Australia: Home Building Act (NSW) Re-write - Consultation Paper
Building and Construction update

The Home Building Act (Act) is renowned for being tortuous, disorderly and about as user friendly as the Income Tax Assessment Act.

For some years, the Office of Fair Trading has been threatening a re-write and submissions have been called from stakeholders on a number of occasions. Having accumulated and evaluated those submissions, the Office of Fair Trading has now issued a "Consultation Paper- A Re-write of the Home Building Act 1989". A full copy can be found here. The Consultation Paper outlines the changes proposed. The Office of Fair Trading now seeks feedback form industry stakeholders as to the issues it proposes to address in its re-write. These submissions are due by 19 March 2010.

Some of the proposed changes include:

1. Making the Act Clearer and More Accessible
   
   Changes are proposed to make the Act clearer and more accessible including consolidation of definitions of a number of key terms and re-wording definitions.
2. Reducing Red Tape
   
   The Office of Fair Trading hopes to eliminate some of the Act's red tape by:
3. • Increasing the monetary threshold for certain contractual requirements from $1,000 to $12,000, thus removing unnecessary red tape
   • .
   • Increasing the monetary threshold for owner-builder work from $5,000 to $12,000 (i.e. below $12,000, the owner-builder regulations will not apply).
   • Stipulating the number of complaints that would be "unreasonable" when considering applications for renewal or rejecting licenses.
   • Combining licensing categories which are virtually identical in terms of the nature and scope of work performed, e.g. "decorating" and "painting" or "roof tiling" and "roof slating".
4. Strengthening Disciplinary Enforcement Powers
   
   The Act has been criticised for being a toothless tiger, not going far enough to discipline and enforce powers. Some of the proposals to give the Act more teeth are:
5. • Allowing the Office of Fair Trading to issue fines where builders fail to comply with rectification orders. (Currently, there is no such power.)
   • Preventing "phoenix" company activity. An option being considered to address this is to disallow licence applications or renewals from those who are undischarged bankrupts or who, in the previous 3 years, had been involved in the management of a company under external administration or to include those involved in the management of a company within 12 months prior to the business entering external administration.
   • Permitting the Office of Fair Trading to cancel licences where undertakings relating to conduct are not honoured by a builder. It is proposed that the Office of Fair Trading be empowered to require written undertakings in relation to named individuals and have discretion to cancel a building licence if such undertakings are breached.
   • Preventing builders demanding or receiving payments not related to the progress of work (i.e. make it an offence to demand or receive payments from consumers, other than deposits, unless the payments relate directly to the progress of work carried out under a contract).
   • Linking rectification orders to the existing statutory warranties. Currently, there is no clear link between the defective work referred to in the Act and the statutory provisions in section 18B of the Act. The Office of Fair Trading is of the view that clarifying the link between rectification orders and statutory warranty provisions would demystify builder obligations and assist in addressing disputes.
   • Increasing the maximum penalty for corporations who fail to comply with licence conditions from $4,400 to $11,000.
   • Clarifying the powers of the Office of Fair Trading to immediately revoke licences in cases where the licence has been issued on the basis of fraud or misrepresentation.
   • Providing that individuals are ineligible to receive a second building licence through a new company or partnership while they are subject to outstanding court or tribunal orders.
6. Providing Greater Certainty and Transparency
   
   The re-write aims to improve the certainty and transparency of contractual relationships between consumers and licensed contractors. Some options put forward to achieve this are:
7. • Factoring building work delays (such as inclement weather or allowance for weekends, public holidays and other breaks) into contract price disclosures. Exactly how this is to be achieved remains a mystery. Concerns have been raised that such a one size fits all approach will be inflexible and take the sledgehammer to the nut.
   • Allowing builders to initiate certain dispute resolution processes. For example, give the tribunal the power to specify that an order to rectify work is nullified if the consumer does not allow the licensed contractor site access.
   • Improving supervision requirements for corporate licence holders. That is, the issue of supervision could be addressed by requiring the contractor licence or qualified supervisor certificate to be held by a director.
   • Clarifying the point at which the statutory warranty period commences. Exactly what constitutes the point of completion of building work is not defined in the Act and is often open to interpretation and debate. An option to address this issue is to include a definition of what constitutes completion of residential building work to provide greater certainty for consumers and contractors alike.
   • Aligning the duration of statutory warranties (i.e. seven years) with home warranty insurance (i.e. two or six years). This would involve reducing the statutory warranty period as there is likely to be little interest in extending the recently reduced insurance indemnity period.
   • Removing the statutory warranty relating to suitability of materials in cases where materials are supplied by the consumer.
   • Requiring those selling residential properties to disclose as part of the sale contract whether the statutory warranties have been previously enforced in relation to defects in that property.

Unfortunately the proposed changes do not propose that the Office of Fair Trading's building inspectors be empowered to issue payment orders at the same time as rectification orders. The imbalance inherent in this early process will continue to erode its effectiveness. The re-write also does nothing to release the straight-jacketing of dispute resolution procedures which will serve to condemn stakeholders to the Consumer Trader & Tenancy Tribunal for another decade or so.

Upon stakeholder submissions being received and evaluated, a bill will issue. This is likely to take many months, indeed given progress to date, one doubts if it will be seen this year.

The home warranty insurance issues will be addressed in a separate e-update to follow shortly.

For more information, please contact:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.