the public to locate information on their rights and responsibilities and disciplinary action against building practitioners.
R E C O M M E N D A T I O N 94.34 The Committee recommends that the ACT Government implement a mechanism where recurring
problems or findings of certifiers and inspectors are conveyed to industry including through training or information sessions for industry to highlight problems and best practice methods.
R E C O M M E N D A T I O N 1 04.43 The Committee recommends that the ACT Government strengthen processes to ensure that
developers lodge plans “as built”, with an initial focus on large multi-unit developments.
R E C O M M E N D A T I O N 1 14.44 The Committee recommends that the ACT Government require developer lodged plans to
provide a minimum standard of detailed design drawings/specifications for areas that are commonly defective.
R E C O M M E N D A T I O N 1 25.7 The Committee recommends that the ACT Government consider establishing an ACT Building
advice line to inform consumers about the processes involved including available dispute mechanisms.
R E C O M M E N D A T I O N 1 35.8 The Committee recommends that the ACT Government:
provide information to consumers, including Owners’ Corporation Executive Committees, on their rights and processes to seek redress when building quality issues take place, including by developing tool kits to support those taking legal action; and
require builders to supply information on that material at the quote or draft contract stage.
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5.12 The Committee recommends that the ACT Government consider making it mandatory for the regulator to inform the public of any rectification orders not completed or addressed within the required timeframe.
R E C O M M E N D A T I O N 1 55.23 The Committee recommends that the Minister responsible for Fidelity Funds established under
the Building Act 2004 provide audited accounts and an annual report to the Assembly on their performance.
R E C O M M E N D A T I O N 1 65.24 The Committee recommends that the ACT Government ensure that, if not already in place,
appropriate prudential standards are set for fidelity funds under Part 6 of the Building Act 2004 (and section 103, in particular) and further, that once set, such prudential standards are maintained and enforced.
R E C O M M E N D A T I O N 1 75.27 The Committee recommends that the ACT Government review the fidelity fund and report the
findings of that review to the Assembly.
R E C O M M E N D A T I O N 1 85.30 The Committee recommends that, as part of its review of the fidelity fund, the ACT Government
consider expanding the scope to allow Owners’ Corporation Executive Committees to make claims for common areas.
R E C O M M E N D A T I O N 1 95.40 The Committee recommends that the ACT Government report to the Assembly on:
Action taken to date to address “phoenixing” in the building industry;
Any further actions planned; and
How the Commonwealth legislation passed in June 2020 will affect action against phoenixing in the ACT.
R E C O M M E N D A T I O N 2 05.41 The Committee recommends that the ACT Government consider restricting the use of special
purpose vehicles for the acquisition, development and sale of property
R E C O M M E N D A T I O N 2 16.3 The Committee recommends that the ACT Government amend the Unit Title legislation to make
it mandatory, upon occupancy and creation of the Owners’ Corporation (OC), that an agreement be established between the developer and the OC for addressing all common property (building and landscape) issues.
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6.10 The Committee recommends that the ACT Government publish a standard building contract that incorporates best practice.
R E C O M M E N D A T I O N 2 36.11 The Committee recommends that the ACT Government implement a standard contract
requirement that the display unit of a project dwelling have the same building quality as intended for and used in the development it represents.
R E C O M M E N D A T I O N 2 46.12 The Committee recommends that standard building contracts contain minimum specifications
for seals or membranes, as some products used for waterproofing are unsuitable for Canberra’s climate.
R E C O M M E N D A T I O N 2 56.21 The Committee recommends that the ACT Government establish a building standards and
disputes tribunal with the power to:
oversee the rectification of defects that have not been remedied in the contracted time;
impose a time frame for rectification of defects, monitor rectification progress and make enforcement orders as necessary;
adjudicate complaints; and
call for documents, people or other things, in order to reach its decision.
R E C O M M E N D A T I O N 2 66.22 The Committee recommends that, should a building standards and disputes tribunal not be
established, that the ACT Government consider for building matters amending the ACT Civil and Administrative Tribunal Act 2008 to increase the amount of money that can be claimed through the tribunal above $25,000 and to enable ACAT to hear contract disputes that arise.
R E C O M M E N D A T I O N 2 76.27 The Committee recommends that the Unit Titles (Management) Act 2011 be amended to prevent
strata management companies being contracted for longer than 12 months during the period of developer control.
R E C O M M E N D A T I O N 2 87.11 The Committee recommends that the ACT Government amend the Constructions Occupations
(Licensing) Act 2004 to expand the breadth of licensing in the ACT to license Architects, Engineers, Designers, Water Proofers, Fire Proofers, Carpenters, Painters and Concreters to cover trades associated with the more critically building issues in line with the Shergold-Weir report.
R E C O M M E N D A T I O N 2 97.14 The Committee recommends that the ACT Government review the link between builders’
licences and associated companies, so licences can be reviewed where associated with companies that have failed to honour contracts.
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R E C O M M E N D A T I O N 3 07.17 The Committee recommends that the ACT Government ensure that vocational education and
apprenticeship schemes are funded appropriately to ensure the production of sufficient high-quality licensees to meet market demand.
R E C O M M E N D A T I O N 3 17.19 The Committee recommends that the ACT Government review barriers to accessing current
copies of the Building Code of Australia (BCA) and Australian Standards to assist licenced builders to have access without facing punitive costs.
R E C O M M E N D A T I O N 3 27.21 The Committee recommends that the ACT Government provide more transparent statistics
regarding disciplinary action against licensees.
R E C O M M E N D A T I O N 3 37.22 The Committee recommends that the ACT Government consider the imposition of more
significant penalties for breaches on building licences.
R E C O M M E N D A T I O N 3 47.23 The Committee recommends that the ACT Government review the criteria for renewing building
licences.
R E C O M M E N D A T I O N 3 57.28 The Committee recommends that the ACT Government complete the objects of the ACT
Architects Act 2004 by:
Requiring adherence to a code of conduct upon registration;
Requiring the holding of professional indemnity insurance; and
Mandating continuing professional development.
R E C O M M E N D A T I O N 3 68.20 The Committee recommends, noting the Minister for Building Quality’s announcement of a
possible requirement to use public certifiers, that the ACT Government also consider, for multi-unit developments (where the developer or builder is also the owner) the Building Commissioner or regulator establish a panel of certifiers and that developers be required to choose their certifier from a rotating subset of that panel.
R E C O M M E N D A T I O N 3 78.21 The Committee recommends that the ACT Government ensure building plans (detailed rather
than concept plans) are reviewed and assessed by certifiers from the beginning of the development.
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8.22 The Committee recommends that the ACT Government consider make it mandatory for the first action of an Executive Committee in a multi-storeyed apartment development to be to obtain a Building Code of Australia Audit Report from an independent certifier so as to provide assurances on the buildings compliance with the Deemed-to-Satisfy (DTS) requirements of the Building Code of Australia (BCA) as well as the ACT’s Building Act 2004 and Building Regulation 2008.
R E C O M M E N D A T I O N 3 98.27 The Committee recommends that the ACT Government consider adding additional hold points
for certification in the building process including:
waterproofing of balconies, courtyards, and tiled areas; and
leak testing of roofs.
R E C O M M E N D A T I O N 4 08.33 The Committee recommends that Certificates of Occupancy should not be issued on a building
until:
a representative of the unit responsible for achieving and storing the drawings (and the certifier) has signed a document to verify that the drawings issued to the department are all of the relevant ‘work as executed’ structural (including shop drawings and precast drawings), architectural, mechanical, electrical, hydraulic, fire and landscape drawings;
detailed and accurate plans are lodged with the ACT government, and lodgement verified by the responsible officer; and
all documents are also lodged with corporate bodies.
R E C O M M E N D A T I O N 4 19.13 The Committee recommends that the ACT Government investigate a building bonds scheme for
multi-unit residential buildings requiring a percentage of the contract value of a property be withheld in a Trust until all defects and warrant issues are addressed satisfactorily.
R E C O M M E N D A T I O N 4 29.21 The Committee recommends that the ACT Government consider amending legislation to make
developers, in addition to builders, liable for breaches of statutory warranties under the Building Act 2004.
R E C O M M E N D A T I O N 4 39.23 The Committee recommends that the ACT Government review statutory warranties to extend
cover for longer term issues including waterproofing, façade cracking and fire protection.
R E C O M M E N D A T I O N 4 49.25 The Committee recommends that the ACT Government consider broadening the application of
the implied warranties under Division 2.9.3 of the Civil Law (Property) Act 2006 by removing the requirement of knowledge of defects on the part of the seller of newly built units.
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R E C O M M E N D A T I O N 4 510.3 The Committee recommends that the ACT Government report back to the Assembly within 6
months of the tabling of this report with information on the regulation of building materials, the respective responsibilities between the Commonwealth and the States and Territories and what position the ACT Government is taking in Building Ministers’ Forum discussions on building material regulation.
R E C O M M E N D A T I O N 4 610.7 The Committee recommends that the ACT Government make representations to the Australian
Building Codes Board to expand Part 3.9.2.3 (c) of the National Construction Code to investigate and make specific recommendations on the maximum safe distances a balustrade can be set out and away from a floor or balcony, specifically taking into consideration balustrades in high rise developments.
R E C O M M E N D A T I O N 4 710.10 The Committee recommends that the ACT Government review minimum requirements for multi-
unit buildings to make them suitable for those with disabilities, with a focus on safety and common areas.
R E C O M M E N D A T I O N 4 810.14 The Committee recommends that the ACT Government draw on the Territory’s experience
dealing with loose-fill asbestos risks and prepare mechanisms for:
the owners of buildings with flammable cladding to produce detailed plans on how the risk will be managed;
those renting or purchasing buildings with flammable cladding to be informed of the risks; and
appropriate fire management plans to be created taking into account the risks posed by the cladding.
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1 INTRO DUCTIO N
1.2 On 28 March 20182 the Standing Committee on Economic Development and Tourism agreed to the following terms of reference:
1. The certification regime for the building and construction industry including;
a. Review by certifiers of the initial building plans;
b. Compliance by builders with the building’s approved construction plans;
c. The adequacy of regulatory mechanisms to ensure compliance with approved construction plans;
d. The role of inspections and audits in the regulatory process; and
e. The appropriateness of current practices for appointing certifiers, including addressing the potential for conflicts of interest.
2. The merits of standard contracts or statutory requirements in contracts covering build quality.
3. Industry skills accreditation and ongoing professional development including;
f. The breadth of the occupational licensing regime in the ACT; and
g. The suitability of ongoing skills education and practices within the industry.
4. Processes and practices for the identification and rectification of defects including;
h. Current mechanisms available for defect identification and redress;
i. The effectiveness of those mechanisms to ensure rectification in instances where standards have not been met;
j. The adequacy and accessibility of those mechanisms especially for individuals or body corporates; and
k. The effectiveness of efforts to address “phoenixing” – the transfer of assets from an indebted building company to a new one to avoid paying its liabilities.
5. The cost effectiveness of current building compliance and defect rectification practices for industry, government, individuals or body corporates and the potential for the introduction of alternative dispute resolution mechanisms.
6. The role of Access Canberra.
2 http://www.hansard.act.gov.au/hansard/2018/pdfs/20180321a.pdf p. 105 [p. 881]
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7. The regulatory setting or practices in other jurisdictions that could inform consideration of any of the above.
8. Personal experiences that could inform consideration of any of the above.
9. Any other relevant matter.
CONDUCT OF THE INQUIRY
1.3 The Committee called for public submissions on 12 April 2018. The Committee issued a media release and the inquiry was announced through the Assembly’s internet and social media channels. The Committee Secretary wrote directly to relevant parties asking them to consider making a submission. The Committee requested submissions by 6 July 2018 but extended this deadline on multiple occasions and accepted submissions received by 30 November 2018. The Committee received 103 submissions and these have been published on the Assembly’s website at: https://www.parliament.act.gov.au/parliamentary-business/in-committees/committees/standing-committees-current-assembly/standing-committee-on-economic-development-and-tourism/inquiry-into-building-quality-in-the-act
1.4 The Committee held nine public hearings on 10 April, 1, 8, 22, and 29 May, 24 July, 7 and 28 August, 4 September 2019. At these hearings, the Committee heard evidence from 52 witnesses. Full details of witnesses who appeared are available in Appendix B of this report. Transcripts from the hearings are available at: http://www.hansard.act.gov.au/hansard/2017/comms/default.htm
1.5 During the course of this inquiry the Building and Construction Legislation Amendment Bill 2019 was referred to the Committee by the Assembly. The Committee reported on that Bill in November 2019 and the Bill was subsequently passed.
STRUCTURE OF THE REPORT
1.6 This report draws from research, submissions and evidence given at public hearings to examine the issues around Building Quality in the ACT.
1.7 The structure of this report is as follows:
Chapter 1: Introduction
Chapter 2: Building Quality in the ACT
Chapter 3: Causes of Building Quality Issues
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Chapter 4: Accountability and Auditing
Chapter 5: Consumer Advice and Protection
Chapter 6: Contracts
Chapter 7: Licensing
Chapter 8: Certification
Chapter 9: Defect Rectification
Chapter 10: Additional Matters
Chapter 11: Conclusion
ACKNOWLEDGEMENTS
1.8 The Committee wishes to thank all the individuals and organisations that made submissions to the Committee or appeared before it at a public hearing.
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2 BUILD ING QUALI TY IN THE ACT2.1 This chapter aims to provide a context for this report. It starts with an overview of building
quality and highlights key areas of concern before looking at two important initiatives: the ACT building regulatory reforms and the Shergold Weir Building Confidence Report.
2.2 As the discussion in this chapter will show, despite strong calls for action from the community and industry, and regardless of having established reforms plans, for a period the ACT Government appeared to make no major improvement in the ACT building regulatory system.3 The Government was behind schedule in implementing its self-established reforms. Coinciding with the commencement of this inquiry, a new ministerial portfolio for Building Quality Improvement was created and reform efforts gained new momentum.
BUILDING QUALITY IN THE ACT: AN OVERVIEW
2.3 The ACT has been experiencing strong population growth. The ACT’s population is projected to reach around 450,000 people by 2022, an increase of 40,000 compared with 30 June 2017. By 2058, an estimated 700,000 people will call the ACT home.4 This increased population will require places to live so thousands of dwellings will need to be constructed over the coming years.
2.4 Among the dwelling choices in Australia, multi-storey/high rise apartments have become increasingly popular over the past two decades. According to the Australian Bureau of Statistics’ data, there are 667,394 apartments, flats or units that have been built all over the country from the end of 2000 up until March 2019; 26,116 of them are built in the ACT.5 Building activity data on apartment commencement in the past 15 years shows a sharp increase in the percentage of high rise/9-19 storeys (152.8% increase from 2005) and super high rise/20 or more storeys (360.8% increase) apartments commenced.6 Currently, there are plans to build another 140,000 apartments across the country.7 Contributing factors behind this trend include affordability, the convenience and reduced travel time due to proximity to work and easy access to amenities in urban centres.
2.5 However, the boom in residential building and constructions highlighted the existence of building quality issues, particularly in multi-storey apartment buildings. A study of buildings in
3 For example see paragraph 2.11.4 ACT Population Projections 2018 to 2058, Chief Minister, Treasury and Economic Development Directorate, January
2019, p. 7.5 https://www.abc.net.au/news/2019-08-18/how-bad-could-the-apartment-building-crisis-be-in-your-state/11413122?
nw=0. 6 https://www.abs.gov.au/ausstats/[email protected]/Latestproducts/8752.0Feature%20Article1Dec%202019?
opendocument&tabname=Summary&prodno=8752.0&issue=Dec%202019&num=&view=. 7 https://theurbandeveloper.com/articles/mascot-towers-lessons-off-the-plan.
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Australia’s east coast States, that were built after 2003, found more than 70% of them had at least one defect.8
2.6 High profile cases with devastating impacts like the Opal and Mascot towers in Sydney, the Lacrosse tower in Melbourne and the Elara apartments in Canberra reveal serious problems not only related to structure and safety but also the complex building regulatory system and enforcement.
2.7 It is difficult to get an exact prevalence and costs of building defects in the ACT. However, as an indication, Access Canberra received complaints related to planning and construction laws on the equivalent of 10% of the housing stock approved in 2016-2017.9 Also, concerns over building defects in the ACT and efforts to rectify them have existed since at least a decade ago. For example, in 2010 there were correspondence between the Owner’s Corporations Network (ACT) and the Minister of Planning to address building defects and reforms.10 In addition, as will be discussed in the following chapters, submissions for this inquiry revealed a range of defective issues, many of which resulted in significant emotional and financial distress. A 2019 report suggest a ‘conservative’ figure of over $260 million would be needed to fix structural and safety defects in apartment buildings across the ACT.11
2.8 Adding to the difficulty in assessing the extent of building quality issues in the ACT are the incentives homeowners have in keeping possible defects quiet. The Owners Corporation Network told that owners of units in developments with building quality issues are:
scared about the value of their property. They pay $300,000, $400,000, $500,000, $600,000, $700,000—whatever the number is. That might be the biggest investment they have ever made. And if they then go through and start to talk about the fact that their building has got defects and this that and the other, obviously that is going to have an impact on the value of their investment.12
2.9 The HIA made the observation that:
it is clear there are consumers in the ACT whose expectations of their home building experience have not been met. Equally, it is important to acknowledge that this is the exception rather than the rule with thousands of Canberrans each year experiencing the joy of taking possession of a new home and any regulatory responses should reflect this balance.13
8 Johnston, N., & Reid, S. (2019). An examination of building defects in residential multi-owned properties. Deakin University and Griffith University. https://www.griffith.edu.au/__data/assets/pdf_file/0030/831279/Examining-Building-Defects-Research-Report.pdf
9 https://www.parliament.act.gov.au/parliamentary-business/in-committees/committees/standing-committees-current-assembly/standing-committee-on-economic-development-and-tourism/inquiry-into-building-quality-in-the-act#tab1187427-2id, p. 4.
10 https://www.parliament.act.gov.au/__data/assets/pdf_file/0006/1365810/Letter-from-Owners-Corporation-Network-to-Minister-for-Planning-30-June-2010.pdf; https://www.parliament.act.gov.au/__data/assets/pdf_file/0005/1365809/Letter-from-Mr-Barr-Minister-of-Planning-re-building-defects-7-June-2010.pdf.
11 Shaky Foundations: The National Crisis in Construction, Equity Economics for CFMEU, 2019, p. 5. p12 Transcript of Evidence, 8 May 2019, p. 95.13 Transcript of Evidence, 24 July 2019, p. 169.
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2.10 On the potential scale of the issues Mr Mal Wilson of Engineers Australia mentioned a building he had been called in to look at that had major cracks in the basement, waterproofing issues and balconies not properly secured to the building. The consultant who originally worked on the building had been “historically, doing 30 per cent of the buildings in Canberra.”14
2.11 Over the years, there have been various initiatives to improve the ACT building regulatory system. Master Builders Australia in its submission to the Committee noted:
This current (2018) inquiry comes after a long history of inquiries and reviews of the ACT’s building regulatory system, namely in 2010 and 2016. Master Builders ACT has made submissions to each of these inquiries.
The recommendations made by Master Builders ACT in our previous submissions and in our Building Quality Policy Paper have helped to inform the recommendations from the 2010 and 2016 ACT Government reports. However, disappointedly, many of the recommendations made by the ACT Government have not yet been acted upon. In some cases, these recommendations remain incomplete after nearly ten years.15
2.12 Other initiatives include:
the establishment of Building Quality Forum (2010);16
the ACT Construction and Energy Efficiency Legislation Amendment Acts in 2013-2014;17
the publication of ‘Building in the ACT: a consumer guide to the building process’ in 2014;18
the creation of Access Canberra in 2014 – one of its roles is to administer building regulation.19
the creation of the new ministerial portfolio for Building Quality Improvement in mid-2018.20
IMPROVING THE ACT BUILDING REGULATORY SYSTEM 2016
2.13 The latest effort to improve building quality in the ACT is the Improving the ACT Building Regulatory System program. This reform program started in 2016 following the ACT Government’s review of the ACT building regulatory system. The review resulted in the production of the ACT Building Regulatory System discussion paper. Produced in November 2015, this paper canvassed reform options and detailed consultation with stakeholders.
14 Transcript of Evidence, 28 August 2019, p. 252.15 https://www.parliament.act.gov.au/__data/assets/pdf_file/0011/1312994/075-Master-Builders-Association.pdf, p. 1. 16 https://www.parliament.act.gov.au/__data/assets/pdf_file/0011/1312994/075-Master-Builders-Association.pdf, annex
B. 17 http://www.legislation.act.gov.au/a/2014-2/20140306-57404/pdf/2014-2.pdf. 18 https://www.planning.act.gov.au/__data/assets/pdf_file/0006/898458/Improving-the-ACT-Building-Regulatory-System-
Discussion-Paper.pdf, p. 2. 19 https://www.accesscanberra.act.gov.au/app/answers/detail/a_id/1782/~/about-access-canberra#:~:text=On
%2016%20December%202014%2C%20the,a%20highly%20effective%20services%20hub. 20 https://www.cmtedd.act.gov.au/open_government/inform/act_government_media_releases/barr/2018/expanded-
ministry-to-deliver-for-canberra.
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2.14 The Improving the ACT Building Regulatory System program aims to ‘set the parameters for quality design, building, certification, and training practices across the ACT, giving certainty to both property owners and industry’.21 The program achieves its aims through guiding a series of improvements throughout the design and construction process. According to the ACT Government, the reforms are targeted at:
creating more effective protections for residential building owners and improving dispute resolution processes for residential building work
responding to the challenges and issues relating to multi-unit residential buildings
improving documentation for building projects
enhancing on-site supervision and verification of work at critical stages
strengthening the builders’ and building surveyors’ licensing systems
improving administrative and compliance actions to better prevent the occurrence and severity of defects
reducing the impact of insolvencies, bankruptcies and financial management issues and improving security of payments.22
2.15 The program consists of 43 reforms, grouped into 29 short-term and 14 medium-term reforms.23 The short-term reforms would address the areas of design and documentation; stage inspection and onsite supervision; builders and building surveyors licensing; contracts for residential buildings and building work; project funding, payment claims and retentions; and alternative dispute resolutions for residential buildings.24 The medium-term reforms would continue all areas of short-term reforms except design and documentation.25 A consolidated list of reforms can be found in Appendix E.
2.16 The original time frame for all reforms’ completion was the end of 2017-18.26 However, initial progress has been slow. By the end of the deadline in mid-2018, the ACT government had only implemented 13 out of 43 reforms.27 The ACT Government identified factors such as changes at the national level and personnel recruitment issues as the causes for the delay.28 The thirteen activities that were complete in the two years of the reform program are:
expanded powers for the regulator to refuse or condition a construction licence;
new powers to require licensees to undertake skills assessment;
creation of a framework for the regulator to direct construction licence holders in particular licence classes to undertake specified training;
21 EPSD Directorate, The ACT Building Regulations System: Summary of Proposed Reforms, June 2016, p. 1.22 https://www.parliament.act.gov.au/__data/assets/pdf_file/0005/1312988/069-ACT-Government.pdf, p. 4.23 EPSD Directorate, The ACT Building Regulations System: Summary of Proposed Reforms, June 2016.24 EPSD Directorate, The ACT Building Regulations System: Summary of Proposed Reforms, June 2016, pp. 2-3.25 EPSD Directorate, The ACT Building Regulations System: Summary of Proposed Reforms, June 2016, p. 4.26 EPSD Directorate, The ACT Building Regulations System: Summary of Proposed Reforms, June 2016.27 https://www.abc.net.au/news/2018-11-07/act-government-misses-deadline-on-construction-industry-reforms/
10472828.28 https://www.abc.net.au/news/2018-11-07/act-government-misses-deadline-on-construction-industry-reforms/
10472828.
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new offences and increased penalties for failing to comply with the ACT Building Act, building code and with a rectification order;
a public register of disciplinary information about licensees;
improved information gathering powers for investigators;
further restrictions on the types of qualifications and experience required to gain an ACT building licence;
new provisions and powers to help prevent ‘phoenixing’ in ACT; construction licensees and people shifting their operations between existing licences;
clarification of the roles of building certifiers and the obligations of corporate and partnership construction licensees in legislation;
new grounds for occupational discipline and automatic suspensions of a construction licence;
statutory warranties to all residential buildings;
increased maximum payments that can be imposed in an occupational discipline order; and
new reporting related to changes in a licensee’s eligibility, including on financial grounds.29
2.17 Since then, as of April 2020, a total of 29 reforms are complete30 with the Government aiming to complete all reforms by the third quarter of 2020.31
No. Category Reform Status
1 Design and documentation
Develop guidelines for minimum design documentation for building approval applications:commencing with initial design documentation, with a view to expanding to maintenance documentation at a later stageexpanding to all classifications of buildings over timestarting with voluntary compliance with a transition period for moving to mandatory within 6 months of release of the guidelines.
Complete
2 Design and documentation
Consider including some aspects of advice on high-risk building elements (e.g. balconies over habitable spaces)
Complete
29 https://www.industry.gov.au/sites/default/files/2020-03/building-confidence-report-jurisdictional-update-2019.pdf, p. 27.
30 https://www.planning.act.gov.au/build-buy-renovate/reviews-and-reforms/building-reforms/status-of-building-reforms . 31 https://www.industry.gov.au/sites/default/files/2020-03/building-confidence-report-jurisdictional-update-2019.pdf, p.
29.
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No. Category Reform Status
in the existing pre-DA process to alert people to high-risk features and things that may be incompatible with building laws, with a view to expand the range of issues as resources and skills increase.
3 Stage Inspection and Supervision
Develop guidelines for builders for supervision and critical hold points with the intention they will be adopted as codes of practice under the Building Act.
In progress
4 Stage Inspection and Supervision
Develop new provisions in the Building Act outlining the functions of the certifier and the purpose and scope of stage inspections, and supporting codes of practice.
Complete
5 Stage Inspection and Supervision
Enact regulations to require stage inspection information shortly after the inspection is complete.
Pending release of new electronic lodgement system.
6 Licensing Remove architectural and engineering qualifications from the mandatory qualifications schedule, with a transition period for applicants who have made an application prior to the commencement.
Complete
7 Licensing Implement a conditioning system for applicants with insufficient experience on residential buildings and revise mandatory qualifications in relation to evidence, critical stages and stages external verification of experience.
Complete
8 Licensing Revise mandatory qualifications to specifically give the Registrar discretion not to consider references from builders with a poor compliance history or in relation to defective work.
Complete
9 Licensing Expand the written assessment prepared for the pilot for class c licensees to incorporate additional subjects, and include random result validation, and create assessments for A and B class licensees.
Complete
10 Licensing Consider interviews conducted by the regulator for applicants that either do not meet the mandatory qualifications or have marginal results in assessments only.
Complete
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No. Category Reform Status
11 Licensing Amend existing provisions for corporations, partnership and nominees eligibility in the Construction Occupations (Licensing) Act and Regulation to clarify their roles and obligations.
Complete
12 Licensing Expand the scope of the existing power to declare mandatory qualifications to include qualifications for all entities that may apply for a licence i.e. corporations and partnerships
Complete
13 Licensing Require additional information in relation to the nominee and their understanding of their role and eligibility for appointment at the time of application.
Complete
14 Licensing Revise operational policies and educational materials to reflect the intention of the law in relation to the corporation/partnership’s responsibility to supervise their nominees and the work under its licence.
Complete
15 Licensing Develop and implement a pre-application assessment for building surveyors licence applicants and for licensees who have transferred from other jurisdictions.
Complete
16 Licensing Develop and make available an online course for building surveyors operating or intending to operate under the ACT’s building regulatory system.
Complete
17 Licensing Provide a new ground for occupational discipline that the licensee is, or has become, ineligible to hold a licence.
Complete
18 Licensing Amend provisions for automatic suspensions on loss of eligibility so that they do not end after 3 months but continue as long as the ground for the suspension exists, if the licensee has not reported the circumstances to the Registrar.
Complete
19 Contracts for Residential Buildings and Building Work
Expand the existing statutory warranties to all private residential buildings or parts of buildings, including those above three storeys.
Complete
20 Contracts for Residential
Amend the Building Act to allow regulations to prescribe requirements for contracts for residential building work.
Complete
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No. Category Reform Status
Buildings and Building Work
21 Contracts for Residential Buildings and Building Work
Enact a regulation to delineate agency agreements from a building contract for certain residential building work contracts.
Complete
22 Contracts for Residential Buildings and Building Work
Develop and consult on standard terms, and standard information for a building contract including explanations on common variation clauses and their meaning.
In progress
23 Contracts for Residential Buildings and Building Work
Consult further in relation to specific regulations for a progress payment model for certain residential building contracts based on payment only for work completed.
Complete
24 Contracts for Residential Buildings and Building Work
To further assist to reduce phoenixing:Expand the capacity for the Registrar to consider an applicant or licensee’s history, including the history of directors, partners and nominees, under other licences.Introduce the ability for the Registrar and ACAT to consider whether a breach is relevant to multiple associated licences and take appropriate action in relation to those licences as well.Increase reporting requirements for automatic suspension grounds.
Complete
25 Project Funding - Payment - Claims and Retentions
Increase reporting requirements for licensees in relation to insolvency.
Complete
26 Project Funding - Payment - Claims and Retentions
Review the response to the recent federal inquiry on insolvency and results of other trials of various models in other jurisdictions and continue targeted consultation, with a view to either conducting an ACT trial to fill in any knowledge gaps if required, or implementing changes in the ACT if Commonwealth legislation is not supported or has insufficient coverage.
Complete
27 Project Funding - Payment - Claims and Retentions
Review the effectiveness of ACT procurement arrangements for security of retentions held by contractors and progress payments on government projects.
In progress
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No. Category Reform Status
28 Alternative Dispute Resolution - Residential Buildings
Refine the proposed alternative dispute resolution model based on consultation feedback and conduct a second round of consultation.
In progress
29 Alternative Dispute Resolution - Residential Buildings
Consider adoption of new standards and tolerances for building-related disputes and complaints, including contractual disputes.
Complete
30 Stage Inspection and Supervision
Complete implementation of the risk-based auditing and inspection system for regulated building certification and building work.
In progress
31 Licensing Consider the introduction of a non-written assessment for building licence applicants. To take place six months after the written pre-licence assessment was introduced.
In progress
32 Licensing Implement mandatory qualifications for corporate and partnership licences, potentially including financial assessment.
Incomplete
33 Licensing Expand mandatory qualifications for new building surveyor licence categories to include completion of the online training course.
Complete
34 Licensing Expand licence renewal assessments for all licensees to include rechecking of eligibility and compliance history.
Complete
35 Licensing Consult on the findings of the review in relation to licensing, licensing categories and ‘contracting’ as a scope of work.
In progress
36 Licensing Consult on the findings of the review of the ACT building regulatory system in relation to insurance and practitioner accountability.
Incomplete
37 Contracts for Residential Buildings and Building Work
Consider expansion of rectification and other relevant powers to allow orders to be issued to people closely associated with an insolvent or ‘disappeared’ corporate licence.
Complete
38 Project Funding - Review federal inquiry funding’s on insolvencies in the Complete
I N Q U I R Y I N T O B U I L D I N G Q U A L I T Y
No. Category Reform Status
Payment - Claims and Retentions
construction industry and associated response, with a view to fill in any gaps in the system if required.
39 Contracts for residential buildings and building work
Consult on the findings of the review of the ACT building regulatory system in relation to building contracts and the residential building insurance system.
Incomplete
40 Project Funding - Payment - Claims and Retentions
Conduct trial of project/retention account model (if agreed and required).
Complete (NFA)
41 Project Funding - Payment - Claims and Retentions
Review the Security of Payments system in the ACT. In progress
42 Other Consider issued raised by stakeholders during the consultation where supported by the findings of the review of the ACT building regulatory system.
Incomplete
43 Alternative Dispute Resolution - Residential Buildings
Complete implementation of alternative dispute resolution model.
In progress in connection with 28
Table 1. Building reforms status – as of 31 December 201932
2.18 In terms of reporting, in response to the Assembly Resolution of 21 March 2018 on Building Regulatory Systems – Reforms, since June 2018 the ACT Government has been providing the Assembly with a six-monthly status update on the implementation of building regulatory systems reform. The latest update was provided in April 2020.33
SHERGOLD WEIR REPORT
OVERVIEW
2.19 In February 2018 the independent experts Peter Shergold and Bronwyn Weir released the report Building Confidence: Improving the effectiveness of compliance and enforcement
32 https://www.planning.act.gov.au/build-buy-renovate/reviews-and-reforms/building-reforms/status-of-building-reforms 33 https://www.parliament.act.gov.au/__data/assets/pdf_file/0006/1535847/6_-Building-Regulatory-Reforms-6-monthly-
update.pdf.
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systems for building and construction industry across Australia (‘Shergold Weir Report’/’Building Confidence Report’) to the Building Ministers’ Forum (BMF)34. This landmark report assessed the effectiveness of compliance and enforcement systems for the building and construction industry across Australia. In particular, Shergold and Weir focussed on inadequacies in the implementation of the National Constructions Code35 (NCC).36
2.20 A series of high-profile building failures, as introduced earlier in this chapter, combined with mounting anecdotal accounts of quality problems in Australian residential and commercial construction provided the catalyst for the Shergold Weir inquiry.
2.21 The report examined a range of problems, grouped into ten categories:
roles, responsibilities and accountabilities of different parties;
education and training;
licensing and accreditation;
accuracy of design and documentation;
quality control and assurance;
competencies of practitioners;
integrity of private certification;
inspection regimes;
auditing and enforcement practices; and
product importation and chain of custody.37
2.22 The report confirmed the concerns raised about the standards of recently constructed buildings in Australia. Shergold and Weir identified a wide range of problems including significant compliance failures, the lack of competence and understanding of the NCC among industry practitioners and inadequate design documentation.38 They also examined the issue of poor oversight and looked at how inadequate funding or a lack of skills and resources for effective enforcement can weaken oversight by licensing bodies, regulators and local governments.39 Shergold and Weir argued:
34 The BMF is a group of Australian Government, State and Territory Ministers with responsibility for building and construction. The forum, which has been meeting since 2014, is created under a series of intergovernmental agreements that establish and maintain the Australian Building Codes Board (ABCB). The ACBC in turn is responsible for the development of the National Construction Code (NCC). For more information about the BMF see https://www.industry.gov.au/regulations-and-standards/building-and-construction/building-ministers-forum.
35 The NCC is a uniform set of technical provisions for building work and plumbing and drainage installations throughout Australia, which allows for variations in climate and geological or geographic conditions. An initiative of the Council of Australian Governments (COAG), the NCC is comprised of the Building Code of Australia (BCA), Volume One and Two; and the Plumbing Code of Australia (PCA), Volume Three. The NCC administration is the responsibility of the States and Territories under their various building and plumbing Acts and Regulations. https://ncc.abcb.gov.au/ncc-online/About.
36 Shergold Weir Report https://www.industry.gov.au/sites/default/files/July%202018/document/pdf/building_ministers_forum_expert_assessment_-_building_confidence.pdf?acsf_files_redirect, p. 3.
37 Shergold Weir Report https://www.industry.gov.au/sites/default/files/July%202018/document/pdf/building_ministers_forum_expert_assessment_-_building_confidence.pdf?acsf_files_redirect, p. 3.
38 Shergold Weir Report https://www.industry.gov.au/sites/default/files/July%202018/document/pdf/building_ministers_forum_expert_assessment_-_building_confidence.pdf?acsf_files_redirect, pp. 3-4.
39 Shergold Weir Report https://www.industry.gov.au/sites/default/files/July%202018/document/pdf/building_ministers_forum_expert_assessment_-_building_confidence.pdf?acsf_files_redirect, p. 4.
I N Q U I R Y I N T O B U I L D I N G Q U A L I T Y
After having examined the matters put to us, we have concluded that their nature and extent are significant and concerning. The problems have led to diminishing public confidence that the building and construction industry can deliver compliant, safe buildings which will perform to the expected standards over the long term.40
… until relatively recently, there has been almost no effective regulatory oversight of the commercial building industry by regulators. Those involved in high-rise construction have been left largely to their own devices. Where there has been supervision, this has generally been by private building surveyors whom critics argue are not independent from builders and/or designers.
The compliance and enforcement systems have not been adequate to prevent these problems from emerging and they need to change as a matter of priority.41
2.23 The report made 24 recommendations which together address what the authors considered as ‘the issues of highest priority that jurisdictions should focus on over the short to medium term’42 over a three-year period.43
2.24 The following table44 provides an overview of the recommendations, while Appendix D of this report lists the full recommendations. Calling for clarity and a consistent approach across jurisdictions to improve compliance and enforcement, the recommendations encompassed:
Focus area Recommendation Number Summary
Registration and training of practitioners
1 – 4 Establish a nationally consistent approach to the registration of certain categories of building practitioners and compulsory Continuing Professional Development. This would include mandatory hours/units dedicated to training on the NCC and the establishment of supervised training schemes which provide better defined career paths for building surveyors.
Roles and responsibilities of regulators
5 – 7 A focus on collaboration between state and local government and (where applicable) private building surveyors to improve regulatory oversight.
The provision of broad powers to audit building work and take effective
40 Shergold Weir Report https://www.industry.gov.au/sites/default/files/July%202018/document/pdf/building_ministers_forum_expert_assessment_-_building_confidence.pdf?acsf_files_redirect, p. 3.
41 Shergold Weir Report https://www.industry.gov.au/sites/default/files/July%202018/document/pdf/building_ministers_forum_expert_assessment_-_building_confidence.pdf?acsf_files_redirect, p. 4.
42 Shergold Weir Report https://www.industry.gov.au/sites/default/files/July%202018/document/pdf/building_ministers_forum_expert_assessment_-_building_confidence.pdf?acsf_files_redirect, p. 4.
43 Shergold Weir Report https://www.industry.gov.au/sites/default/files/July%202018/document/pdf/building_ministers_forum_expert_assessment_-_building_confidence.pdf?acsf_files_redirect, p. 4.
44 Adapted from Shergold Weir Report https://www.industry.gov.au/sites/default/files/July%202018/document/pdf/building_ministers_forum_expert_assessment_-_building_confidence.pdf?acsf_files_redirect, p. 5.
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compliance and enforcement action.
Each jurisdiction to implement a proactive audit strategy for regulatory oversight of the commercial building sector.
Role of fire authorities
8 Consistent with the International Fire Engineering Guidelines, jurisdictions require early engagement with fire authorities on designs which include performance solutions on fire safety matters.
Integrity of private building surveyors
9 – 11 Minimum statutory requirements for the engagement, and role, of private building surveyors, a code of conduct with legislative status and enhanced supervisory powers and reporting obligations.
Collecting and sharing building information and intelligence
12 The creation of a central database by each jurisdiction and collaboration to develop a platform that can provide for information sharing to inform regulatory activities and the work of the BMF. Information in the databases would also be accessible as appropriate, by authorised persons including owners or purchasers of buildings.
Adequacy of documentation and record keeping
13 – 17 Imposing a statutory duty on design practitioners to prepare documentation that demonstrates proposed buildings will comply with the NCC.
Providing for third party review of designs and the documentation and approval of performance solutions and variations.
Inspection regimes
18 – 19 Requiring jurisdictions to perform on-site inspections for all building works and greater oversight of the installation and certification of fire safety systems in commercial buildings.
Post-construction information management
20 For Commercial buildings, a comprehensive digital building manual be created for owners which can be passed on to successive owners. This would include all relevant documents for the ongoing management of the building, such as as-built construction documentation, fire safety system details and maintenance requirements.
I N Q U I R Y I N T O B U I L D I N G Q U A L I T Y
Building product safety
21 The BMF to agree its position on the establishment of a compulsory product certification system for high-risk building products.
The implementation of the recommendations
22 – 24 Commitment to a three-year timetable for the implementation of the recommendations.
The BMF to establish a plan for implementation which is reported against by each jurisdiction annually.
Establishment of uniform terminology across jurisdictions, through a national dictionary.
Table 2: The Shergold Weir report recommendations summary
RESPONSES TO THE REPORT
2.25 The Shergold Weir report was positively received and widely supported by the building and construction industry. In their submissions to, and appearances before, this inquiry for example, the Australian Institute of Architects, the Australian Institute of Building, and Master Builders of Australia included their endorsements of the report.45 Many other submissions also made references to the Shergold Weir report.
2.26 However, different state and territory governments responded in different ways. The NSW Government, for example, published two papers in response to the Shergold Weir report.46 The first paper, released in February 2019, laid out the NSW Government reform plan in response to the recommendations. The second paper was a discussion paper for public consultation. Released in June 2019, the paper discussed the implementation of the NSW Government response to the Shergold Weir report. The discussion paper included a table which clearly explained the status of NSW’s response to the Shergold Weir report recommendations.47 At around the same time, the ACT Government appeared to have no specific publication in response to the report. As noted by Kerin Benson Lawyers to the Committee in May 2019:
The position of the ACT Government in response to this report is difficult to determine given the lack of publicity in this regard. Curiously there is not one mention of the Shergold Weir Report in the “Documentation and Information for Building Approval Applications Preview Guideline” released last week.
45 https://www.parliament.act.gov.au/__data/assets/pdf_file/0011/1365806/Australian-Institute-of-Architects-summary-of-Shergold-Weir-report-July-2018.pdf; Transcript of Evidence, 7 July 2019, p. 239; https://www.parliament.act.gov.au/__data/assets/pdf_file/0011/1312994/075-Master-Builders-Association.pdf ; Transcript of Evidence, 7 July 2019, pp. 205-206.
46 The reports are downloadable from https://www.fairtrading.nsw.gov.au/resource-library/reports/nsw-government-response-to-the-shergold-weir-building-confidence-report and https://static.nsw.gov.au/nsw-gov-au/1561499024/Building-Stronger-Foundations-Discussion-Paper.pdf.
47 https://static.nsw.gov.au/nsw-gov-au/1561499024/Building-Stronger-Foundations-Discussion-Paper.pdf; pp. 34-36.
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Further, a simple Google search of the terms “ACT Government” and “Shergold Weir Report” elicits no ACT Government document that addresses the Shergold Weir Report recommendations. Further again, nothing on the Environment, Planning and Sustainable Development Directorate website addresses the Shergold Weir Report.48
2.27 At the national level, it took over a year after the release of the report before building ministers agreed to implement the Shergold Weir report recommendations nationally through the Australian Building Code Boards in July 2019.49
2.28 To develop and report on a National Framework for the consistent implementation of the recommendations contained in the Shergold Weir/Building Confidence Report (BCR) and the design, construction and certification of complex buildings, the BMF established the BCR Implementation team.50
BUILDING CONFIDENCE REPORT IMPLEMENTATION PLAN : JURISDICTIONAL UPDATES FROM THE ACT
2.29 A national implementation plan for the Shergold Weir Building Confidence report was first created in March 2019. The BCR implementation plan sets out national priority reforms, a summary of reforms underway in states and territories, planned reforms and proposed timeframes for each jurisdiction’s industry involvement in the process.51 The latest version was published in December 2019 and contains jurisdictional updates on progress against the reform agenda.
2.30 The December 2019 Building Confidence Report: jurisdictional updates also included updates from the ACT Government. Most of the discussion in the ACT update discussed the ACT Government’s Improving the ACT Building Regulatory System program. The update stated that, as introduced earlier, the ACT Government has completed a review of its building regulatory system in 2015 (the Review). As a result of the Review, the Territory has implemented reforms to strengthen the integrity of the system. The ACT Government stated it is progressing a range of reforms that relate to the recommendations of the BCR. The ACT has the Improving the ACT Building Regulatory System program that includes a comprehensive set of reforms targeting issues such as design and documentation, practitioner regulation, supervision and regulatory oversight of building projects, client protections such as insurance and warranties, dispute resolution and contracting practices.52
48 https://www.parliament.act.gov.au/__data/assets/pdf_file/0010/1365724/Kerin-Benson-Lawyers-Opening-Statement.pdf.
49 https://www.industry.gov.au/sites/default/files/2019-07/bmf-communique-18-july-2019.pdf. 50 https://www.abcb.gov.au/Initiatives/All/building-confidence-report-implementation-team. 51 https://www.industry.gov.au/data-and-publications/building-confidence-report-implementation-plan.52 https://www.industry.gov.au/sites/default/files/2020-03/building-confidence-report-jurisdictional-update-2019.pdf, p.
27.
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2.31 Further, in its report,53 the ACT Government stated that the Territory has a building regulatory system that already includes many of the powers and processes suggested in the Shergold Weir Report. Some of these have been in place for many years, while others have been introduced as a result of the 2015 ACT Review. The ACT Government stated that by the time the report was released, the Government has implemented 13 reforms as part of its building regulatory system reform program.
2.32 The ACT Government also reported that it has completed a further 15 reforms under its reform program since the implementation was established. Only when reporting these latest reforms that the ACT compares them against specific Shergold Weir report recommendations.
A new code of practice for licensed building surveyors that outlines their general obligations when undertaking licensable services and statutory functions as well as minimum requirements for carrying out stage inspections (completes work related to recommendations 9 and 10).
A new regulation separating building contracts for residential building work from any agreement between a landowner and another party to appoint the building certifier or arrange approvals (relates to recommendation 9).
A new minimum documentation guideline for building approvals applications for new or substantially altered class 2-9 buildings (supports recommendations 11, 12, 13, 14, 16 and 20).
Introducing licence examinations for applicants for new builder licences and pre-licence assessments for applicants for building surveyors licences (relates to recommendations 1, 2 and 4).
Assessments for applicants for building surveyors licences (relates to recommendations 1, 2 and 4).
Changes to licensing processes for building practitioners to increase checking of eligibility against technical and probity requirements at first application and at renewal (supports recommendation 2).
Release of a new online training courses for practitioners on the ACT building regulatory system (relates to recommendations 2, 3, 4 and supports 9, 10 and 11).54
2.33 Further, the ACT Government outlined its planned reforms below – also with reference to the Shergold Weir report recommendations.
Reforms that will be completed in the next six months include a new code of practice for builders to improve supervision and oversight of building projects by licensees during construction. Additionally, the ACT Government has introduced legislation that, if passed, will introduce enforceable rectification undertakings completing work on
53 https://www.industry.gov.au/sites/default/files/2020-03/building-confidence-report-jurisdictional-update-2019.pdf, pp. 27-28.
54 https://www.industry.gov.au/sites/default/files/2020-03/building-confidence-report-jurisdictional-update-2019.pdf, p. 28.
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recommendation 6. The regulator will publish an audit strategy for buildings and building approvals for the year shortly (recommendation 7).
The ACT Government will also consult further on licensing scopes, insurance and accountability of design practitioners preparing plans, specifications and other reports for building approvals (relates to recommendations 1, 2, 13, 17 and 19).
In relation to recommendation 15, which is to provide a process for the approval of a performance solution for constructed building work, in the ACT’s system a building approval is for proposed building work and cannot be issued retrospectively. This recommendation will be considered in relation to processes for final certification of buildings with unapproved work.
The ACT has an existing database where all building approval documents and a range of certificates and inspection information is stored (recommendation 12).
With one level of ACT Government and one building regulatory agency, the ACT considers that establishing further regulatory bodies (recommendation 5) is not needed in the Territory.55
2.34 The above quotes show that not all of 24 recommendations were mentioned. Although some recommendations are not applicable as they were made for the BMF (the national level), other recommendations like recommendations 6, 8 and 15 were missing.
2.35 The ACT Government has also provided a more recent and comprehensive update on the Shergold Weir report implementation progress through its six-monthly building regulatory update to the Legislative Assembly in April 2020.56
Recommendation 12.36 The Committee recommends that the ACT Government implement the outstanding
recommendations of the 2016 Improving the ACT Building Regulatory System report and the Shergold-Weir report.
Recommendation 22.37 The Committee recommends that the Minister for Building Quality, as part of the ACT
Government response to this report, continue to publish:
a list of all recommendations in the 2016 Improving the ACT Building Regulatory System
55 https://www.industry.gov.au/sites/default/files/2020-03/building-confidence-report-jurisdictional-update-2019.pdf, pp. 28-29.
56 https://www.parliament.act.gov.au/__data/assets/pdf_file/0006/1535847/6_-Building-Regulatory-Reforms-6-monthly-update.pdf, pp. 4-5.
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report and the Shergold-Weir report;
the action taken by the ACT Government to date to implement those recommendations; and
the timeline for further action on those recommendations.
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3 CAUSE S OF BUILD ING QUA LITY ISSU ES
3.1 The simplest explanation for a building quality issue is a failure by the builder to complete work to standard. The Committee received numerous submissions about seemingly basic errors made during builds. The Committee was told that “a building defect can have two causes: poor workmanship by a builder or negligent design by an architect or an engineer. Or it can be a combination of those two.”57 While this is true there are additional factors that can lead to these outcomes.
3.2 The above explanation fails to reveal why the work was substandard and this chapter examines some of the reasons advanced by submitters and witnesses as to why building quality issues arise. This chapter does not attempt to determine which of these factors play the greatest role, especially as this will differ from case to case, but instead highlights the interlinked factors that have contributed to rising community concern about building quality.
3.3 The contributing factors include:
Cost and time pressures;
Building material issues;
Builder training and expertise; and
Involvement of experts.
COST AND TIME PRESSURES
3.4 Housing affordability has been a significant issue of community focus for many years in Australia. With the cost of housing such a significant portion of the average income there is considerable pressure from would be owners to keep costs controlled. Builders are competing to win contracts within this very cost-conscious environment. For developers, lower costs mean increased profit.
3.5 The Committee heard that in multi-unit developments, in particular, the focus may be on reducing costs by using materials and equipment that will not last thereby transferring costs to the future owners. The example was given of garage doors being replaced by cheaper examples that cannot handle the amount of usage in the complex and need replacing with more robust equipment after only two years.58
3.6 Ross Taylor highlighted the role of developers in making design decisions intended to save money as leading to building quality issues:
57 Transcript of Evidence, 22 May 2019, p. 105.58 Transcript of Evidence, 8 May 2019, p. 99 and Transcript of Evidence, 29 May 2019, p. 136.
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When we do analysis and the forensic work, I see that the start of the defects is way back, earlier in the process, and at the phase when the developer has the most influence on the design. That is when the leaks and the cracks happen— when the developer starts screwing down the floor to ceiling heights, changing the architect to get a cheaper designer, changing the builder to get a cheaper builder, and screwing down all of the costs to maintain their margin. That is the source of it.59
3.7 Mal Wilson of Engineers Australia made a similar observation:
With apartment buildings, the person making the decisions as to how good this building is going to be, how reliable it is going to be, what the maintenance costs are going to be and everything else, is not an owner—is never going to own any of these. [. . .] So the person who is making the decisions and saying: “We’re going to use this particular product here and we are going to do it this particular way, so we’re using cheap products. We’re using cheap form and construction. We’re not going to worry too much about the falls. We’re not going to get a hydraulic consultant to design anything. We’re not going to do proper drawings. We’re not going to; we’re not going to; we’re not going to.” is the developer.60
3.8 On cost pressures the MBA observed:
When a client is pressuring for a job to be completed to a particular budget or to a particular time frame, that puts pressure on quality. Often quality is what is sacrificed in return for a quick job or a cheap job.61
3.9 The MBA also highlighted the link between lax enforcement and cost pressures:
if there is a continual lack of enforcement, which there has been in the past—up until recently there has almost been no enforcement of standards in the ACT—that not only allows the bad guys to keep on doing bad things, but eventually lowers everyone’s standard. If the guys trying to do the good thing—who are trying to charge appropriately, who have all the proper safety processes and quality processes—are continually undercut by those getting away with a lesser job, the whole industry eventually comes down.
Enforcing the minimum standards is as much about dealing with the people doing the wrong thing as trying to support those who are doing the right thing. We should be trying to do as much as we can to support those doing the right thing, as well as dealing with the other end of the spectrum.62
3.10 The CFMEU highlighted the lack of accountability for developers. While previously developers had come up with a budget and a builder and let the builder work, now developers had significant input into the trades and products used. The CFMEU observed:
59 Transcript of Evidence, 29 May 2019, p. 122.60 Transcript of Evidence, 28 August 2019, p. 257.61 Transcript of Evidence, 7 August 2019, p. 211.62 Transcript of Evidence, 7 August 2019, p. 228.
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for the dodgy developer—there are pretty of good ones out there, but for the ones who are not doing the right thing there is a real incentive to cheat.63
3.11 The CFMEU also observed that time pressure was also a significant factor:
It is not just cost anymore, in terms of how the builder might be selected, in terms of getting the best value for money. There is also a major factor now of building it quicker than anyone else—and there is obviously an economic pay-off there in terms of getting the number of sales settling sooner, paying back whatever loans you have to your financiers quicker. But we are seeing more and more that time frames are getting more and more compressed. Jobs that might have once been 24-month builds are now becoming 12 months.64
BUILDING MATERIAL ISSUES
3.12 The Committee received evidence from a number of sources about the problems caused by imported materials that were defective, unproven or unsuitable for Australian conditions and standards.65
3.13 Lawyer Maurice Falcetta observed that waterproofing, a source of many building quality complaints, was a complex problem:
It could be design. It could be the detailing and it could be a design issue. It could be a workmanship issue. It could be also whether the material was suitable for the Australian climate. A lot of the materials come from overseas. The material science experience from overseas is different to Australia’s.66
3.14 Mr John Harris, Trustee of the MBA Fidelity Fund, told the Committee that “a significant number of the claims occur as a result of new or innovative materials or construction practices which are not proved and which do not work”. Mr Harris noted that the industry had to develop through innovation but that the more technical buildings became the more they tended to fail.67 He also observed:
Some of the big issues that have arisen in the industry in the past few years have been manufactured goods. These claddings that burst into flames and tear up the sides of buildings and things. Those builders believed they were installing a correct, proper and verified product at the time they were putting them on. Now they are not.68
3.15 The AIA noted the impact that the building material can have on the maintenance for a multi-unit development:
63 Transcript of Evidence, 28 August 2019, p. 263.64 Transcript of Evidence, 28 August 2019, p. 268.65 See for example Transcript of Evidence, 7 August 2019, p. 238.66 Transcript of Evidence, 29 May 2019, p. 128.67 Transcript of Evidence, 24 July 2019, p. 159.68 Transcript of Evidence, 24 July 2019, p. 163.
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A material that was commonly called blue board was frequently used as fibre cement. It got rendered over and painted, like a rendered building. But one of its inherent faults is that it moves with the timber framing that is behind it and you get cracking all over the building. Those sorts of buildings require a lot of maintenance and a lot of costs to keep them looking good.69
BUILDER TRAINING
3.16 Building consultant Damien Moloney told the Committee that being a builder is really about running a complex business:
When I did my building licence it was all about running a business. It was all about subcontracting, contracts, learning how to handle money. Essentially you are a bank. You get a $100,000 progress payment through and it is sitting in your account. You get these younger builders going out and buying brand-new cars because they have got $100,000 that is not theirs in their account.
We do a lot of conflict resolution with builders going broke, going bust and leaving, and then it comes back to the fidelity fund. There needs to be more education.70
3.17 In contrast, Mr Ross Taylor saw the focus on trade training as a distraction from the real issues of developer influenced design.71
3.18 It was also noted that even with good training it was a highly technical area. The HIA told the Committee that:
the national construction code, as we know, is a robust document. It is over 700 pages long just as the housing document. Then it references over 100 primary standards and also secondary and tertiary standards from that.72
INVOLVEMENT OF EXPERTS
3.19 The Committee was told of the emergence of design and construct contracts around 30 years ago. These worked well when being offered by large firms that had engaged their own architects and engineers. The practice, however, has been adopted by smaller firms and now builders are undertaking the design part of contracts without the necessary expertise.73
3.20 The Owners Corporation Network told the Committee that:
69 Transcript of Evidence, 24 July 2019, pp. 203-204.70 Transcript of Evidence, 22 May 2019, p. 113.71 Transcript of Evidence, 29 May 2019, p. 122.72 Transcript of Evidence, 24 July 2019, p. 173.73 Transcript of Evidence, 29 May 2019, p. 121, and see also Transcript of Evidence, 7 August 2019, p. 238.
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The independence of certifiers is an issue. But it is not only the certifiers that are needed to supervise what a building looks like and how it is built. As I said, if you build a $2 million property, you would not do it without an architect. The certifier needs the support of the original architect with decent documentation—full documentation, not stuff that says, “When the person comes off the boat, you decide where you put the expansion joints in the wall,” because they do not necessarily know how to do that. It needs to be done properly by the architect and be supervised by the same architect and the same engineers.74
3.21 It was also suggested that builders build to plans but if the plans are deficient in some way the responsibility still ended up with the builder rather than the architect or engineer.75 Ross Taylor told the Committee:
Structural engineers, for example, are not engaged in the defect issue and should be. The developers should be engaged in this issue, as well as architects. But we understand that there has been a huge reduction in the architect’s role, to save money for the developer.76
3.22 The HIA also emphasised the importance of the design stage in building quality outcomes telling the Committee that:
in terms of the design documentation requirements, too often we are probably seeing that by the time it actually gets to constructing the building, there are some issues with the quality and the actual accuracy of the plans. At that stage, just assume that the builder builds a slab. He assumes that that slab has been designed by a structural engineer, that it complies with the relevant codes, and he builds it. If that slab were to fail, we sort of have to say that it is a bit disproportional that he should be held accountable for the non-compliance of that design.77
3.23 The Australian Institute of Architects saw the issue as less about architects not taking responsibility and more about their involvement being limited for cost reasons:
The current market sees developers and builders breaking up the design documentation and construction stage services of the design team. That includes architects and engineers. Instead of maintaining continuity through the life of the project, they shop around the market, mid-project, to change the team, ostensibly to reduce fees. This process, by default, militates against quality outcomes.78
3.24 They went on further to state that:
74 Transcript of Evidence, 8 May 2019, p. 93.75 Transcript of Evidence, 22 May 2019, p. 111.76 Transcript of Evidence, 29 May 2019, p. 123.77 Transcript of Evidence, 24 July 2019, p. 173.78 Transcript of Evidence, 24 July 2019, p. 197.
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While there have been many contributing factors to the current crisis, a significant part of the problem has been new and expanding forms of building procurement that allow building quality to be systematically eroded. Essentially, many of these forms or contracts see the client and developer hand over decision-making powers and risks to the builder. Whereas previously the building professionals, including architects, maintained a direct relationship with the client and developer, today that is rarely the case.79
3.25 The AMCA, whose members install ventilation, air conditioning and critical fire safety features but are unlicensed in the ACT informed the Committee that:
A lot of our members do go through that process of the design phase as well as installation and maintenance. As far back as 15 years ago, our business in particular was 10 per cent design and construct. That would now be closer to 80 per cent. So there is a significant shift in the market in how facilities are delivered, making sure that that is captured and that suitably qualified people are actually designing and certifying.80
3.26 Mr Mal Wilson of Engineers Australia told the Committee that:
most of the issues are on the drawings. You show me a set of drawings, if you have any. Sometimes there are no drawings, in which case I would say, “Yes, you’re going to have a leaky balcony.” A lot of times when there are drawings, I can look at the drawings and say, “Yes, that balcony is going to leak here, here, here and here.” It is that simple.81
79 Transcript of Evidence, 24 July 2019, p. 198.80 Transcript of Evidence, 7 August 2019, p. 232.81 Transcript of Evidence, 28 August 2019, p. 251.
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4 THE REGU LATOR
4.1 The previous chapter highlighted some of the factors leading to poor building quality outcomes. Intervention by a strong regulator can push back against these factors and provide disincentives to reducing costs in a manner that detrimentally affects the quality of the build.
4.2 The Committee heard differing views on whether there was sufficient regulation of the industry. There are some areas where regulatory deficiencies have been identified and the Committee has made recommendations that those be addressed. The Committee also heard, however, that while the regulations may exist, they are only effective if enforced adequately. As one witness told the Committee “a regulator is of no use if the regulator does not regulate”.82
4.3 Lawyer Christopher Kerin told the Committee that,
I think in the ACT, compared to New South Wales and Victoria, and possibly Queensland, you probably have better regulations than they do in those jurisdictions. But they are not being enforced. [. . . The ACT Government] has found itself spending large amounts of money in legal fees, as I understand, and as a result has been reluctant to exercise its powers to issue rectification orders.83
4.4 The Owners Corporation Network told the Committee that “there has been weak oversight by the licensing body or regulator. In our case, it is Access Canberra.”84 Mr John Harris, Trustee, told the Committee that, “there is some sense in the industry that the regulators could be a bit tougher.”85 The MBA observed, “While the attention by government to the enforcement of minimum standards has recently improved, we have a poor history of enforcing these standards in the past in the territory.”86 Engineers Australia spoke of “the government’s inability to administer the regulations.”87
4.5 The HIA observed:
We note the additional funding for staff for building compliance in the recent budget and the development of guidelines for design documentation to name two, both of which were addressed by HIA in our submission to this inquiry. So to some degree the discussion has moved forward since the inquiry commenced.88
82 Transcript of Evidence, 8 May 2019, p. 89.83 Transcript of Evidence, 22 May 2019, p. 108.84 Transcript of Evidence, 8 May 2019, p. 92.85 Transcript of Evidence, 24 July 2019, p. 166.86 Transcript of Evidence, 7 August 2019, p. 206.87 Transcript of Evidence, 28 August 2091, p. 253.88 Transcript of Evidence, 24 July 2019, pp. 169-170.
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4.6 The model for a more active regulator was identified by some witnesses as ACT WorkSafe which has a role both as a regulator on site taking enforcements actions and as an educator.89
4.7 The Minister for Building Quality told the Committee that he wants the regulator to be “a tough cop on the beat” 90 but that “while the government has a role to play, the responsibility for quality must ultimately rest with industry.”91 Access Canberra informed the Committee that the number of building inspections had doubled due to the 2019 budget increase.92
COMMITTEE COMMENT
4.8 The Committee notes the strong calls for increased activity by the regulator. The Minister said that he expected significant pushback against reform from industry93 but all key industry groups are supportive of a more active regulator. The Committee also heard the suggestion that the industry should be better at policing itself and should not need the regulator to be looking over its shoulder in order to build for good outcomes. The Committee is of the view that while sectors of the industry can contribute to better building quality outcomes through their own efforts, it is only the regulator who is in a position to force change on the least reputable parts of the industry. Clear and effective action by the regulator can both cause those with poor practices to lift their standards and provide a fairer market environment for those with good practices to compete for work.
4.9 The Committee heard from a number of sources that there were fewer building quality issues when each jurisdiction had a “Clerk of Works” – a statutory officer who combined the roles of certifier, inspector and auditor and was frequently backed up by experts who were former industry practitioners. The Committee does not believe that that same model should be revived but does see a need for a higher profile, powerful regulator. The Committee notes the highly visible role of the WorkSafe Commissioner for both the public and industry and proposes a similar approach be adopted for building quality. Increased visibility for the Commissioner and their team may also assist in attracting the level of expertise needed for that team to carry out its role.
Recommendation 34.10 The Committee recommends that the ACT Government establish a Building Commissioner
as an independent statutory officer with a remit to ensure building code and standards compliance by:
performing audits;
enforcing site inspections during the various phases of a build;
89 See for example the MBA at Transcript of Evidence, 7 August 2019, p. 210.90 Transcript of Evidence, 4 September 2019, p. 270.91 Transcript of Evidence, 4 September 2019, p. 271.92 Transcript of Evidence, 4 September 2019, p. 291.93 Transcript of Evidence, 4 September 2019, p. 270.
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managing license compliance of professionals;
managing the allocation of certifiers to developments; and
managing the Notices of Dispute and Arbitration processes and make decisions enforceable on both parties.
4.11 Mr Mal Wilson of Engineers Australia told the Committee that he was concerned about:
the lack of an auditing system, how the government does not know anything. The government is so ignorant of what the problems are, because we have to wait for a building to have a problem.94
4.12 Engineers Australia noted that some councils would send around 10 per cent of the plans they receive out for independent review and auditing.95
4.13 The Construction Occupations Registrar told the Committee that his team needed:
to be targeting specifically those people who actively choose not to comply and also the people who do not comply because they have failed in their obligations—those that fail to take the responsibility to get things fixed.96
4.14 He also noted that while there had been an existing audit capacity, the creation of the rapid regulatory response team had freed up the construction audit team to focus more on audit aspects.97 The increased documentation requirements, discussed below, also assist with auditing.98
COMMITTEE COMMENT
4.15 The Committee notes the vital role that auditing plays in ensuring building quality. A rigorous audit program will catch defects before they occur, detect poorly skilled and undesirable industry participants, highlight areas needing additional education or training work, assist the regulator in targeting resources and provide an incentive to all industry participants to ensure that they are meeting standards. With the Committee’s recommendation to expand licencing, as well as the already completed reforms around a code of practice for certifiers, it is important that the audit program expand to ensure that these new requirements are met by industry.
4.16 The Committee also notes that certain areas repeatedly appeared in submissions as areas where building quality disputes were most likely to arise and believes that these areas would benefit from increased scrutiny.
94 Transcript of Evidence, 28 August 2019, p. 251.95 Transcript of Evidence, 28 August 2019, p. 252.96 Transcript of Evidence, 4 September 2019, p. 275.97 Transcript of Evidence, 4 September 2019, p. 275.98 Transcript of Evidence, 4 September 2019, p. 299.
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Recommendation 44.17 The Committee recommends that the ACT Government and/or Building Commissioner
establish a comprehensive audit scheme that:
applies to all who hold a license or registration;
underpins the accreditation and licensing system which applies to all professionals and other practitioners;
deals with processes, procedures, and work performed;
includes all trades, practitioners, and professionals involved in the building and construction process; and
include both randomised audit inspections and scheduled inspections of high-risk work.
Recommendation 54.18 The Committee recommends that the ACT Government, noting that plumbing, electrical,
waterproofing and drainage works are frequent sources of building quality issues, review the current level of inspection of these works and report back to the Assembly.
ACCESS CANBERRA
4.18 The Committee heard from a number of submitters that their interactions with Access Canberra were unsatisfactory. Some related a lack of action or an absence of communication about action taken.99 Industry was supportive of a well-resourced and pro-active regulator. The MBA told the Committee that:
If the government wants to make the greatest short-term improvement in building quality, we believe it should resource Access Canberra, the building regulator, so that existing building laws and standards are enforced and so that there is an easy-to-access, fair and responsive team to respond to complaints from both industry and consumers.100
4.19 The HIA’s submission expressed concern that the EPSDD had been under resourced to perform its function for some.101 The Owner’s Corporation Network identified a lack of resources for auditing.102
99 Submission 18, Raymond David, p. 5, Submission 57, Hopner, p. 5.100 Transcript of Evidence, 7 August 2019, p. 206.101 Submission 71, HIA, p. 11.102 Submission 44, Owners Corporation Network, p. 8.
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4.20 The 2019-20 ACT budget allocated an $8.9 million investment for eight new rapid response officers, to boost capacity for up to 1,000 additional building inspections across the ACT per year. The rapid regulatory response team means that Access Canberra was able to get inspectors out on site within 5 days of receiving a complaint.103
4.21 The MBA was supportive of the increased resourcing to Access Canberra:
there were 16 additional resources provided. That is a substantial number of resources, which we wholeheartedly support. Even though industry will pay for those resources by an increase in the building levy, we think that the benefit outweighs the cost. We think it is also good that some of those 16 resources—I think four—are dedicated to facing consumer education. The others are inspectors and auditors.104
Recommendation 64.22 The Committee recommends that the ACT Government review funding for enforcement
staff within Access Canberra, so that all building, design and development complaints can be responded to, and disputes resolved, in a timely and consistent manner.
Recommendation 74.23 The Committee recommends that the ACT Government have an appropriately staffed shop
front for Access Canberra’s building regulatory activities, with sufficient staff for a mobile/response unit able to enforce regulatory actions at short notice.
4.24 During the inquiry the Committee received some negative feedback about the Access Canberra website and its information for consumers. One submitter described it as “poorly designed” and “opaque”105 while another submitter wrote that it was:
inadequate to support owners and BCs to seek information on how to proceed with a claim for building defects. How does a person know the form to fill in is a Controlled Activity or Construction occupations complaint? The website does not assist owners or BCs to seek information. When the specific area is found in the website, the next screen states “What Access Canberra does not act on” with numerous examples. This information is buried deep in the website under ‘contractual issues or Civil disputes. It states there is a seven month complaint resolution timeframe. Nothing on this website supports owners or BCs to seek redress for building defects and how to practically go about this.106
103 Transcript of Evidence 4 September 2019, p. 275.104 Transcript of Evidence, 7 August 2019, p. 228.105 Submission 69, Name withheld, p. 13.106 Submission 61, Name withheld, p. 4.
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4.25 In June 2019 the Minister for Building Quality launched the “build, buy or renovate” website:
designed to make it easier for consumers and businesses to access important information. The website outlines the obligations and the rights for builders, developers and consumers when they are considering whether to build, buy or renovate in the ACT. There are easy links that detail compliance and dispute resolution processes for consumers, as well as the disciplinary register and a register of licensed practitioners.107
COMMITTEE COMMENT
4.26 The Committee notes that the “build, buy or renovate” website brings together information into one location. Some of the information that may be of interest to consumers, however, was structured and presented in a way more easily understood by industry.
Recommendation 84.27 The Committee recommends that Access Canberra continue to promote and work on the
“build, buy or renovate” website to make it easier for the public to locate information on their rights and responsibilities and disciplinary action against building practitioners.
4.28 The Committee received feedback from industry that they did not necessarily know what the most common problems were. The HIA told the Committee that:
As industry we have said to government, “Look, tell us where the problems are and we can take those forward and government can take those forward.” I understand some of the new staff from the recent budget announcement will be looking at collating information collected by inspectors and getting an understanding of where the problem is. [. . . ]
For example, if it is seeing as a common problem damp-proofing being installed the wrong way, develop up a practice note that goes out to all of industry to say, “This is how you should be installing. We are seeing this as a common area of non-compliance or misunderstanding.” That does not necessarily mean that there needs to be mandatory CPD. That should be proactive work that the ACT government is doing to educate on the rules around the building regulations. 108
4.29 The MBA similarly supported increased education from the regulator about the problems they are encountering noting that “Guidance notes to assist in the interpretation of building laws and response to common defect issues would assist.”109 They observed:
We have our own ideas about what those defects are, but I imagine government has a much greater pool of information about what they actually are. We all know that
107 Transcript of Evidence, 4 September 2019, p. 271.108 Transcript of Evidence, 24 July 2019, p. 170, 173.109 Transcript of Evidence, 7 August 2019, p. 206.
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waterproofing is one of them, but we would like to know some of the other issues that they are commonly seeing in the audits. I imagine some of them are not even technical related. They might be around a builder’s business management practices, a complaints process or dealing with contracts, as we were talking about. If that information were provided, we would address it by providing training and advice to our members, as we have done with waterproofing.110
4.30 Access Canberra told the Committee that they had been focussed on systematically collecting information on regulatory activity and that they:
have been much more refined over the last two years in all our systems internally, bringing the breadth of information that we have across our agency together to target our resources directly to the harmful events that are happening across this industry at the moment.111
4.31 The ACT Government submission also noted the provisions of the Construction Occupations (Licensing) Act 2004 that empower the Construction Occupations Registrar to direct a course of training for a construction occupation or occupation class if the Registrar “is satisfied on reasonable grounds that the training is necessary for the development or enhancement of the skills or knowledge of licensees in that construction occupation or class.” These provisions could be used if a particular deficiency is identified by the regulator.112
COMMITTEE COMMENT
4.32 The ACT Government is not the sole source of information on building quality matters and industry has a significant role to play in builder education. The regulator does, however, hold important information about common issues and is able to promote positive change. The Committee notes the role that the ACT Government plays in promoting occupational health and safety as an example of combining regulatory and educative functions.
4.33 The Committee views the directed training provisions as a useful tool available to the regulator but notes that they are designed to operate alongside existing industry training and so it is preferable if industry is informed of areas requiring improved training focus.
Recommendation 94.34 The Committee recommends that the ACT Government implement a mechanism where
recurring problems or findings of certifiers and inspectors are conveyed to industry including through training or information sessions for industry to highlight problems and best practice methods.
110 Transcript of Evidence, 7 August 2019, p. 226.111 Transcript of Evidence, 4 September 2019, p. 291.112 Submission 69, ACT Government, p. 16.
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DOCUMENTATION REQUIREMENTS
4.35 The Committee heard that the lack of proper documentation for developments was a significant issue and aspects of the issue are discussed in Chapter 3. Some developments may have concept plans drafted by an architect for the development application process, but subsequent plans put together by draftsmen and no documentation of the building as built.113
4.36 The AIA emphasised the importance of good documentation to quality outcomes stating:
What we consider to be a good series of documents is legible to any person who has a level of skill within the trades profession, so that they can understand the intent of how a building comes together. [. . . ]
4.37 The AIA also noted that there is increased participation in the building industry in the ACT by workers who do not come from strong English-speaking backgrounds. In these cases, “the drawing is the one piece of language that we all understand. Having a minimum level of documentation removes that level of misinterpretation.”114
4.38 The AIA was strongly supportive of the ACT Government’s reforms during the course of this inquiry to increase the requirements for documentation noting that it “basically requires the level of construction documentation to be brought forward for the DA component. It essentially guarantees a level of detail in construction.”115
4.39 Engineers Australia cited, as examples of documentation failure, drawings that had certification stamps obscuring vital detail. Commenting on the reforms announced by the Government they suggested that they did no got far enough as what was needed was a “full set of work-as-executed drawings”.
4.40 Mr Mal Wilson told the Committee:
I had a 16-storey building I went to look at in Belconnen where they did not have a single structural drawing, and it was new. Then they had to go begging, and the developer sits there and says, “We want to give you the drawings, but maybe we’ve lost the drawings.” You have got to deal with that on a daily basis. We have had developers and builders come to us and say, “We’ll give you the drawings but you need to sign an affidavit to say that you will never sue us for anything that’s on these drawings.”116
4.41 During the course of this inquiry the ACT Government introduced minimum documentation requirements for multi-unit buildings. These requirements are:
113 Transcript of Evidence, 8 May 2019, p. 95.114 Transcript of Evidence, 24 July 2019, p. 200.115 Transcript of Evidence, 24 July 2019, p. 200116 Transcript of Evidence, 28 August 2019, p. 254.
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a signal to industry that this is the minimum expectation that we require. That touches on things like engineering requirements. It touches on things like architectural aspects. It also touches on the importance of continuity of design and moving away from the blame game about who is actually responsible.117
COMMITTEE COMMENT
4.42 The Committee welcomes the steps taken by the ACT Government to increase documentation requirements. The evidence that drawings effectively become a negotiating tool between developers and owners’ corporations is highly concerning and suggests that clear requirements, with appropriate penalties, should be a priority for multi-unit developments. While the increased documentation requirements should have a positive impact on design and building outcomes, it remains important that plans capturing any variations undertaken during the process are also available.
Recommendation 104.43 The Committee recommends that the ACT Government strengthen processes to ensure that
developers lodge plans “as built”, with an initial focus on large multi-unit developments.
117 Transcript of Evidence, 4 September 2019, p. 275.
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Recommendation 11
4.44 The Committee recommends that the ACT Government require developer lodged plans to provide a minimum standard of detailed design drawings/specifications for areas that are commonly defective.
4.45 The Committee heard evidence that some purchasers who had bought off the plans were surprised by significant changes that had been made without their knowledge or approval. The Crestwood Owners Corporation EC told the Committee that changes had been made to the plans and that they:
found out that certifiers through ACTPLA had signed off on these changes to the original plans. None of this was clear. No-one from ACTPLA was able to give us any direct responses and answers to what had happened. We were unable to track down plans. They were not able to get us plans. We had to get a partner of someone on the committee, who was a builder, to actually go and track these down and get us copies that were not entirely up to date with all the additional alternative solutions that had been incorporated into the final build.118
4.46 One couple informed the Committee that the plans they were shown were:
significantly different to the house that was built resulting in a complaint from us to Access Canberra. The pool above was included in the plans as an in-ground pool which is clearly not what has been built due to a major surveying error. We were then advised that the development application had been approved as amended. However, Access Canberra were not required under the current laws and processes to provide us with an amended set of plans, nor an opportunity to comment on these changes even though they now consisted of a plan which was in breach of the Single Dwelling Housing Development Code.119
4.47 A submitter expressed concerns about:
the ACT practise of allowing a builder to deviate from building plans and install “alternative solutions”, and for these works to be approved by an ACTPLA certifier without sight or inspection and without notification to those who had purchased off-the-plan.120
COMMITTEE COMMENT
4.48 The Committee notes that steps have been taken to improve the lodging of relevant plans with the government.
118 Transcript of Evidence, 29 May 2019, p. 133.119 Submission 12, Steven and Melinda Kouparitsas, pp 3-4. 120 Submission 72, Keeley, p. 2.
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4.49 The Committee notes the concern raised by submitters about changes to the plans being made without the purchasers being informed. Some of these changes can significantly impact upon the amenity or suitability of the purchased property. The Committee notes the changes made by the Unit Titles Legislation Amendment Act 2020 requiring disclosure statements by sellers and allowing buyers to rescind contracts or claim compensation for material variations to those statements.121 These changes have not yet been commenced but will come into effect no later than 1 July 2021.
4.50 The Committee makes additional recommendations around documentation requirements in its discussion of the role of certifiers.
121 Sections 7 and 8, amending and inserting new provisions into section 260 of the Civil Law (Property) Act 2006.
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5 CONS UMER ADVI CE AND PRO TECTIO N
5.1 A recurring theme of the evidence before the Committee is the knowledge imbalance between the industry and the consumer. The average consumer may only build a house or purchase an apartment off the plans once in their lifetime, whereas industry participants engage in the activity every day. Information asymmetry tends to result in less efficient markets. Consumers can be at a distinct disadvantage, possibly not even knowing what questions to ask to avoid common building problems.
5.2 Mr Ross Taylor observed, “At the moment, consumers have almost no way of checking the bona fides of a developer or builder when they buy off the plan or buy a new building.”122
5.3 The lack of information and experience can be a severe problem for the Executive Committees (EC) of owners’ corporations.123 They are frequently formed of people with no experience in the role. Crestwood Owners Corporation told the Committee:
The processes are not laid out easily for an EC and, I suppose, on the process side or the regulation side, we would be looking for some clearer instructions on where ECs sit within the overall complex legally.124
5.4 The Vista Executive Committee told the Committee in relation to seeking rectification work that:
It is hard to find information on how to go about doing it. When you have got basically an owner’s corporation that is full of a lot of first home buyers, full of a lot of investment property purchases, people do not really know what is going on. It is hard to know what is going on.125
5.5 The Construction Occupations Registrar told the Committee that:
One of the things that we have been funded for, going forward, is some community education and engagement. [. . .] In addition to producing that type of information, we want to look at engaging with industry groups. For example, the Law Society would be one that we would be targeting. A lot of people engaged in a purchase in a multi-unit complex are engaging from a sales contract perspective and have a lawyer involved.
There are a number of pathways that we can employ on a voluntary basis to start getting that information out there. Prior to the launch of this website—I do not recall the time frame—there were a number of guides released in relation to unit living, the maintenance of units, what to do when you are buying off the plan and questions you should ask. That information is available. We know that groups like the Owners
122 Transcript of Evidence, 29 May 2019, p. 123.123 Submission 44, Owners Corporation Network, p. 2.124 Transcript of Evidence, 29 March 2019, p. 132.125 Transcript of Evidence, 29 May 2019, p. 147.
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Corporation Network have that information. There are certainly opportunities. One of the things we will work towards is capitalising on those opportunities to give information.126
COMMITTEE COMMENT
5.6 The Committee welcomes the establishment of the “build, buy or renovate” website but notes that this is a passive way of consumers receiving information. The Committee supports additional steps to allow buyers, potential buyers and executive committees to seek advice for their specific circumstances. The Committee acknowledges that information is being voluntarily distributed through organisations but notes that the most vulnerable consumers will be those who never make contact with those organisations.
Recommendation 125.7 The Committee recommends that the ACT Government consider establishing an ACT
Building advice line to inform consumers about the processes involved including available dispute mechanisms.
Recommendation 135.8 The Committee recommends that the ACT Government:
provide information to consumers, including Owners’ Corporation Executive Committees, on their rights and processes to seek redress when building quality issues take place, including by developing tool kits to support those taking legal action; and
require builders to supply information on that material at the quote or draft contract stage.
PUBLICATION OF RECTIFICATION ORDERS
5.9 Rectification orders are a tool by which the regulator can require a builder to rectify an identified defect or defects. The regulator must first issue a notice of intention to issue the order, usually accompanied by technical reports on the defect, and the builder can respond. The decision to issue a rectification order is significant regulatory action to take.127
126 Transcript of Evidence, 4 September 2019, p. 286.127 Transcript of Evidence, 4 September 2019, p. 292.
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5.10 The Building and Construction Legislation Amendment Act 2019 introduced the power for licensees to enter enforceable rectification undertakings. These undertakings are published on the Construction Occupations Licensing register.
COMMITTEE COMMENT
5.11 The Committee notes that stop work orders and disciplinary action against licencees are now available on the “build, buy or renovate website”.
Recommendation 145.12 The Committee recommends that the ACT Government consider making it mandatory for
the regulator to inform the public of any rectification orders not completed or addressed within the required timeframe.
PRE-CONTRACTUAL REPRESENTATIONS
5.13 Evidence was given to the Committee from multiple sources that aspects of builds were being negatively altered after they had been purchased off the plan.
5.14 One couple informed the Committee that they built off the plan but that the builder did not build to the plan but had:
changed the floor plan of our house from split level to single level without consultation, permission or any form of variation notice. The changes have caused flow on effects to the rest of the house e.g. reduced space in family room, loss of pantry, requirement to extend staircase to suit new levels, increased height of the main floor so that the laundry now requires steps and landing, increase in roof height that protrudes further than the approved departure of the solar envelope.128
5.15 Ross Taylor suggested that developers were relaxed because they felt beyond the reach of litigation and had the:
buffer of the builder taking full responsibility for design and construction and for any costs associated with defects. This is a massive buffer to the developer. It means then that the developer can screw down the design during that design development stage, to save money for the developer, without worrying about the repercussions of litigation or a defect arising.129
128 Submission 28, Name withheld. The submitter noted that the only way to address the matter appeared to be expensive legal proceedings.
129 Transcript of Evidence, 29 May 2019, p. 122.
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COMMITTEE COMMENT
5.16 The Committee again notes the changes made by the Unit Titles Legislation Amendment Act 2020 requiring disclosure statements by sellers and allowing buyers to rescind contracts or claim compensation for material variations to those statements.130 These changes have not yet been commenced but will come into effect no later than 1 July 2021
F IDELITY FUNDS
5.17 Fidelity funds for builders exist because of the difficulty of obtaining insurance for the industry. Builders are required to have an indemnity certificate before commencing a job. Following the collapse of HIH Insurance and the withdrawal of other providers from the market, the fidelity funds were established under the Building Act 2004 to provide certificates.131 The two insurance products that appear to dominate the ACT market for builders are the MBA’s fidelity fund and a QBE policy used by the HIA, with the fidelity fund being the most popular.132
5.18 Features of the MBA’s fidelity fund include:
Each building indemnified to a total of $85,000 for building defects;
Structural defects covered for six years from the date of issue of the final certificate, and they must be notified to the fund within that time;
Non-structural defects are covered for two years on the same basis;
A pre-condition to making a claim against the fund is that the owner must have exhausted their claims against the builder;
Operates where the builder is dead, disappeared or bankrupt;
Fees determined by actuarial assessment of the fund’s claim exposure;
Governance set up an appointed board, but the scheme is administered by MBA staff appointed by the board.133
5.19 The Committee heard evidence from a variety of witnesses that the MBA Fidelity fund did not provide them with the support that they through that it would. Kerin Benson Lawyers informed the Committee that there were particular difficulties for owners’ corporations due to a decision of the Federal Court.134 The outcome was that:
in order to make a claim on the scheme, an owners corporation needs to do all of the following within five years of completion of the building: identify the building defects in the apartment building; commence court proceedings against the builder; obtain judgement against the builder; defeat any appeal of that judgement by the builder;
130 Sections 7 and 8, amending and inserting new provisions into section 260 of the Civil Law (Property) Act 2006.131 Transcript of Evidence, 24 July 2019, p. 155.132 Transcript of Evidence, 22 May 2019, p. 103.133 Transcript of Evidence, 24 July 2019, p. 156-157.134 Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36
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pursue the builder for judgement unsuccessfully; appoint a liquidator to the builder; and then finally make a claim on the fidelity fund. 135
5.20 This makes it very difficult for owners’ corporations to make claims against fidelity funds, especially given the time that may be required for defects to emerge and for litigation to proceed through the courts. With an insurance product you can notify the insurer of a possible claim, pursue the builder through the courts, and then have recourse to an insurance claim if the builder fails to pay a judgement against them. This is not possible with a fidelity fund.
5.21 Witnesses raised concerns about a lack of transparency and a lack of payouts. One witness suggested that the fund had only paid out a single claim in its history.136 In contrast the evidence of the fund is that they issue around 2,000 certificates per year and have claims against approximately 1 per cent of those. The fund pays out about 20 claims totalling at least $1 million per year.137 The fund also makes assessments of a builder’s financial capacity and around 5-10% of applications for certificates are refused each year.138
COMMITTEE COMMENT
5.22 Having heard evidence from the fidelity fund, the Committee wrote to the Minister for Building Quality requesting copies of recent financial reports by the Trustees of the Fidelity Fund. The Minister provided those to the Committee but noted that they were commercially sensitive. The Committee is of the view that the Assembly should be in possession of these reports, along with a simple narrative annual report, and that they should be tabled annually.
Recommendation 155.23 The Committee recommends that the Minister responsible for Fidelity Funds established
under the Building Act 2004 provide audited accounts and an annual report to the Assembly on their performance.
135 Transcript of Evidence, 22 May 2019, p. 102.136 Transcript of Evidence, 29 May 2019, p.139.137 Transcript of Evidence, 24 July 2019, p. 156, 158.138 Answer to Question taken on Notice, Mr John Harris, dated 1 October 2019
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Recommendation 165.24 The Committee recommends that the ACT Government ensure that, if not already in place,
appropriate prudential standards are set for fidelity funds under Part 6 of the Building Act 2004 (and section 103, in particular) and further, that once set, such prudential standards are maintained and enforced.
5.25 Mr John Harris, Trustee, noted that the Assembly could change the rules for the fund and the fund would be administered accordingly. If the scope of the certificates was expanded, whether by increasing the amount claimable or extending the timeframe for claims, there would be a commensurate change in the cost of the certificates. These costs would ultimately be passed on to the consumer.139 Mr Harris also noted that similar funds in other jurisdictions had failed and had to fall back on state government funding.140
COMMITTEE COMMENT
5.26 The Committee acknowledges that the scope of the fund must strike a balance with increased cover leading to increased costs. While below the Committee recommends a specific increase in scope to permit claims by Executive Committees, a more general review of the adequacy of the scope of the fund would be beneficial.
Recommendation 175.27 The Committee recommends that the ACT Government review the fidelity fund and report
the findings of that review to the Assembly.
5.28 The Crestwood Owners Corporation made a claim against the Master Builders fidelity fund but were informed that the EC cannot act on behalf of individual owners even though the claim related to the roof of the complex, a common area. They told the Committee:
This is where the legislation probably needs to stand up and identify and support the ECs. There are other parts of the legislation that support the ECs and make them liable. We can be taken to court if we do not pursue problems in our build, but when it comes to the Master Builders fidelity fund, which is a fund set up by the ACT government, there seems to be this loop where, if there is not a fidelity fund issued for the EC of the building then it is only issued to the individual owners.141
139 Transcript of Evidence, 24 July 2019, pp. 161-162.140 Transcript of Evidence, 24 July 2019, pp. 157.141 Transcript of Evidence, 29 May 2019, p. 133.
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COMMITTEE COMMENT
5.29 The Committee notes that at the time of giving evidence the Crestwood Owners Corporation EC was seeking to appeal against that interpretation of the fidelity fund legislation. The Committee believes that, should the outcome of those court proceedings be an upholding of the current interpretation, the legislation should be amended to permit ECs to apply to the fidelity fund for common areas. Such claims should be limited by the total number of owners and not treated as a single certificate.
Recommendation 185.30 The Committee recommends that, as part of its review of the fidelity fund, the ACT
Government consider expanding the scope to allow Owners’ Corporation Executive Committees to make claims for common areas.
PHOENIXING
5.31 Phoenixing occurs when the controllers of a company deliberately avoid paying liabilities by shutting down an indebted company and transferring its assets to another company. This impacts on creditors who fail to receive payments for goods and services, employees through lost wages and/or superannuation entitlements and the general public through lost revenue to the Government. The total cost of phoenixing to the Australian economy is estimated to be between $2.9 billion and $5.1 billion annually.142
5.32 The Committee received evidence from a number of witnesses that after the completion of work building companies had been dissolved leaving the owners with no one to seek a remedy from. This was frequently referred to as phoenixing although some of what was described would not accurately fall within that definition.
5.33 Lawyer Maurice Falcetta explained that the use of companies to prevent exposure to personal liability was not illegal:
The general concept that you can have a special purpose vehicle and have another special purpose vehicle—the law condones that. So you can approach it at a very macro level, but the law certainly allows that. That is why people have incorporated companies and entities for over 150 years: that separation of personal risk and private. The concept of phoenixing, which is illegal, is when I have company A which is insolvent and has assets, and it sells its assets without value to company B. That is phoenixing and that is not permitted. But if a company does not have the resources—we are going back to that earlier point—and it has liabilities, in fact the law almost demands that
142 A 2018 report prepared for the Phoenix Taskforce (a coalition of 37 federal, state and territory government agencies established to combat illegal phoenix activity), estimated that the direct cost of illegal phoenix activities to the Australian economy is between $2.85 billion - $5.13 billion per annum.
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those directors do something about it and deal with it in an insolvency context; otherwise those people are exposed personally, so it requires that.143
5.34 One submitter described their experience when the builder:
simply did not respond to emails and we later discovered the original builders, as a legal entity, do not exist anymore. I am unsure what avenues we have for redress or dispute resolution.144
5.35 Other submitters described how they moved into their home in January 2018 but two weeks later the builder:
went into liquidation owing hundreds of thousands of dollars to various clients and trades. Whilst they delayed completing our house in 2017 [he] had already started up his new business [. . . ] and was delivering completed homes to his new clients. All the assets [. . . ] had been transferred into the new business leaving no recourse for us. We are $10,000 out of pocket in money we are owed and we have a defects list of over 60 items that need to be addressed.145
5.36 The AIB suggested that phoenixing was a greater problem in the residential sector, and particularly multi-unit residential, than the commercial sector.
5.37 The ACT Government noted that responsibility for corporation law lay with the Commonwealth but that they had taken what action they could. The Minister for Building Quality also pointed to the director liability reforms of the Building and Construction Legislation Amendment Act 2019. While this did not address phoenixing it did address the related matter of the winding up of companies leaving no one liable for rectification.146
5.38 In 2019 the Commonwealth introduced a suite of bills to create a new Commonwealth business registry regime.147 The Bills passed both Houses on 12th June 2020 and received royal assent on 22 June 2020. They cover the modernisation of Commonwealth registers, and the implementation of the Director identification regime. Key reforms relevant to phoenixing include:148
Creditor-defeating dispositions: These reforms introduce new phoenixing offences, with civil penalties and criminal offences for contraventions by directors, pre-insolvency advisers and other facilitators. Directors' duties have also been expanded to include a duty to prevent creditor-defeating dispositions.
143 Transcript of Evidence, 29 May 2019, p. 130.144 Submission 38, Name withheld, p. 3.145 Submission 24, Natalie Bice and Brendan Pratt, p. 2.146 Transcript of Evidence, 4 September 2019, p. 277.147 Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 Commonwealth Registers Bill 2019,
Business Names Registration (Fees) Amendment (Registries Modernisation) Bill 2019, Corporations (Fees) Amendment (Registries Modernisation) Bill 2019 and National Consumer Credit Protection (Fees) Amendment (Registries Modernisation) Bill 2019
148 https://www.mondaq.com/australia/white-collar-crime-anti-corruption-fraud/919878/new-laws-passed-to-tackle-illegal-phoenix-activity
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Leaving the company without a director: Directors will now be prohibited from improperly backdating resignations, or ceasing to be a director, when this could leave a company with no director.
Director Identification numbers (DIN): The DIN will require all directors to confirm their identity and it will be a unique identifier for each person who consents to being a director. The person will keep that unique identifier permanently, even if they cease to be a director. The DIN will provide traceability of a director’s relationships across companies, enabling better tracking of directors of failed companies and will prevent the use of fictitious identities. The new DIN regime will also offer benefits beyond combating phoenixing. For instance, simpler more effective tracking of directors and their corporate history will reduce time and cost for administrators and liquidators, thereby improving the efficiency of the insolvency process. In addition, the new regime will improve data integrity and security. For example, it would be possible to allow directors to be identified by a number rather than by other more personally identifiable information. 149
COMMITTEE COMMENT
5.39 The Committee notes that its recommendations under licencing also look to address liability beyond company structure by linking action to licences. The Committee notes that both the Commonwealth and ACT Government have acknowledged the impact of phoenixing and have taken steps to address it.
Recommendation 195.40 The Committee recommends that the ACT Government report to the Assembly on:
Action taken to date to address “phoenixing” in the building industry;
Any further actions planned; and
How the Commonwealth legislation passed in June 2020 will affect action against phoenixing in the ACT.
Recommendation 205.41 The Committee recommends that the ACT Government consider restricting the use of
special purpose vehicles for the acquisition, development and sale of property
149 https://parlinfo.aph.gov.au/parlInfo/download/legislation/ems/r6471_ems_e063b7ca-d61d-4993-a078-292990b204fc/upload_pdf/723538.pdf;fileType=application%2Fpdf p. 39-40.
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6 CONTR ACTS AND D ISPU TE RESO LUTI ON
6.1 Typically, the construction of a dwelling is governed by a contract between the future owner and the builder. The ultimate determination on whether the contract has been adhered to is made by the courts, if necessary. As litigation is a time consuming and expensive process, any steps that can be taken beforehand to ensure that the terms of the contract are clear to both parties, and that any disputes can be resolved by methods short of resorting to the courts, are to be welcomed.
6.2 The situation for multi-unit dwellings contains some complexity. While there will be a contract between the developer and each individual purchasing off the plan, there will be no contract between the eventual owners’ corporation and the developer. The owners’ corporation has obligations under legislation to care for common property but has no contractual relationship with the developer. To create this would require a change to the Unit Title legislation. The Owner’s Corporation Network wrote in their submission that with:
this in place the OC would then have the same rights to arrange rectification for common property defects as the individual unit owner has for defects in their own unit. It is worth noting developers, builders and other professionals have capacity for insurance coverage in the case of building defects but the owners in strata have no such capacity.150
Recommendation 216.3 The Committee recommends that the ACT Government amend the Unit Title legislation to
make it mandatory, upon occupancy and creation of the Owners’ Corporation (OC), that an agreement be established between the developer and the OC for addressing all common property (building and landscape) issues.
STANDARD CONTRACTS
6.4 There are a number of model contracts that are frequently used in the ACT construction market including those of the MBA, the HIA, and certain law firms. The ACT Government does not currently have a standard contract for the public but does have the power under the Building Act 2004 to require certain terms be placed in all construction contracts.
6.5 When asked about the possibility of introducing a government standard contract the MBA told the Committee that:
150 Submission 44, Owners Corporation Network, p. 5.
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The issue with a standard government contract—I know that in previous submissions there have been references to, say, the ACT Law Society contract for the sale of land—is that just having a standard contract provided by a government authority or the Law Society does not prevent anyone adding special conditions or other sections onto the end of that contract. In my experience, most contracts for the sale of land end up with pages and pages of special conditions at the end.151
6.6 When asked about evidence from some witnesses that there was no willingness to alter the contract demonstrated by the builders or developers the MBA responded:
If a home owner is not happy with the contract that is presented, they should not sign it. It is as simple as that. The ACT has no shortage of builders. It is not as though we are in a market where there are not enough options to go and find an alternative.152
6.7 The MBA did, however, believe that government could contribute short of having a standard contract through:
having some greater standardisation of terms, things like the building progress points, when payments are often made. If there were some standard definitions of the various progress points, that is something that would assist, particularly at the practical completion stage, because that is when the final payment is due and that is when often a lot of these small disputes boil up.153
6.8 The AIB told the Committee that the appeal of standard contracts is that:
if you have a standard contract and it is something that has been used for a while, everyone becomes comfortable with it and they know the rules of engagement. From that respect at least, when people are putting prices in and looking at how they are going to do the work, they know what they need to do and what they are allowed to do and not allowed to do.154 [. . . ]
They protect both the builder and the client. In the commercial environment, you usually get more informed clients. In the residential sector, you get less informed clients. Contracts are complex documents, so standardisation tends to mean that you get a balance of responsibility and protections.155
COMMITTEE COMMENT
6.9 The Committee does not believe that a standard government contract will eliminate contract disputes nor obviate the need for homeowners to seek independent legal advice. It could, however, provide a useful assurance to purchasers. It could also look to address common
151 Transcript of Evidence, 7 August 2019, p. 212.152 Transcript of Evidence, 7 August 2019, p. 218,153 Transcript of Evidence, 7 August 2019, p. 213.154 Transcript of Evidence, 7 August 2019, p. 242.155 Transcript of Evidence, 7 August 2019, p. 243.
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areas of dispute by providing greater clarity on the builder’s role and what a client can legitimately expect.
Recommendation 226.10 The Committee recommends that the ACT Government publish a standard building contract
that incorporates best practice.
Recommendation 236.11 The Committee recommends that the ACT Government implement a standard contract
requirement that the display unit of a project dwelling have the same building quality as intended for and used in the development it represents.
Recommendation 246.12 The Committee recommends that standard building contracts contain minimum
specifications for seals or membranes, as some products used for waterproofing are unsuitable for Canberra’s climate.
D ISPUTE RESOLUTION
6.13 An area of proposed reforms that the ACT Government has not yet completed are those for alternative dispute resolution (ADR) methods. The Committee has already recommended a role for the Building Commissioner in dispute resolution, although the exact format can be the subject of further government consultation.
6.14 The HIA supported initial use of alternative dispute resolution but submitted that:
For those matters that do proceed to formal litigation, there should be a specialised, knowledgeable, independent building jurisdiction (whether that be a statutory panel, a tribunal or division of the courts) to deal with domestic building disputes. This body should be presided over by judges but with a list of specialists and experts with building industry experience or knowledge.156
6.15 The AIB noted that avoiding the courts was best for all parties:
156 Submission 71, Housing Industry Association, p. 10.
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Generally, rather than resorting to fisticuffs or going to court, mediation processes tend to bring about a better solution to things. It is often about clients not understanding processes or understanding their responsibilities as well as the builder. So standard processes help, and the only way you can build them in is through the contractual process or through some regulatory mechanism.157
6.16 The ACT Government submitted that:
ADR mechanisms could help resolve many issues that are not likely to be resolved, or able to be considered, through the construction complaints system or other more informal mechanisms. They could relieve the pressure on the existing complaints system and courts and tribunals while acting as a bridge between a more informal negotiation and conciliation process and a formal action such as litigation or a regulatory order.158
6.17 The ACT Government submission went on to note that no single resolution method would be appropriate for all issues and that there would be matters that still need to be resolved by a court or tribunal.
6.18 The Committee heard evidence about the barriers to taking action against builders particularly as the ACT Civil and Administrative Tribunal (ACAT) can only hear disputes up to the value of $25,000. As one submitter told the Committee:
Anything above ACAT’s $25,000 limit will require the matter to heard by the Magistrates Court. An option that would not be taken by many home builders due to the cost of getting the case before the magistrate and the risk that could see the court costs exceed the original claim against the builder. Given the cost of the average family home to build, ACAT’s limit of $25,000 is inadequate to meet today’s building costs. By comparison, the Victorian Civil and Administrative Tribunal has no limit on the amount of money that can be claimed on building issues, with owners having up to 10 years to make the claim.159
6.19 Another submitter told the Committee:
We have been unable to identify any mechanisms that we could have used to identify or confirm the defects, then to compel to rectify during the build. and ACT builders in general, are aware of the lack of complaint mechanisms and the limits restricting ACAT ($25,000) and of the high expense seeking due process through legal action.160
157 Transcript of Evidence, 7 August 2019, p. 248.158 Submission 69, ACT Government, p. 20.159 Submission 7, Stephen and Amanda Peeks. 160 Submission 18, Raymond David, p. 7.
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COMMITTEE COMMENT
6.20 The Committee notes that in addition to the industry evidence above, the Committee received evidence from homeowners and executive committees that legal options were costly, intimidating and time consuming. A dedicated tribunal with access to expert support could streamline this process saving costs for all parties. Should the ACT Government reject that recommendation, it should look to increase the limit for ACAT so that more disputes can be resolved at that level where there are fewer barriers to consumers and litigation costs are reduced for all parties.
Recommendation 256.21 The Committee recommends that the ACT Government establish a building standards and
disputes tribunal with the power to:
oversee the rectification of defects that have not been remedied in the contracted time;
impose a time frame for rectification of defects, monitor rectification progress and make enforcement orders as necessary;
adjudicate complaints; and
call for documents, people or other things, in order to reach its decision.
Recommendation 266.22 The Committee recommends that, should a building standards and disputes tribunal not be
established, that the ACT Government consider for building matters amending the ACT Civil and Administrative Tribunal Act 2008 to increase the amount of money that can be claimed through the tribunal above $25,000 and to enable ACAT to hear contract disputes that arise.
STRATA MANAGEMENT
6.23 Strata managers are property managers who manage the operations of multi-dwelling properties with common areas. A key aspect of their role for building quality issues is their management of common area maintenance. For new developments the strata manager is initially contracted by the developer and then by the owners’ corporation upon the expiry of that initial contract.
6.24 The Crestwood Owners Corporation EC told the Committee that:
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The initial set-up of the EC is done by the owner, the builder or the developer in our case. The builder combined both. They then put in place, by law, an EC which is made up of them only, a strata management made up of them and an outside company, which generally contracts for the cheapest price to the developer for that.
Where it falls down is that they do not implement a lot of the normal requirements that would happen in a building, especially maintenance plans—things like lifts and exhaust systems. A lot of the general necessary maintenance plans are not implemented and not put in place. They have a contract for two years on those initial strata appointments. You are two years down; you then start to look for an EC to set up, made up of owners. Your contract is open. You have got this new EC coming in two years after the build is done, and then it takes a long time to realise how it works and it also takes just as much time to realise what is required by the EC.161
6.25 Mr Mal Wilson of Engineers Australia told the Committee that:
If the body corporate knew what was good for them, the first point of order at the first meeting would be to sack the strata manager who was just appointed by the builder. They are often locked into five-year contracts, and that is a very hard thing to do, but the strata manager is quite often the same person who is selling the units on the next development and the next development after that and they are going and telling the builder every single thing that is happening at every meeting.162
COMMITTEE COMMENT
6.26 The Committee understands that developers will have to appoint a strata manager initially as no owners’ corporation exists when a multi-unit development first receives residents. The time this company should be contracted for should be limited, however. Action to require rectification of building defects must be started before certain time limits expire and a strata management company with divided loyalties may delay this action.
Recommendation 276.27 The Committee recommends that the Unit Titles (Management) Act 2011 be amended to
prevent strata management companies being contracted for longer than 12 months during the period of developer control.
161 Transcript of Evidence, 29 May 2019, p. 134.162 Transcript of Evidence, 28 August 2019, p. 255.
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7 L ICEN SING 7.1 The area of licencing is possibly the area that has seen the most development over the course
of this inquiry’s life. The 2016 Improving the ACT Building Regulatory System report had 19 recommendations in this area and the ACT Government reports that 15 are now complete.
7.2 One prominent reform were the changes to the Class C builders licence examination process to make it more rigorous. This reform was generally welcomed by industry, with the HIA noting that it would assist in ensuring that applicants were of a high quality.163
7.3 The Australian Institute of Architects has called for a significant increase in the scope of registration and licensing telling the Committee that they:
propose regulation and registration of all building practitioners. To further ensure community protection, we are of the view that all building practitioners, including project managers, building designers and drafters need to be brought under a regulatory regime, a level playing field, where all are required to hold public liability and professional indemnity insurances and demonstrate appropriate skills in the building type and class that they are working with.164
7.4 The MBA was very supportive of a broadening of the licensing regime165 as was the AIB.166
7.5 The AMCA acknowledge that licensing its members would require cost and significant hardship, especially around the adoption of the scheme and proving the competency of long-term industry participants. However if:
we took a long-term view of mechanical services in ACT, we would see that, over time, if we get to 10 or 20 years down the track, if we have fully qualified, competent people operating within this area, that is the best result for industry and the public.167
7.6 Engineers Australia strongly supports the introduction of licences for engineers in the ACT and commented that the ACT Government had been promising the introduction of engineer licencing since 2014.168
7.7 The CFMEU told the Committee that their position was that a substantial increase in occupational licencing would make a significant contribution to improving building quality. The ACT “was the laxest territory or state around at the moment as far as occupation licensing goes.”169
163 Transcript of Evidence, 24 July 20219, p. 182.164 Transcript of Evidence, 24 July 2019, pp. 196-197.165 Transcript of Evidence, 7 August 2019, p. 208.166 Transcript of Evidence, 7 August 2019, p. 243.167 Transcript of Evidence, 7 August 2019, p. 234.168 Submission ??169 Transcript of Evidence, 28 August 2019, p. 263.
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7.8 New South Wales requires licenses for almost all trades involved in construction: air conditioning and refrigeration; bricklaying; building; carpentry; decorating; disconnection and reconnection of fixed electrical equipment; dry plastering; electrical; erection of pre-fabricated metal framed homes; excavating; fencing; general concreting; glazing; installation of security grilles and equipment; joinery; kitchen, bathroom and laundry renovation; metal fabrication; minor maintenance and cleaning; minor trade work; painting; plumbing, draining and gas-fitting; roof plumbing; roof slating; roof tiling; stonemasonry; structural landscaping; swimming pool building, pool repairs and servicing; underpinning and piering; wall and floor tiling; waterproofing, and wet plastering.170
7.9 Architects are also required to register with the NSW Architects Registration Board171 and are discussed further below.
COMMITTEE COMMENT
7.10 The Committee supports a significant expansion in licensing requirements in the ACT. Many common building quality issues identified in the ACT involve currently unlicensed trades. While the Committee is supportive of increased licensing, it would be administratively difficult to attempt to move directly to an approach similar to NSW. Instead the focus should initially be on trades associated with critical building issues and common defects, as identified in the Shergold-Weir report, with the possibility of expansion to other trades after that.
Recommendation 287.11 The Committee recommends that the ACT Government amend the Constructions
Occupations (Licensing) Act 2004 to expand the breadth of licensing in the ACT to license Architects, Engineers, Designers, Water Proofers, Fire Proofers, Carpenters, Painters and Concreters to cover trades associated with the more critically building issues in line with the Shergold-Weir report.
7.12 The AIB supported a link between licences and companies, telling the Committee:
Probably one of the best things would be to say that if a company closes down for any reason—liquidation or anything—we make it a bit tougher for those individuals who had responsibility, whether they were directors or even just partners, to be able to get a licence again.172
7.13 The Committee received a submission from an Executive Committee (EC) for a small unit complex in Canberra’s Inner North. The company responsible for the building dissolved the company but the Director transferred his activities and building licence to a larger developer and construction group. This new company continues to rely on the individual’s building
170 https://www.fairtrading.nsw.gov.au/trades-and-businesses/licensing-and-qualifications 171 https://www.architects.nsw.gov.au/architecture-resources 172 Transcript of Evidence, 7 August 2019, p. 245.
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licence while the complex has limited options to pursue the builder to rectify defects. The EC supported linking defect rectification obligations to a builders’ licence rather than a company.173
Recommendation 297.14 The Committee recommends that the ACT Government review the link between builders’
licences and associated companies, so licences can be reviewed where associated with companies that have failed to honour contracts.
7.15 The ACMCA told the Committee that:
Fifty per cent of the labour force undertaking mechanical work could be unskilled. The CIT, as it sits at the moment, does not offer a mechanical trade certificate, so there is no real pathway for us as an industry to even contemplate training. Some of our members actually use training from Victoria, which is obviously quite a costly and difficult exercise.174
7.16 The ACMCA expressed concerns that there are around 150 mechanical pipe fitters currently in the industry in the ACT but only 14 apprentices across a four-year period, threatening the renewal of the trade.175
Recommendation 307.17 The Committee recommends that the ACT Government ensure that vocational education
and apprenticeship schemes are funded appropriately to ensure the production of sufficient high-quality licensees to meet market demand.
COMMITTEE COMMENT
7.18 In Chapter 3 the Committee noted the HIA’s comments on the complexity of the National Construction Code and associated standards. Licensed builders must be able to access these documents if they are to be held to those standards. Access to these standards currently requires paying a fee.
Recommendation 317.19 The Committee recommends that the ACT Government review barriers to accessing current 173 Submission 90, Name withheld, pp. 2-3. 174 Transcript of Evidence, 7 August 2019, p. 231.175 Transcript of Evidence, 7 August 2019, p. 234.
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copies of the Building Code of Australia (BCA) and Australian Standards to assist licenced builders to have access without facing punitive costs.
COMMITTEE COMMENT
7.20 In Chapter 4 the Committee noted concerns that regulation was ineffective due to a lack of enforcement by the regulator. The Committee notes that this would be true of expanded licensing provisions. Licensed industry participants have acknowledged standards that they must be held to. The regulator should demonstrate that these standards are being upheld and that appropriate action is taken where they are not.
Recommendation 327.21 The Committee recommends that the ACT Government provide more transparent statistics
regarding disciplinary action against licensees.
Recommendation 337.22 The Committee recommends that the ACT Government consider the imposition of more
significant penalties for breaches on building licences.
Recommendation 347.23 The Committee recommends that the ACT Government review the criteria for renewing
building licences.
ARCHITECTS
7.24 The Architects Institute of Australia (AIA) highlighted the benefits of a registration or licencing scheme in their submission:
Consumers need to be able to differentiate between the levels of skill on offer in the market, and to know that an architect is – a person with an accredited tertiary qualification to the equivalent of a Masters degree, has at least 3000 hours of supervised experience, and is examined for competence. The Act also provides benefits for the ACT architectural profession, and the building and construction industry by
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enabling services to be offered interstate and overseas where there are mutual recognition arrangements in place. Depending upon the state or territory in which an architect is registered, there are obligations relating to the holding of professional indemnity insurance, adherence to a Code of Conduct and undertaking continuing professional development. The Institute believes that each of these is a necessary aspect of a model professional regulation Act.176
7.25 The AIA contended that the current approach to registering architects should be a guide for registering or licensing others in the building industry.177 It noted, however, that the Architects Act 2004 does not mandate some core requirements:
While an existing regulation under the Act may be used to adopt a code of conduct, the Act does not refer to a code that must be adhered to upon registration.
It requires architects to divulge to clients the level of professional indemnity insurance held (but does not prohibit that insurance being ‘none’, or for an inadequate amount).
It does not mandate compulsory continuing professional development.
7.26 All of the above requirements are mandated in NSW. The AIA believes that adoption of the requirements currently stipulated by the NSW Act into the ACT would enhance consumer protection, be relatively simple to achieve and bring consistency with NSW.
COMMITTEE COMMENT
7.27 The Committee notes the importance of good architectural work to quality building outcomes as discussed in Chapter 3. The Committee supports the AIA’s proposed reforms.
176 Submission 77b, Australian Institute of Architects, p. 177 Submission 77b, Australian Institute of Architects, p. 10.
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Recommendation 357.28 The Committee recommends that the ACT Government complete the objects of the ACT
Architects Act 2004 by:
Requiring adherence to a code of conduct upon registration;
Requiring the holding of professional indemnity insurance; and
Mandating continuing professional development.
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8 CERTIF IC AT I ON
8.1 The role of a building certifier is not clear to those outside the industry and the term itself can be confusing. The following terms are helpful:
Building surveyors: professionals with skills in assessing compliance with technical building standards.
Building certifiers: a statutory role undertaken by some building surveyors to certify compliance with standards.
Building consultants: a private role undertaken by some building surveyors, with particular application to the assessment of building defects.
Building inspectors: a regulatory position undertaken by people who may or may not have building surveying qualifications.
8.2 Certification is a function of a building surveying professional. In the ACT, building surveyors have to be registered and licensed to practice as building certifiers. The building certifier is responsible for inspecting the building work during the construction phase.
8.3 The Building Act identifies a number of stages of building work where an inspection by the building certifier is required. These include:
The completion of excavation, placement of formwork and placement of steel reinforcing for the footings before any concrete for the footings is poured;
Completion of the structural framework before the placement of any internal lining;
Completion of placement of formwork, and placement of steel reinforcing, for any reinforced concrete member before any concrete for the member is poured; and
Final inspection of the building works at completion.
8.4 It is the responsibility of the builder to advise the building certifier when each stage is ready for inspection.
8.5 From the evidence received the Committee notes that there appears to be a misunderstanding in the community about the role of certifiers. The Committee received submissions suggesting that certifiers should not have signed off on work because of quality issues but the issues were around matters that were not subject to certification.
8.6 One of the most consistent claims made to the Committee by submitters and witnesses was that the current system of certification does not work. For those building a home they have little concept of what a certifier does and are highly likely to simply take the recommendation of the builder. The Committee heard from witnesses who said that the “builder appoints the certifier”178 even though they are required to be contracted by the owner.
178 Transcript of Evidence, 8 May 2019, p. 87.
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8.7 The MBA told the Committee that the ACT Government could improve the situation:
by educating homeowners, and industry associations can contribute to that as well to reinforce that the homeowner is the person who appoints the certifier, that they have choice in who they appoint.179
8.8 For multi-unit developments the certifier is employed by the developer and has no relationship with the eventual unit owners. This situation was seen as giving rise to a clear conflict of interest as future work for the certifier depends on the opinion of the builders and developers rather than owners.180 As Mr Ross Taylor told the Committee “When the person checking the work is hired by the original owner, being the developer, then the future owner’s interests are not being protected.”181
8.9 While the solutions proposed to this problem varied, one witness summarised the key choice as:
now that we have private certifiers, we either move to a system where there are public servant certifiers rather than the private or, if you are going to keep a system with private certifiers, there have to be checks and balances and audits to make sure that they are following the process.182
8.10 The Owners Corporation Network told the Committee that:
there could be a pool of certifiers who are known by the government, and they could be allocated by some system like that rather than the developer. [. . .] We do not have to go back to government certifiers. We do not have to do that. We can simply have government in control of allocating certifiers.183
8.11 The AIA told the Committee that:
certification must be independent. In the ACT it is the building owner who engages the certifier, not the builder. However, when the owner is the developer and the builder, or has a close relationship with the builder, the certifier’s position is compromised. We recommend maintaining a third-party distance between builder and certifier—that is, those who certify should be independent and not be employed directly by the developer-builder.184
8.12 The Australian Institute of Building Surveyors suggested that consumer education was important for educating owners about the role of certifiers,185 but acknowledged that the situation with multi-unit developments was “tricky”. The AIBS noted that in some cases developments were highly technical and that there were certain certifiers with specialist skills
179 Transcript of Evidence, 7 August 2019, p. 222.180 See, for example, Transcript of Evidence, 22 May 2019, p. 115 and Transcript of Evidence, 29 May 2019, p. 153.181 Transcript of Evidence, 29 May 2019, p. 119, 122.182 Transcript of Evidence, 8 May 2019, p. 80.183 Transcript of Evidence, 8 May 2019, pp. 96-97.184 Transcript of Evidence, 24 July 2019, p. 197-198.185 Transcript of Evidence, 24 July 2019, p. 189.
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in those areas that would be particularly appropriate for those roles. The AIBS suggested that an effective auditing scheme could address the perceived conflicts of interest.186
8.13 The Shergold Weir report was clear that this was an issue as demonstrated by recommendation 9: “that each jurisdiction establishes minimum statutory controls to mitigate conflicts of interest and increase transparency of the engagement and responsibilities of private building surveyors”.187
8.14 Since the beginning of this inquiry the ACT Government has introduced a code of practice setting out the obligations on, and expectations for, building certifiers. With the code of practice in place, Access Canberra will audit against it to ensure that certifiers are properly performing their roles.188 Since September 2019 compliance with the code has been tied to licensing.189
8.15 During the course of this inquiry, the ACT Government introduced a requirement that for any agreement for a builder to act as the landowner’s agent, to appoint the building certifier and to apply for approvals for certain residential building work, they must be separate from a building contract.190 Access Canberra told the Committee that it was undertaking work both to inform certifiers of their obligations under the code of practice and to inform consumers about what to expect from a certifier.191
8.16 Regarding conflict of interest the Construction Occupations Registrar told the Committee that:
If certifiers want to put their licence on the line by making incorrect decisions in relation to building compliance elements, that is a decision they can make. And if we become aware of those things we can look at the regulatory actions we can take. I think there is sufficient disincentive, if I can use that term, for certifiers to act in that way.192
8.17 The ACT Government’s submission noted that there was no current system in Australia where certifiers were randomly assigned to projects. It also noted that if government certification was introduced it would have to be in a competitively neutral way so that the private sector was not disadvantaged.
COMMITTEE COMMENT
8.18 The Committee notes the reforms put in place since the beginning of this inquiry and believe that they will help ensure appropriate standards are maintained by building certifiers. The Committee is not convinced, however, that the reforms implemented to date are sufficient to
186 Transcript of Evidence, 24 July 2019, pp. 189-190.187 See Appendix D.188 Transcript of Evidence, 4 September 2019, p. 276.189 Transcript of Evidence, 4 September 2019, p. 276.190 Transcript of Evidence, 4 September 2019, p. 271.191 Transcript of Evidence, 4 September 2019, p. 303.192 Transcript of Evidence, 4 September 2019, p. 304.
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address the concern about conflict of interest where the certifier is appointed by developers. For the higher risk category of buildings, the regulator should play a role, even it is only allocating a private sector certifier from an agreed panel.
8.19 The day before the tabling of this report the Minister for Building Quality announced plans to introduce a team of public sector certifiers but this would not be implemented until after the end of this term of government. The team of public certifiers is proposed to operate on a fee for service basis and would be mandatory for certain types of ‘complex’ development as well as being available to the general public at a fee.193
Recommendation 368.20 The Committee recommends, noting the Minister for Building Quality’s announcement of a
possible requirement to use public certifiers, that the ACT Government also consider, for multi-unit developments (where the developer or builder is also the owner) the Building Commissioner or regulator establish a panel of certifiers and that developers be required to choose their certifier from a rotating subset of that panel.
Recommendation 378.21 The Committee recommends that the ACT Government ensure building plans (detailed
rather than concept plans) are reviewed and assessed by certifiers from the beginning of the development.
Recommendation 388.22 The Committee recommends that the ACT Government consider make it mandatory for the
first action of an Executive Committee in a multi-storeyed apartment development to be to obtain a Building Code of Australia Audit Report from an independent certifier so as to provide assurances on the buildings compliance with the Deemed-to-Satisfy (DTS) requirements of the Building Code of Australia (BCA) as well as the ACT’s Building Act 2004 and Building Regulation 2008.
193 Media Release, Gordon Ramsay MLA, 22 July 2020.
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8.23 It was suggested to the Committee that the current role of certifiers does nothing to assist build quality. Mr Ross Taylor told the Committee regarding certifiers:
At the moment their actual purpose with regard to quality is completely ineffective. A certifier is essentially an outsourcing of a previous council function, as I understand it, and is very good at doing the paperwork in terms of gathering the paperwork early in the process. But we find that the skill level of the certifiers and their remit, what they are asked to do, has no impact on building quality whatsoever.194
8.24 The AIBS told the Committee that:
The role of the building surveyor, particularly the statutory building surveying, is about compliance with technical standards and much less about quality. So there is that really important distinction that is often missed by the community, the media and even regulators to a large degree. Building surveyors have an ability to apply technical requirements that is created within the legislative environment. In my opening I said that building surveyors are actually limited in what they can do in respect to building quality by the legislation they operate within.
If we were able to deal with things like buildability or quality matters under the legislation then certainly we would do so, but we cannot. All legislation in Australia has a provision that if a set of documentation demonstrates conformity with the minimum requirements of the building code and standards we are obliged to issue an approval.195
8.25 The MBA supported additional hold points in the certification process.196
COMMITTEE COMMENT
8.26 The Committee acknowledges the limitations of the certifier’s role based on current legislative requirements. The Committee sees scope for expanding the certifier’s roles to address a key area of building quality concern.
Recommendation 398.27 The Committee recommends that the ACT Government consider adding additional hold
points for certification in the building process including:
waterproofing of balconies, courtyards, and tiled areas; and
leak testing of roofs.
194 Transcript of Evidence, 29 May 2019, p. 118.195 Transcript of Evidence, 24 July 2019, p. 191.196 Transcript of Evidence, 7 August 2019, p. 223, Submission 75, Master Builders Association, p. 6.
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CERTIFICATE OF OCCUPANCY
8.28 When the builder finishes the building work subject to building approval, the building certifier will undertake a final inspection. This inspection does not confirm all works under the contract such as landscaping, driveways, fences and window furnishings. When the building certifier is satisfied the building work complies with the building approval and associated technical requirements, they will issue a certificate of completion and lodge any final certificates or paperwork with the Registrar.
8.29 If the building project includes electrical, plumbing or gas work, those licensees, often contracted by the builder, have the responsibility to ensure they lodge the paperwork with the Registrar. ACT Government inspectors may then inspect the works.
8.30 Inspectors from the Office of the Registrar may undertake inspections of the installation of electrical and plumbing/gas fitting work.
8.31 Once all the inspections are cleared and tested by government and all relevant clearances have been received by the Registrar, the landowner can make an application to the Registrar for a certificate of occupancy and use. The certificate will be issued by the Registrar once all clearances are received and there are no outstanding issues.
8.32 The certificate of occupancy and use indicates that, based on the information provided by the building certifier and results of any government inspections of the electrical, gas or plumbing work, the building is fit for use in the class which is stated on the certificate.
Recommendation 408.33 The Committee recommends that Certificates of Occupancy should not be issued on a
building until:
a representative of the unit responsible for achieving and storing the drawings (and the certifier) has signed a document to verify that the drawings issued to the department are all of the relevant ‘work as executed’ structural (including shop drawings and precast drawings), architectural, mechanical, electrical, hydraulic, fire and landscape drawings;
detailed and accurate plans are lodged with the ACT government, and lodgement verified by the responsible officer; and
all documents are also lodged with corporate bodies.
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9 DEFEC T RECTI F ICAT ION
9.1 There was some confusion in submissions about what could be covered by defect rectification. While the majority of submissions focussed on the kind of structural matters that building certifiers would examine and could potentially make buildings unsafe or uninhabitable, there was also some reference to matters that could better be described as irritants or cosmetic problems. These latter kinds of disputes are best handled as consumer contractual matters and while some of this report’s recommendations may impact on them the focus is on more fundamental defects.
9.2 In evidence to the Committee, the ACT Government highlighted the use of court-enforceable undertakings as a possible tool to get commitments to rectification works without having to go through the formal rectification order process.197
9.3 Kerin Benson Lawyers observed that a key response for New South Wales to the Shergold Weir report was the “introduction of a duty of care to home owners to ensure that building practitioners owe a duty of care to owners’ corporations and subsequent title holders.”198
BOND SCHEMES
9.4 One issue for multi-unit developments has been conflict between developers and eventual owners’ corporations over responsibility for maintenance issues. The Owners' Corporation Network suggested that developers needed to have a financial incentive to be concerned about future maintenance.199
9.5 The Vista Owners Corporation talked about the difficulty of getting rectification work done because of funding:
The builder does not want to pay for it. We feel we should not have to pay for it. And it is hard to get the builder to come to the party. If there was some kind of bond system—if you want this bond back then you have got to do the right thing—maybe that might work.200
9.6 The CFMEU told that Committee that they believed that the NSW bonds scheme was worth examining. This sort of scheme could ensure that there was something available to pay for rectifications even if the corporate entity that was established for the project no longer had
197 Transcript of Evidence, 4 September 2019, p. 293.198 Transcript of Evidence, 22 May 2019, p. 105.199 Transcript of Evidence, 8 May 2019, pp. 98-99.200 Transcript of Evidence, 29 May 2019, p. 147.
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any funds.201 Similar points were made by the Executive Committee of a unit complex with rectification issues.202
9.7 The NSW Government introduced the Strata Bond and Inspections Scheme (the Scheme) on 1 January 2018. The Scheme was set up to rectify defective building work early in the life of a new high-rise strata buildings.
9.8 The Scheme is designed to ensure there is a clear process to incentivise developers and builders to build well and work collaboratively with owners’ corporations to minimise building issues in new residential high-rise buildings and make sure any defective building work is readily identified so it can be fixed promptly and cost-effectively.
9.9 The amount secured by a building bond is to be two percent of the contract price for the building work. The purpose of the building bond is to secure funds (up to the amount of the bond) to pay for the costs of rectifying defective building work.
9.10 Developers are required to lodge a building bond with NSW Fair Trading for residential and mixed-use, high-rise strata buildings of four storeys and over. Buildings that are three storeys or under may be covered under Home Building Compensation cover.
9.11 The Scheme consists of eight stages and the length of the Scheme is up to three years. The Scheme includes:
1. Building bond lodgement - by the developer2. Building inspector appointment3. Interim inspection and report4. Rectification of identified defective building work5. Final inspection and report6. Determination of cost to rectify defective building work7. Payment of the building bond8. Completing the process 203
COMMITTEE COMMENT
9.12 The NSW bond scheme appears to provide a useful incentive to promote quality building practices and would merit further consideration by the ACT Government.
Recommendation 41
201 Transcript of Evidence, 28 August 2019, p. 267.202 Submission 90, Name withheld, p. 4.203 https://www.fairtrading.nsw.gov.au/housing-and-property/strata-building-bond-and-inspections-scheme
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9.13 The Committee recommends that the ACT Government investigate a building bonds scheme for multi-unit residential buildings requiring a percentage of the contract value of a property be withheld in a Trust until all defects and warrant issues are addressed satisfactorily.
STATUTORY WARRANTIES
9.14 Under the Building Act there is a statutory warranty for building work on a residential building that requires a building approval and has a cost of $12,000 or more, if it was contracted for on or after 20 August 2017.
9.15 Under these provisions the builder warrants the following:
That the residential building work has been or will be carried out in accordance with the Building Act.
That the work has been or will be carried out in a proper and skilful way and:
in accordance with the approved plans; or
if the work involves or involved handling asbestos or disturbing friable asbestos – in accordance with approved plans that comply with the Building Act in relation to asbestos.
That good and proper materials for the work have been or will be used in carrying out the work.
If the work has not been completed, and the contract does not state a date by which, or a period within which, the work is to be completed - that the work will be carried out with reasonable promptness.
If the owner of the land where the work is being or is to be carried out is not the builder, and the owner expressly makes known to the builder, or an employee or agent of the builder, the particular purpose for which the work is required, or the result that the owner desires to be achieved by the work, so as to show that the owner is relying on the builder's skill and judgement- that the work and any material used in carrying out the work is or will be reasonably fit for the purpose or of such a nature and quality that they might reasonably be expected to achieve the result.
9.16 The period for which statutory warranty operates is:
six years after the completion day for the work for residential building work in relation to a structural element of a building, which includes components of external walls (including weatherproofing); and
two years after the completion day for the work for residential building work in relation to a non-structural element of a building.
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9.17 The completion day is taken to be the day the work is completed or the day the contract relating to the work ends, whichever is the later.
9.18 The Committee heard evidence from Owners’ Corporations that rectification of problems in common areas was particularly difficult. Existing homeowners’ warranties cover individual units but there needs to be a system for dealing with common areas.204 The Committee notes the Multi-Unit Residential Building Maintenance Guide now available on the build, buy or renovate website.205
9.19 The ACT has a particular issue with an absence of statutory warranties for some residential buildings over three stories. A 2014 High Court ruling left owners’ corporations with no avenue to pursue remedies. Legislative action taken with effect from 20 August 2017 means that apartments buildings arising from building contracts entered into after that date will have statutory warranty protection. Kerin Benson Lawyers advised the Committee that the only avenue for owners’ corporations in this position is to get rectification orders issued by the ACT Government.206
9.20 Kerin Benson Lawyers submitted that developers as well as builders should be liable for breaches of statutory warranties:
This would bring the ACT into line with New South Wales and also provide an additional layer of protection for apartment owners without increasing the risk profile for ACT projects beyond that of New South Wales projects. Given many national builders run or oversee their ACT operations from a Sydney office, there would be little disruption to their management of risk if such an amendment was made. This additional layer of protection would motivate developers to ensure that the quality of the work completed by builders is high.207
Recommendation 429.21 The Committee recommends that the ACT Government consider amending legislation to
make developers, in addition to builders, liable for breaches of statutory warranties under the Building Act 2004.
9.22 There was concern expressed to the Committee that statutory warranties do not cover some of the most common building quality issues. Ross Taylor told the Committee that:
the statutory warranties need to be overhauled because the wording at the moment is about structural elements. For example, waterproofing strictly is not a structural
204 Submission 90, Name withheld, p. 4.205 https://www.accesscanberra.act.gov.au/ci/fattach/get/240077/1536900225/redirect/1/filename/Multi-
unit+residential+building+maintenance+guide.pdf 206 Transcript of Evidence, 22 May 2019, p. 106.207 Submission 20, Kerin Benson Lawyers, p. 2.
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element; it is in a floor, say, but it is not an element per se. It could be argued that it is only in the two-year mark, and major defects like that are more like three or four years. I think there could be a redefining of the two big expenses, which are fire and water, and facade cracking. Those elements have a much longer period. Certainly the six years would be a help.208
Recommendation 439.23 The Committee recommends that the ACT Government review statutory warranties to
extend cover for longer term issues including waterproofing, façade cracking and fire protection.
9.24 Kerin Benson Lawyers pointed to the requirements Civil Law (Property) Act 2006 for the seller to have knowledge of defects in order to activate implied warranties:
The prerequisite of knowledge of specific defects limits the potential liability of developers for defects. It is unclear why such a prerequisite is necessary or appropriate given the consumer protection nature of the provision. The removal of this provision would bring these warranties more in line with the statutory warranties in the Building Act 2004 which have no prerequisite knowledge for their operation.
Recommendation 449.25 The Committee recommends that the ACT Government consider broadening the application
of the implied warranties under Division 2.9.3 of the Civil Law (Property) Act 2006 by removing the requirement of knowledge of defects on the part of the seller of newly built units.
208 Transcript of Evidence, 29 May 2019, p. 124.
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10 ADDIT I ONAL MATTERS
BUILDING MATERIALS
10.1 One of the causes of building quality issues, as discussed in Chapter 3, is the use of defective or inappropriate building materials. This is not necessarily a fault of the builder. For example, the 2014 recall of defective electrical cabling supplied by Infinity Cable Co involved 3900km of product that had accredited testing certification and was only subsequently found to be non-compliant.209 Similarly, some cladding products, now the source of fire safety concerns, was legally installed.
COMMITTEE COMMENT
10.2 The Committee is aware that building material regulation is an area where both the Commonwealth and States and Territories have roles. As a small market the ACT is unlikely to be effective taking the lead on this issue and will need to work cooperatively with other jurisdictions.
Recommendation 4510.3 The Committee recommends that the ACT Government report back to the Assembly within
6 months of the tabling of this report with information on the regulation of building materials, the respective responsibilities between the Commonwealth and the States and Territories and what position the ACT Government is taking in Building Ministers’ Forum discussions on building material regulation.
BALCONY SAFETY
10.4 The Committee received a submission (number 57) from the owner of a unit in a newer high-rise residential tower. The submission outlined concerns about the balcony glass balustrades installed on each floor. The gaps between the edge of the building and the balustrades is large enough for a significant sized object (the example given was a wine bottle) to fall through or a child’s body part to get trapped in. The owners received assurances that the design was approved but it is unclear whether it meets NCC requirements nor whether it would pass any reasonable risk assessment.
10.5 The submitter proposed that an obligation be placed on the builder; in the absence of any legislative requirement, standard or guidance; to ensure a proper investigation of a design
209 https://www.accc.gov.au/update/infinity-cables-frequently-asked-questions
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component whereby there is potential for an object to fall in excess of 2 metres. This should be performance based and trigger a mandatory and documented risk assessment that must be approved by the project’s certifier.
COMMITTEE COMMENT
10.6 The Committee notes the proposal for an ACT requirement but believes this is better addressed by ensuring that the National Construction Code adequately addresses the issue.
Recommendation 4610.7 The Committee recommends that the ACT Government make representations to the
Australian Building Codes Board to expand Part 3.9.2.3 (c) of the National Construction Code to investigate and make specific recommendations on the maximum safe distances a balustrade can be set out and away from a floor or balcony, specifically taking into consideration balustrades in high rise developments.
D ISABILITY ACCESS
10.8 The Committee received a submission from an apartment purchaser whose wife has a disability requiring the use of a motorised scooter. They selected the apartment due to its adaptable units and amenities such as large lifts, disabled parking and a swimming pool with disabled access. The wife has been unable to utilise these as access to common use facilities is through manual doors that she is unable to operate. The building complies with the BCA but not the Premises Standard Guide as they are not harmonised.210
COMMITTEE COMMENT
10.9 The Committee notes that as the population ages there will be increased demand for accessible apartments and that this should come with accessibility to common areas. It would be of concern if significant numbers of units were being added to the ACT’s stock without consideration of accessibility to common areas.
210 Submission 59, Olley.
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Recommendation 4710.10 The Committee recommends that the ACT Government review minimum requirements for
multi-unit buildings to make them suitable for those with disabilities, with a focus on safety and common areas.
CLADDING
10.11 The June 2017 fire which destroyed Grenfell Tower in London and killed 72 people highlighted the issues of flammable cladding. Jurisdictions in Australia have taken a variety of responses to the issue, with the Victorian Government’s audit of all at risk buildings and commitment of $600 million for rectification work the most prominent.
10.12 The ACT Government audited 466 ACT Government owned sites and assessed 70 to have some form of combustible cladding. Those 70 sites will undergo further assessment to confirm what, if any, rectification work is needed. In December 2019 the ACT Government announced that it “will also start the work on identifying, where possible, the use of potentially combustible cladding on private buildings in the ACT.”211
COMMITTEE COMMENT
10.13 The Committee notes that the ACT Government has considerable experience in dealing with an issue of building safety through its experience with loose-fill asbestos. The Committee recommends drawing on that experience to manage the risk posed by flammable cladding.
Recommendation 4810.14 The Committee recommends that the ACT Government draw on the Territory’s experience
dealing with loose-fill asbestos risks and prepare mechanisms for:
the owners of buildings with flammable cladding to produce detailed plans on how the risk will be managed;
those renting or purchasing buildings with flammable cladding to be informed of the risks; and
appropriate fire management plans to be created taking into account the risks posed by the cladding.
211 Statement from Minister for Building Quality, Gordon Ramsay, 18 December 2019 accessed at https://www.planning.act.gov.au/build-buy-renovate/reviews-and-reforms/cladding/building-cladding-review.
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11 CONCL USIO N
11.1 When the Committee began this inquiry, it appeared that reform had stalled and the urgent need to address the systemic failures causing building quality issues would go unaddressed. Renewed efforts at both the Territory and national level have seen significant reforms implemented over the last few years. These reforms appear to have been appropriately targeted at some of the significant issues identified by submitters to this inquiry. The Committee urges the ACT Government to work to bed down the reforms and consider further efforts as recommended in this report.
Jeremy Hanson MLA
Chair
15 July 2020
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APPE NDIX A - W I TNE SSES
10 APRIL 2019 Ms Natalie Bice Mr Peter Hopner Mr Jerry Howard Mr Kris Mcallister Mr Peter Olley Mr Stephen Peek Ms Georgina Pinkas Mr Brendan Pratt
1 MAY 2019 Mr Raymond David Mr John Grant Ms Linda Seaniger Mr Justin Sowden Ms Glenda Toffolon
8 MAY 2019 Mr Brad Kane Mr David Mckay Mr Gary Petherbridge, President, Owners Corporation Network
22 MAY 2019 Mr Christopher Kerin, Kerin Benson Lawyers Mr Damien Moloney, Capital Building Consultants
29 MAY 2019 Ms Lisa Downs, Crestwood Owners Corporation Mr Maurice Falcetta, Trinity Law Ms Lara Jurkiewicz, Crestwood Owners Corporation Mr John Oam Keeley, Crestwood Owners Corporation
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Ms Cheryl Keeley, Crestwood Owners Corporation Mr Julian Matos, Vista Executive Committee Mr Ross Taylor, Ross Taylor Associates
24 JULY 2019 Ms Melissa Adler, Executive Director, Industrial Relations, Housing Industry Association Mr Simon Croft, Executive Director, Building Policy, Housing Industry Association Mr David Delchau, Branch Convenor, ACT, Australian Institute of Building Surveyors Mr Will Gardner, Associate, Guida Moseley Brown Architects Mr John Harris, Trustee, Master Builders Fidelity Fund Mr Philip Leeson, President, ACT Chapter, Australian Institute of Architects Mr Brett Mace, Chief Executive Officer, Australian Institute of Building Surveyors MR Dean Mcpherson, Director, AMC Architecture Mr Chris Millman, Director, Cox Architecture Mr Jeremy Turner, National Technical Manager, Australian Institute of Building Surveyors Mr Greg Weller, Executive Director, ACT and Southern New South Wales, Housing Industry
Association
7 AUGUST 2019 Ms Ashlee Berry, Legal and Compliance Director, Master Builders ACT Mr James Cameron, Executive Director, Air Conditioning and Mechanical Contractors
Association ACT Dr Robyn Hardy, National Council Representative for ACT, Australian Institute of Building Mr Michael Hopkins, Chief Executive Officer, Master Builders ACT Mr Roger Poels, President, ACT Chapter, Australian Institute of Building Mr Scott Polsen, President, Air Conditioning and Mechanical Contractors Association ACT
28 AUGUST 2019 Mr Jason O’mara, ACT Divisional Branch Secretary, Construction and General Division, CFMEU Mr Jonathan Russell, National Manager, Public Affairs, Engineers Australia Mr Zachary Smith, ACT Divisional Branch Assistant Secretary, Construction and General
Division, CFMEU Mr Mal Wilson, Director, Advanced Structural Designs
4 SEPTEMBER 2019 Dr Erin Brady, Deputy Director-General, Land Strategy and Environment, Environment,
Planning and Sustainable Development Directorate
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Mr Ben Green, Construction Occupations Registrar and Executive Branch Manager, Construction and Utilities, Access Canberra, Chief Minister, Treasury and Economic Development Directorate
Ms Vanessa Morris, Coordinator, Building Policy, Environment, Planning and Sustainable Development Directorate
Mr Ben Ponton, Director-General, Environment, Planning and Sustainable Development Directorate
Mr Gordon Ramsay, Attorney-General, Minister for the Arts, Creative Industries and Cultural Events, Minister for Building Quality Improvement, Minister for Business and Regulatory Services, and Minister for Seniors and Veterans
Mr David Snowden, Chief Operating Officer, Access Canberra, Chief Minister, Treasury and Economic Development Directorate
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APPE NDIX B – SUBMI SS IO NS
Submission Number Submitter Received
001 Hugh Dakin 18 April 2018
002 Andrew Martin 22 April 2018
003 Brad Kane 25 April 2018
004 June Keogh 25 May 2018
005 Cheng Fei 30 May 2018
006 Name withheld 14 June 2018
007 Stephen & Amanda Peeks 17 June 2018
008 Name withheld 19 June 2018
009 Irene Pellegrino 26 June 2018
010 Executive Committee Units Plan 3089 29 June 2018
011 Glenda Toffolon 30 June 2018
012 Steven and Melinda Kouparitsas 03 July 2018
013 Shannon Cuthbertson 03 July 2018
014 Suzanne Maginnity 05 July 2018
015 Taneill Jager 06 July 2018
016 Pascal Deschanel 06 July 2018
017 Lauren Upton 08 July 2018
018 Raymond David 16 July 2018
019 David Berston 18 July 2018
020 Kerin Benson Lawyers 19 July 2018
021 Kylie Fitzsimmons 20 July 2018
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Submission Number Submitter Received
022 Daniel Christiadi 25 July 2018
023 Owners Corporation Network 25 July 2018
024 Natalie Bice and Brendan Pratt 26 July 2018
025 Samintha Pathiranage and Kumara Weligama 30 July 2018
026 Scott and Aimee Hunter 30 July 2018
027 Todd Garratt 31 July 2018
028 Name withheld 26 July 2018
029 Artur Baumhammer 01 August 2018
030 Guo & Wu Family Pty Ltd 03 August 2018
031 ACT Manhattan 13 August 2018
032 Yang 16 August 2018
033 Corcoran 17 August 2018
034 Ghildyal 20 August 2018
035 Davis and Rudkin 24 August 2018
036 Matkovic 24 August 2018
037 Canberra Business Chamber 30 August 2018
038 Name withheld 30 August 2018
039 E Martin 31 August 2018
040 Chen 11 September 2018
041 Australia Institute of building 14 September 2018
042 Name withheld 16 September 2018
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Submission Number Submitter Received
043 Grant 21 September 2018
044 Vista executive committee 26 September 2018
045 Pinkas 27 September 2018
046 Sherwin 27 September 2018
047 Australian Institute of Building Surveyors 28 September 2018
048 Combined Community Councils 28 September 2018
049 CFMEU 28 September 2018
050 Engineers Australia 28 September 2018
051 Taylor 28 September 2018
052 Olley 29 September 2018
053 Inner South Canberra Community Council 29 September 2018
054 Name withheld 29 September 2018
055 Kingston and Barton Resident's Group 29 September 2018
056 McKay 04 October 2018
057 Hopner 23 October 2018
058 Jayasekara 25 October 2018
059 Olley 28 October 2018
060 Robinson 06 November 2018
061 Name withheld 07 November 2018
062 Smithurst 14 November 2018
063 Kiely 15 November 2018
064 Payne 24 November 2018
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Submission Number Submitter Received
065 Rosser and Skvorc 24 November 2018
066 Haiduk 26 November 2018
067 Bursill 26 November 2018
068 Name withheld 27 November 2018
069 ACT Government 28 November 2018
070 Seaniger 28 November 2018
071 HIA 28 November 2018
072 Keeley 28 November 2018
073 Howard 28 November 2018
074 Raj 29 November 2018
075 Master Builders Association 29 November 2018
076 Domovina 29 November 2018
077 Australian Institute of Architects 29 November 2018
078 Name withheld 30 November 2018
079 Canale 30 November 2018
080 Moloney 30 November 2018
081 Champness 30 November 2018
082 Bektas 30 November 2018
083 Tranzillo 30 November 2018
084 Confidential 30 November 2018
085 McCormack 30 November 2018
086 Wood 30 November 2018
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Submission Number Submitter Received
087 Name withheld 30 November 2018
088 AMCA 30 November 2018
089 Confidential 30 November 2018
090 Name withheld 30 November 2018
091 Confidential 30 November 2018
092 Confidential 30 November 2018
093 Confidential 30 November 2018
094 Withdrawn 30 November 2018
095 Name withheld 30 November 2018
096 Zeil 30 November 2018
097 Cummins 30 November 2018
098 Name withheld 30 November 2018
099 Resosudarmo 03 December 2018
100 Downs 03 December 2018
101 Name withheld 18 February 2019
102 Name withheld
103 Petrovic
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APPE NDIX C: RECO MMEND ATI ONS FROM SHERG OLD WEIR REPO RT BUILD ING CONFI DENCE – IMPRO VING THE EFFE CTIVE NESS OF COM PLIAN CE AND ENFO RCEM ENT SYS TEMS FOR THE BUIL D ING AND CONS TRUCT ION INDUS TRY ACRO SS AUSTR AL IA
Recommendation 1:
That each jurisdiction requires the registration of the following categories of building practitioners involved in the design, construction and maintenance of buildings:
• Builder
• Site or Project Manager
• Building Surveyor
• Building Inspector
• Architect
• Engineer
• Designer/Draftsperson
• Plumber
• Fire Safety Practitioner
Recommendation 2:
That each jurisdiction prescribes consistent requirements for the registration of building practitioners including:
• certificated training which includes compulsory training on the operation and use of the NCC as it applies to each category of registration;
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• additional competency and experience requirements;
• where it is available, compulsory insurance in the form of professional indemnity and/or warranty insurance together with financial viability requirements where appropriate; and
• evidence of practitioner integrity, based on an assessment of fit-and-proper person requirements.
Recommendation 3:
That each jurisdiction requires all practitioners to undertake compulsory Continuing Professional Development on the National Construction Code.
Recommendation 4:
That each jurisdiction establishes a supervised training scheme which provides a defined pathway for becoming a registered building surveyor.
Recommendation 5:
That each state establishes formal mechanisms for a more collaborative and effective partnership between those with responsibility for regulatory oversight, including relevant state government bodies, local governments and private building surveyors (if they have an enforcement role).
Recommendation 6:
That each jurisdiction give regulators a broad suite of powers to monitor buildings and building work so that, as necessary, they can take strong compliance and enforcement action.
Recommendation 7:
That each jurisdiction makes public its audit strategy for regulatory oversight of the construction of Commercial buildings, with annual reporting on audit findings and outcomes.
Recommendation 8:
That, consistent with the International Fire Engineering Guidelines, each jurisdiction requires developers, architects, builders, engineers and building surveyors to engage with fire authorities as part of the design process.
Recommendation 9:
That each jurisdiction establishes minimum statutory controls to mitigate conflicts of interest and increase transparency of the engagement and responsibilities of private building surveyors.
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Recommendation 10:
That each jurisdiction put in place a code of conduct for building surveyors which addresses the key matters which, if contravened, would be a ground for a disciplinary inquiry.
Recommendation 11:
That each jurisdiction provides private building surveyors with enhanced supervisory powers and mandatory reporting obligations.
Recommendation 12:
That each jurisdiction establishes a building information database that provides a centralised source of building design and construction documentation.
Recommendation 13:
That each jurisdiction requires building approval documentation to be prepared by appropriate categories of registered practitioners, demonstrating that the proposed building complies with the National Construction Code.
Recommendation 14:
That each jurisdiction sets out the information which must be included in performance solutions, specifying in occupancy certificates the circumstances in which performance solutions have been used and for what purpose.
Recommendation 15:
That each jurisdiction provides a transparent and robust process for the approval of performance solutions for constructed building work.
Recommendation 16:
That each jurisdiction provides for a building compliance process which incorporates clear obligations for the ongoing approval of amended documentation by the appointed building surveyor throughout a project.
Recommendation 17:
That each jurisdiction requires genuine independent third party review for specified components of designs and/ or certain types of buildings.
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Recommendation 18:
That each jurisdiction requires on-site inspections of building work at identified notification stages.
Recommendation 19:
That each jurisdiction requires registered fire safety practitioners to design, install and certify the fire safety systems necessary in Commercial buildings.
Recommendation 20:
That each jurisdiction requires that there be a comprehensive building manual for Commercial buildings that should be lodged with the building owners and made available to successive purchasers of the building.
Recommendation 21:
That the Building Ministers’ Forum agree its position on the establishment of a compulsory product certification system for high-risk building products.
Recommendation 22:
That the Building Ministers’ Forum develop a national dictionary of terminology to assist jurisdictions, industry and consumers to understand the range of terminology used to describe the same or similar terms and processes in different jurisdictions.
Recommendation 23:
That the Building Ministers’ Forum acknowledges that the above recommendations are designed to form a coherent package and that they be implemented by all jurisdictions progressively over the next three years.
Recommendation 24:
That the Building Ministers’ Forum prioritise the preparation of a plan for the implementation of the recommendations against which each jurisdiction will report annually.
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APPE NDIX D: SUMMA RY OF PROP OSED ACT BUILD ING REGU LATORY SYS TEM REFO RMS , JUNE 2016SUMMARY OF SHORT-TERM REFORMS BY END 2016
DESIGN AND DOCUMENTATION
1. Develop guidelines for minimum design documentation for building approval applications:
• commencing with initial design documentation, with a view to expanding to maintenance documentation at a later stage,
• expanding to all classifications of building over time,
• starting with voluntary compliance with a transition period for moving to mandatory within 6 months of release of the guidelines.
2. Consider including some aspects of advice on high-risk building elements (e.g. balconies over habitable spaces) in the existing pre-DA process to alert people to high-risk features and things that may be incompatible with building laws, with a view to expand the range of issues as resources and skills increase.
STAGE INSPECTION AND ON-SITE SUPERVISION
3. Develop guidelines for builders for supervision and critical hold points with the intention they will be adopted as codes of practice under the Building Act.
4. Develop new provisions in the Building Act outlining the functions of the certifier and the purpose and scope of stage inspections, and supporting codes of practice.
5. Enact regulations to require stage inspection information shortly after the inspection is complete.
BUILDERS AND BUILDING SURVEYORS LICENSING
6. Remove architectural and engineering qualifications from the mandatory qualifications schedule, with a transition period for applicants who have made an application prior to the commencement.
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7. After further consultation, implement a conditioning system for applicants with insufficient experience on residential buildings and revise mandatory qualifications in relation to evidence, critical stages and external verification of experience.
8. Revise mandatory qualifications to specifically give the Registrar discretion not to consider references from builders with a poor compliance history or in relation to defective building work.
9. Expand the written assessment prepared for the pilot for class C licensees to incorporate additional subjects, and include random result validation, and create assessments for A and B class licence categories.
10. Consider interviews conducted by the regulator for applicants that either do not meet the mandatory qualifications or have marginal results in the assessment only.
11. Amend existing provisions for corporations, partnership and nominees eligibility in the Construction Occupations (Licensing) Act and Regulation to clarify their roles and obligations.
12. Expand the scope of the existing power to declare mandatory qualifications to include qualifications for all entities that may apply for a licence i.e. corporations and partnerships as well as individuals.
13. Require additional information in relation to the nominee and their understanding of their role and eligibility for appointment at the time of application.
14. Revise operational policies and educational materials to reflect the intention of the law in relation to the corporation/partnership’s responsibility to supervise their nominees and the work under its licence.
15. Develop and implement a pre-application assessment for building surveyors licence applicants and for licensees who have transferred from other jurisdictions.
16. Develop and make available an online course for building surveyors operating or intending to operate under the ACT’s building regulatory system.
17. Provide a new ground for occupational discipline that the licensee is, or has become, ineligible to hold a licence.
18. Amend provisions for automatic suspensions on loss of eligibility so that they do not end after 3 months but continue as long as the grounds for the suspension exist, if the licensee has not reported the circumstances to the Registrar.
CONTRACTS FOR RESIDENTIAL BUILDINGS AND BUILDING WORK
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19. Expand the existing statutory warranties to all private residential buildings or parts of buildings, including those above three storeys.
20. Amend the Building Act to allow regulations to prescribe requirement for contracts for residential building work.
21. Enact a regulation to delineate agency agreements from a building contract for certain residential building work contracts.
22. Develop and consult on standard terms, and standard information for a building contract including explanations of common variation clauses and their meaning.
23. Consult further in relation to specific regulations for a progress payment model for certain residential building contracts based on payment only for work completed.
24. To further assist to reduce phoenixing:
• Expand the capacity for the Registrar to consider an applicant or licensee’s history, including the history of directors, partners and nominees, under other licences.
• Introduce the ability for the Registrar and ACAT to consider whether a breach is relevant to multiple associated licences and take appropriate action in relation to those licences as well.
• Increase reporting requirements for automatic suspension grounds.
PROJECT FUNDING, PAYMENT CLAIMS AND RETENTIONS
25. Increase reporting requirements for licensees in relation to insolvency.
26. Review the response to the recent federal inquiry on insolvency and results of trials of various models other jurisdictions and continue targeted consultation, with a view to either conducting an ACT trial to fill in any knowledge gaps if required, or implementing changes in the ACT if Commonwealth legislation is not supported/or has insufficient coverage.
27. Review the effectiveness of ACT procurement arrangements for security of retentions held by contractors and progress payments on government projects.
ALTERNATIVE DISPUTE RESOLUTION – RESIDENTIAL BUILDINGS
28. Refine the proposed alternative dispute resolution model based on consultation feedback and conduct a second round of consultation on the detailed model.
S T A N D I N G C O M M I T T E E O N E C O N O M I C D E V E L O P M E N T A N D T O U R I S M
29. Consider adoption of new standards and tolerances for building-related disputes and complaints, including contractual disputes.
SUMMARY OF MEDIUM TERM REFORMS (DEPENDENT ON RESOURCES) BY END 2017
STAGE INSPECTION AND ON-SITE SUPERVISION
30. Complete implementation of the risk-based auditing and inspection system for regulated building certification and building work.
BUILDERS AND BUILDING SURVEYORS LICENSING
31. Consider introduction of non-written forms of assessment after review of 6 months of operation of the written pre-licence assessment for licence applicants.
32. Implement mandatory qualifications for corporate and partnership licences, potentially including financial assessment.
33. Expand mandatory qualifications for new building surveyor licence categories to include completion of the online training course.
34. Expand licence renewal assessments for all licensees to include rechecking of eligibility and compliance history.
35. Consult on findings of the review of the ACT building regulatory system in relation to licensing, licensing categories and ‘contracting’ as a scope of work.
36. Consult on the findings of the review of the ACT building regulatory system in relation to insurance and practitioner accountability.
CONTRACTS FOR RESIDENTIAL BUILDINGS AND BUILDING WORK
37. Consider expansion of rectification and other relevant powers to allow orders to be issued to people closely associated with an insolvent or ‘disappeared’ corporate licensee.
38. Review federal inquiry findings on insolvencies in the construction industry and associated response, with a view to fill in any gaps in the system if required.
39. Consult on the findings of the review of the ACT building regulatory system in relation to building contracts and the residential building insurance system in the ACT.
PROJECT FUNDING, PAYMENT CLAIMS AND RETENTIONS
40. Conduct trial of project/retention account model (if agreed and required).
I N Q U I R Y I N T O B U I L D I N G Q U A L I T Y
41. Review the Security of Payments system in the ACT.
OTHER
42. Consider issues raised by stakeholders during consultation where supported by the findings of the review of the ACT building regulatory system.
BY END 2017-18
ALTERNATIVE DISPUTE RESOLUTION – RESIDENTIAL BUILDINGS
43. Complete implementation of new dispute resolution model.
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