Wednesday, 4 August 2021

Bills

Building Amendment (Registration and Other Matters) Bill 2021

Statement of compatibility

Mr WYNNE (Richmond—Minister for Planning, Minister for Housing) (10:43): In accordance with the Charter of Human Rights and Responsibilities Act 2006, I table a statement of compatibility in relation to the Building Amendment (Registration and Other Matters) Bill 2021.

In accordance with section 28 of the Charter of Human Rights and Responsibilities Act 2006, (the ‘Charter’), I make this Statement of Compatibility with respect to the Building Amendment (Registration and Other Matters) Bill 2021.

In my opinion, the Building Amendment (Registration and Other Matters) Bill 2021, as introduced to the Legislative Assembly, is compatible with human rights as set out in the Charter. I base my opinion on the reasons outlined in this statement.

Overview of the Bill

Part 2 of the Bill amends the Building Act 1993 (Building Act) to make several improvements to the scheme for the registration of builder subcontractors and the licensing of building employees. This scheme was inserted into the Building Act by the Building Amendment (Registration of Building Trades and Other Matters) Act 2018. The scheme will commence when certain types of building work carried out by building subcontractors and building employees are prescribed in regulations. The scheme has not yet commenced as the regulations have not yet been made.

Specifically, Part 2 of the Bill will

o reclassify the proposed classes of registered subcontractors as registered and provisionally registered builder subcontractors in the category of builder, to distinguish them from other registered builders who are authorised to carry out work as head contractors for building work costing more than the prescribed amount (currently $10,000);

o provide that registered builder subcontractors cannot be head contractors for any building projects costing more than the prescribed amount ($10,000); which in turn will support amendments to reduce the financial and personal probity requirements for registered and provisionally registered builder subcontractors;

o clarify that the Act and regulations can prescribe that a prerequisite for being granted a certain class of builder subcontractor registration or building employee licence is a requirement to hold, respectively, a certain class of registration or licence; and

o provide for additional regulation-making powers necessary for implementation of the new scheme.

Part 2 of the Bill also amends the Domestic Building Contracts Act 1995 to not allow a registered or provisionally registered builder subcontractor to enter into a major domestic building contract, which is for domestic building work costing more than the prescribed amount (currently $10,000).

Part 3 of the Bill amends section 251 of the Building Act to clarify that, if a retail lease for premises in a retail shopping centre provides that the occupier is responsible for the costs of maintaining essential safety measures for the premises, the building or land owner can recover these costs from the occupier as outgoings under the lease. The Bill ensures the lease will take priority over other provisions in the Building Act and Building Regulations 2018 that make the building owner primarily responsible for the maintenance and costs of essential safety measures.

The Bill also makes other minor or technical amendments to the Building Act.

Human rights protected by the Charter that are relevant to the Bill

The human rights protected by the Charter that are relevant to the Bill are the right to privacy and reputation (section 13) and property rights (section 20).

Right to privacy and reputation

Section 13(a) of the Charter provides that a person has the right not to have their privacy, family, home or correspondence unlawfully or arbitrarily interfered with. Section 13(b) provides that a person has the right not to have their reputation unlawfully attacked. An interference will be lawful if it is permitted by a law which is precise and appropriately circumscribed, and will be arbitrary only if it is capricious, unpredictable, unjust or unreasonable, in the sense of being disproportionate to the legitimate aim sought.

In Part 2 of the Bill, clauses 222 and 228 will amend the Building Act to insert a requirement that a person who is a provisionally registered builder subcontractor or a provisionally licensing building employee must report annually to the Victorian Building Authority (Authority) on the person’s progress in undertaking the person’s training plan. A requirement to undertake a training plan may be a condition of a person’s provisional builder subcontractor registration or provisional building employee licence.

These clauses may limit the Charter right to privacy in that they will require a person to give information to the Authority each year about their participation and progress in their personal training program.

Any limit by the Bill is reasonable and justified

The condition requiring a person to undertake and complete a training plan before the expiry of their five-year provisional registration or five-year provisional licence is intended to help the person eventually apply successfully for a full registration or licence. This is intended to minimise the risk of there being a large number of provisionally registered builder subcontractors and provisionally licensed building employees who, at the end of their five year provisional period, may have their provisional authorisation to carry out building work expire without being able to obtain a registration or licence for ongoing work in the building industry.

The requirement in the Bill for a person to report annually to the Authority is intended to generate an incentive for the person to undertake and complete training as planned. It will also inform the Authority of whether this condition of a person’s provisional registration or provisional licence is being complied with. Sections 171H(2) and 187H(2) of the Building Act provide it is an offence if a person does not comply with the conditions of their registration or licence (respectively) and the Authority is the enforcement agency for these offences. The requirement to provide the information is reasonable and justified as it must be given only to the Authority, which is the entity that requires this information to carry out its statutory functions.

Further, the granting of registrations and licences to carry out building work, and enforcement of conditions of a registration or licence, are also the functions of the Authority under Parts 11 and 11A of the Building Act. The Authority must assess each applicant’s qualifications for a registration or licence, so the Authority will receive information about each person’s qualifications and training as part of their application for a registration or licence.

The reporting requirement will arise only four times at most because a provisional registration and a provisional licence will exist for only five years and cannot be renewed. The persons will not need to report at the end of the fifth year because the provisional registration or licence expires at the end of the fifth year. Any information about the person’s completion of their training plan will be a necessary part of a person’s application for a registration or a licence. A person may qualify for a registration or a licence in fewer than five years, in which case the reporting requirements may be fewer in number.

In my view Part 2 of the Bill is compatible with the Charter because any limitation on the right to privacy is not arbitrary and is reasonable and justified.

Property Rights

Section 20 of the Charter provides that a person must not be deprived of their property other than in accordance with law. This right requires that powers that authorise the deprivation of property are conferred by legislation or common law, are confined and structured rather than unclear, are accessible to the public and are formulated precisely. Property may include a person’s rights under a retail lease.

Clause 302 in Part 3 of the Bill will amend section 251 of the Building Act. The Building Act requires an owner of a building or land to ensure the essential safety measures specified under the Building Act and Building Regulations 2018 are in place and maintained to be fit for purpose. There may be times where the owner has failed to meet maintenance requirements imposed on them, in which case, section 251(1) of the Building Act provides that the occupier of a building or land may carry out the work themselves and, under s.251(2) of that Act, the occupier may recover the expenses they incur from the owner or deduct or off-set their expenses from any rent due to the owner.

Under section 251(2A) of the Building Act the occupier cannot recover these expenses if the owner and occupier have agreed that the occupier will contribute to the costs of carrying out repairs or maintenance work, or an installation, in respect of essential safety measures for the leased premises as outgoings under the lease, where the lease is a “retail premises lease” under the Retail Leases Act 2003. Clause 302 of the Bill amends the Building Act to extend this exemption to retail leases in a shopping centre.

These amendments affect only persons whose interests are not regulated or protect by the Retail Leases Act 2003. This class of persons are either bodies corporate (to which the Charter does not apply) or a person whose—

• occupancy costs (rent and outgoings) under the lease exceeds $1 million;

• retail lease is for premises above the second floor of a multi-story building; or

• retail lease is for a period of 15 years or longer and the lease imposes substantial works or financial obligations on the tenant.

To the extent that Part 3 of the Bill affects the property rights of a natural person, the Bill does not limit these rights. This is because the Bill provides only for the terms of the person’s lease to prevail over the obligation under the Act of the owner of the leased land or building to maintain, and cover the cost of, essential safety measures. The Bill is not limiting the person’s property rights because the person has already agreed in their lease to be responsible for these costs.

For the above reasons, I am satisfied that Part 3 of the Bill does not limit any rights under the Charter.

For the above reasons, I am also satisfied that the Bill is compatible with the Charter.

The Hon. Richard Wynne, MP

Minister for Planning

Second reading

Mr WYNNE (Richmond—Minister for Planning, Minister for Housing) (10:43): I move:

That this bill be now read a second time.

I ask that my second-reading speech be incorporated into Hansard.

Incorporated speech as follows:

The Bill amends the Building Act 1993 (Building Act) to continue reforms to implement a new registration and licensing scheme for tradespeople who perform building work in Victoria. It also provides clarity on the obligation to pay maintenance costs for essential safety measures in certain retail premises.

It is important to note the Bill precedes and is separate to the anticipated package of more comprehensive reforms anticipated to respond to the Building Reform Expert Panel’s review of Victoria’s building legislation.

The main purposes of the Bill are to:

• provide a new streamlined pathway to registration for subcontractors

• strengthen and improve the registration and licensing scheme for tradespeople generally, including the framework to transition a large number of unregulated trades into regulation

• expand the regulation making powers in the Act to enable the detail of the scheme to be prescribed in regulation

• provide further in relation to the payment of costs relating to the maintenance of essential safety measures in relation to certain retail premises; and

• make minor technical amendments

Registration and licensing changes

The Building Amendment (Registration of Building Trades and Other Matters) Act 2018 introduced a framework to prescribe types of building work that can only be carried out by tradespeople with appropriate skills and experience, whether they be trade contractors or trade employees, subject to appropriate transitional arrangements.

In consultation with industry to develop the regulations needed to implement the scheme for carpentry trades, a number of improvements were identified to lower regulatory burden while continuing to achieve the objectives of the scheme.

The government has welcomed and accepted this industry feedback and is making changes to improve the new scheme ahead of its introduction. The changes will make the scheme more efficient and fair for industry while delivering the government’s policy objectives, including reducing the incidence of non-compliant work, improving skills development in the building industry (including the completion of apprenticeships) and ensuring tradespeople are accountable for their work. These outcomes will boost the quality of the Victorian building system and benefit Victorian consumers.

Key improvements to the scheme include:

• introducing a new and proportionate pathway to registration for trade subcontractors; and

• clarifying the functions and responsibilities of trade subcontractors relative to other building practitioners

Additional improvements to the scheme include:

• Strengthening and clarifying the registration and licensing process generally, including the framework to facilitate the transition of unregulated tradespeople into regulation; and

• expanding the regulation making powers in the Act to ensure sufficient regulation can be made to implement the detail of the new scheme.

The Bill will introduce a new streamlined pathway to registration for subcontractors by:

• Not requiring subcontractors to register as head contractor builders.

• Instead, provision will be made for a new class of subcontractor to which less onerous but targeted registration requirements will attach, including financial probity requirements, personal probity requirements and business competence requirements. This is expected to ensure tradespeople are not overregulated while balancing the protection of consumers.

• Importantly, subcontractors who will not enter a major domestic building contract will not be required to demonstrate eligibility for domestic building insurance on application for registration.

• No probity requirements will apply to obtain a provisional registration, but these must be met on application for a full registration.

The Bill will clarify the role of a trade contractor by:

• limiting trade contractors to subcontracting to registered building practitioners (head contractors) or contracting directly with consumers only for low risk work;

• prohibiting trade contractors from entering a major domestic building contract; and

• limiting a trade contractor’s responsibility to their own regulated scope of work. A registered builder will continue to be responsible for all work under a permit, even where performed by others.

The new scheme is expected to require the transition of a large number of unregulated tradespeople into regulation. The Bill will strengthen the provisional registration and licensing scheme to assist this transition by:

• providing for a training plan to support tradespeople to upskill to a full registration or licence in the qualifying period

• clearly specifying when the provisional scheme can be accessed and by who

• providing a clear pathway to a provisional registration or licence

• providing flexibility for the Victorian Building Authority to grant a provisional registration or licence where an applicant has applied for full registration and does not meet the requisite criteria

• providing flexibility to extend a provisional registration or licensing period beyond the qualifying 5 year period if this time is needed to assess a follow-on application for a full registration or licence

Clarifying essential safety measures requirements

The Bill includes amendments to the Building Act to increase certainty in retail leasing arrangements about who pays for costs relating to the installation, repair and maintenance of essential safety measures.

Building owners, including landlords of retail premises are required to maintain essential safety measures under the Building Act. Essential safety measures include the fire and life safety systems installed or constructed in a building. These are set out in the Building Regulations 2018. Examples of essential safety measures include but are not limited to traditional building services such as sprinklers, fire detection, alarm systems, passive fire safety mechanisms such as fire doors, fire-rated structures and other building infrastructure items such as paths of travel to exits.

Compliance with essential safety measures is particularly vital in buildings used by large numbers of people for multiple purposes, such as retail premises within shopping centres. Essential safety measures in such locations can be of significant size and complexity, and may be expensive to install, repair and maintain. Premises within a shopping centre will generally be leased to a large number of different tenants, and a consistent approach to essential safety measures in these locations can support achieving compliance and better protect the safety of building occupants, visitors, passers-by, and the occupants of adjoining buildings.

Longstanding industry practice in Victoria, consistent with other jurisdictions, has been for landlords to recover expenses associated with meeting essential safety measures by charging tenants as outgoings. Outgoings are expenses directly attributable to the operation, maintenance or repair of the retail premises.

This practice was thrown into doubt by a VCAT Advisory Opinion in 2015 that found that in relation to Essential safety measures, the Building Act prevailed. It provided that the landlord must bear the cost of compliance with Essential safety measures obligations and cannot pass these costs on to the tenant as outgoings under the Retail Leases Act 2003 (Retail Leases Act).

Following the issuing of the Advisory Opinion, landlords and tenants raised concerns about liability for the costs of essential safety measures, and the uncertainty about how essential safety measures costs can be recovered. In 2020, this uncertainty was addressed by amendments to section 251 of the Building Act that enabled a landlord to recover expenses relating to essential safety measures under a lease regulated under the Retail Leases Act.

The Retail Leases Act sets out landlords’ obligations in respect of expenses they can recover from tenants as outgoings. However, the Retail Leases Act does not apply to leases of retail premises where the occupancy costs exceed $1,000,000, where the tenant is a corporation, listed on the stock exchange or has been exempted by the Minister.

The previous amendments were guided by the principle that the obligation for building safety remains that of the building owner, but permitted landlords and retail tenants to negotiate to pass on the costs as part of the overall lease negotiations. The 2020 amendments focussed on retail leases regulated under the Retail Leases Act intended to provide certainty and fairness in relation to smaller retail leasing arrangements.

The government became aware during the passage of the 2020 Act that despite the positive impact on the industry, there were unresolved issues that required further consideration. Specifically, industry requested the government to consider broadening the ability of building owners to pass on costs of essential safety measures for all lease arrangements within one shopping centre, to ensure a pragmatic approach to meeting these obligations could be achieved. This Bill is the result of that further consideration.

The Bill seeks to further amend section 251 of the Building Act to provide that an occupier cannot recover from a building owner expenses relating to the installation, repair or maintenance of essential safety measures that the occupier has agreed to bear under a lease in a retail shopping centre other than a residential leases. These amendments will ensure that the costs for essential safety measures within a retail shopping centre are treated the same way regardless of whether the lease is regulated under the Retail Leases Act or not.

An agreement relating to the costs of essential safety measures is not intended to displace the landlord’s obligations as a building owner. The landlord as a building owner remains responsible to comply with their obligations under the Building Act and any associated regulations. The ability of a building owner to consistently manage the costs associated with essential safety measures will ensure these obligations can be discharged at a systemic level in relation to a single shopping centre. This will also contribute to one of the critical underlying goals of the Victorian building regulatory framework: public safety.

Transitional provisions in the Bill provide that the amendments to section 251 apply to retail leases that were entered into before the amendments commenced if the lease contains a provision to the effect that the tenant must pay the landlord, as a contribution to outgoings, the cost, or part of the cost, of installation, repairs or maintenance work in respect of an essential safety measure. However, it does not affect the rights of tenants under section 251 prior to the commencement of the legislation. In addition, these provisions do not affect retail premises leases entered into before the commencement of this Bill. They only affect the future operation of affected leases. This is necessary to give effect to the intention of the parties at the time the lease was entered into and clarify the validity and effect of provisions in existing retail premises leases relating to essential safety measures. Providing clarity on this issue will reduce barriers to compliance that can impact building safety, whilst ensuring the purpose and objectives of the Building Act are upheld.

The Bill will increase certainty in retail leasing arrangements about who pays for costs relating to the installation, repair and maintenance of essential safety measures within retail shopping centres, ensuring a consistent approach can be taken by building owners to these life saving mechanisms.

I commend the Bill to the house.

Ms McLEISH (Eildon) (10:43): I move:

That this debate be adjourned.

Motion agreed to and debate adjourned.

Ordered that debate be adjourned for two weeks. Debate adjourned until Wednesday, 18 August.