Wednesday, 5 March 2025

Building Legislation Amendment (Buyer Protections) Bill 2025

Statement of compatibility

Nick STAIKOS (Bentleigh – Minister for Consumer Affairs, Minister for Local Government) (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 Legislation Amendment (Buyer Protections) Bill 2025:

Opening paragraphs

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 Legislation Amendment (Buyer Protections) Bill 2025 (the Bill).

In my opinion, the Bill, as introduced to the Legislative Assembly, is compatible with the human rights protected by the Charter. I have this opinion for the reasons outlined in this statement.

Overview of the Bill

The purpose of the Bill is to amend Building Act 1993 (Building Act), the Domestic Building Contracts Act 1995 (Domestic Building Contracts Act), the Sale of Land Act 1962 (Sale of Land Act), the Subdivision Act 1988 and the Victorian Civil and Administrative Tribunal Act 1998 to integrate a number of building regulatory functions and improve consumer protection by enhancing building insurance requirements and bolstering compliance mechanisms available to the Victorian Building Authority (Authority).

The key amendments contained in the Bill are to establish a statutory domestic building insurance scheme on a monopoly basis by the Authority, enhance the Authority’s enforcement powers including by empowering the Authority to issue orders for the rectification of incomplete, non-compliant or defective building work, provide for a developer bond scheme in relation to particular residential apartment buildings and confer additional regulatory functions on the Authority.

Human rights issues

The human rights protected by the Charter that are relevant to the Bill are:

• right to property (s 20);

• freedom from forced or compulsory labour (s 11(2));

• the right to privacy (s 13(a));

• freedom of expression (s 15)

• the right to a fair hearing (s 24(1));

• the right to be presumed innocent (s 25(1)); and

• the right not to be tried or punished more than once (s 26).

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 conferred by legislation which authorise the deprivation of property are confined and structured rather than unclear, are accessible to the public, and are formulated precisely.

Transfer of certain property rights to the Authority

Clause 10 of the Bill will, amongst other things, transfer certain contracts of insurance to the Authority (new s 292 of the Building Act) and empower the VMIA Minister to direct the VMIA to transfer to the Authority, property, rights and liabilities specified in an allocation statement (s 300). The effect of any transfer is that all rights and liabilities of VMIA under transferred contracts of insurance vest in the Authority (s 292). Similarly, all property, rights and liabilities in an allocation statement vest in the Authority (s 302). The transfer of these property rights remain subject to any encumbrances in effect at the time of transfer (s 293 and s 304). Further, any rights or liabilities of the VMIA under an agreement vest in the Authority (s 305) and the Authority is substituted for the VMIA in any proceedings pending or existing in any court or tribunal which relate to any transferred property, rights of liabilities (s 295 and s 307).

New s 290 defines property to mean ‘any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description’, liabilities to mean ‘all liabilities, duties and obligations, whether actual, contingent or prospective’, and rights to mean ‘all rights, powers, privileges and immunities, whether actual, contingent or prospective’.

The transfer of any of VMIA’s property, rights and liabilities to the Authority, including the transfer of a contract of insurance, is relevant to the property rights of natural persons who hold an interest in the property or liability transferred. However, the transfer will not limit the property rights of persons holding the interest as they are not being deprived of their interest, but rather, the property or liability is transferred without altering the substantive content of that property right or liability.

Insofar as a cause of action in relation to any potential liability held by the VMIA may be considered ‘property’ within the meaning of s 20 of the Charter, the Bill may engage this right. However, in my opinion, the Bill does not effect a deprivation of property as it does not extinguish any cause of action which a person may have against VMIA. Rather, liability is transferred to the Authority.

Finally, even if the Bill could be considered to deprive a person of property, any such deprivation would be ‘in accordance with law’ and will therefore not limit the Charter right to property. In particular, the new provisions of the Building Act dealing with the transfer of property, rights and liabilities from the VMIA to the Authority, as outlined above, are drafted in clear and precise terms, and are sufficiently accessible to allows persons to regulate their own conduct in relation to them.

Accordingly, I consider that the transfer of VMIA’s property, rights and liabilities to the Authority is compatible with the property rights in s 20 of the Charter.

Rescission of off-the-plan contracts

Clauses 101 and 102 expand the grounds on which the purchaser may rescind an off-the-plan contract for a lot in a residential apartment building, namely where the vendor requires or permits the purchaser to take possession where an occupancy permit has not been issued or where the developer has not executed a developer bond at all or the bond amount secured is less than required by the Building Act. Clause 102 also provides a purchaser who rescinds a contract the ability to recover any amount paid under the contract as well as penalty interest on this amount from a court.

These amendments may engage a vendor’s right to property by depriving them of their rights under a contract which may now be rescinded in new circumstances by the purchaser. However, in my view the right is not limited, as the situations in which a purchaser may rescind a contract will be under a clearly formulated, publicly accessible law and confined to specific circumstances necessary to encourage compliance by vendors and developers with the statutory scheme. Similarly, the power of a court to award penalty interest to the purchaser clearly sets out the circumstances in which this can occur and the method of calculation of any penalty awarded.

For these reasons, I consider that clauses 101 and 102 are compatible with the property rights in s 20 of the Charter.

Freedom from forced or compulsory labour

Section 11(2) of the Charter provides that a person must not be made to perform forced or compulsory labour. ‘Forced or compulsory labour’ relevantly does not include work or service that forms part of normal civil obligations. While the Charter does not define ‘normal civil obligations’, comparative case law has considered that to qualify as a normal civil obligation, the work or service required must be provided for by law, must be imposed for a legitimate purpose, must not be exceptional and must not have any punitive purpose or effect (Faure v Australia (Human Rights Committee Communication No 1036/2001)). This has extended to obligations to take undertake work in order to maintain compliance with regulatory standards.

Part 5 of the Bill introduces provisions empowering the Authority, in certain conditions, to issue orders requiring the person who carried out the building work or a developer to rectify incomplete, non-compliant or defective building work. The Bill also introduces an offence for contravention of a rectification order (new s 75M of the Building Act).

I am of the view that work required under a rectification order would form part of a normal civil obligation, and as such, would not constitute a limit on this right. A rectification order is provided for under law as introduced in this Bill and is confined in its impact, including that a builder or developer can only be compelled to complete or rectify building work (new s 75E(1)), as opposed to being required to commence an entirely new building project. The Bill also provides protections to persons who may be required to undertake rectification works, including that the Authority may decide not to issue a rectification order if it would be unfair or unreasonable in the circumstances (new s 75B(5)) and is subject to review by VCAT (new s 75S). These provisions together work to ensure that the rectification order scheme will not operate arbitrarily.

Further, an order is imposed for the legitimate non-punitive purpose of ensuring that builders and developers deliver buildings of an appropriate standard, ultimately protecting both the health and safety of any persons who enter the building, as well as guarding against any financial loss which may be incurred by purchasers of a defective building.

For these reasons, I do not consider that the freedom from forced or compulsory labour will be limited by this Bill.

Right to privacy

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. 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.

Transfer of certain information to the Authority

The transfer of property, rights and liabilities from the VMIA to the Authority under new Part 15 of the Building Act (as detailed above), may also involve the transfer of personal information from the VMIA to the Authority. In particular, new s 303(a) specifies that the VMIA, must provide to the Authority all records and information in the custody or control of the VMIA relating to any property, rights or liabilities that vest in or become liabilities of the Authority under the transfer.

While not all information transferred will be of a private nature or be information concerning a natural person, as opposed to information concerning a corporation to which the Charter does not apply, to the extent that these provisions effect the disclosure of personal information to the Authority, this will occur in lawful and not arbitrary circumstances. The transfer of information serves a legitimate purpose of ensuring that the insurance provider has the relevant information in order to provide the required insurance and administer the new scheme under the Building Act. This ultimately serves the purpose of providing for appropriate regulation of the building industry and enhancing consumer protection. The provisions providing for the transfer of information are drafted in clear and precise terms and will principally impact on registered builders who have voluntarily undertaken to practise in a regulated industry where special duties and responsibilities attach.

Further, the Authority is required to comply with relevant privacy laws (including the Charter) in the handing of personal information, assisting to ensure that any interference with the right to privacy will be lawful and non-arbitrary.

I therefore consider that the transfer of information to the Authority under the Bill does not limit the right to privacy.

Powers of entry

Clause 96 of the Bill introduces powers of entry in Division 5 of new Part 9B of the Building Act, which deals with developer bonds. Under new s 137ZZK, a building assessor may enter and inspect the common property or any lot in order to perform their functions under the new Part, broadly being to identify, assess and report on building defects. A builder appointed to rectify defective building work is also empowered to enter common property or any lot in order to carry out the required works. An authorised person who exercises these powers of entry may take photos, make sketches of building work or use any other means for recording information for the purposes of this new Part. Under new s 137ZZL, the owners corporation, building manager or the owner and/or occupier of a private lot may be required to provide reasonable assistance to and cannot, without reasonable excuse, obstruct, hinder or refuse access to the building assessor or builder carrying out their functions in the relevant building. New s 137ZZM further provides that a person may apply to VCAT for an order requiring the owner or occupier of a lot to give access to the building.

These powers engage a person’s right in s 13(a) of the Charter not to have their privacy or home unlawfully or arbitrarily interfered with by permitting access and allowing records to be taken of common and private property by building assessors and/or builders. I consider that these powers are compatible with s 13(a) because the provisions in new Division 5 of Part 9B are precise and appropriately circumscribed, as they can only be exercised following written notice to the owners corporation and to the owner and occupier (in the case of access to a private lot) explaining why the person wishes to enter and at a reasonable time agreed upon by these parties. Further, safeguards apply to the exercise of the powers including that persons are required to exercise these powers of entry in a reasonable manner and must not, without consent, stay or permit others to stay on the premises longer than is necessary to achieve the purpose of the entry. The new provisions also allow for a person to refuse access to property where there is as a reasonable excuse for doing so and any disagreement over access is able to be resolved through the VCAT process. I also consider these powers are proportionate to the legitimate aim of ensuring building defects are properly identified and rectified before any of the remaining bond is returned to the developer.

Right to freedom of expression

Section 15(2) of the Charter provides that every person has the right to freedom of expression, which includes the freedom to seek, receive and impart information and ideas of all kinds. However, s 15(3) provides that special duties and responsibilities attach to this right, which may be subject to lawful restrictions reasonably necessary to respect the rights and reputations of others, or for the protection of national security, public order, public health or public morality.

New s 137ZG provides that a person, not otherwise acting on behalf of the Authority, must not use a prescribed expression, or variation therein, in connection with selling the right to participate in the statutory insurance scheme.

While the right to use prescribed expressions may impose a limitation on the freedom of expression, I consider that this is a lawful restriction which is reasonably necessary to both protect public order and the rights of others within the meaning of the internal limitation in s 15(3) of the Charter. The expression ‘protection of … public order’ is a wide and flexible concept and includes measures for ‘peace and good order, public safety and prevention of disorder and crime’ (Magee v Delaney (2012) 39 VR 50) and can include laws that enable the public to engage in their personal and business affairs free from unlawful interference to their person or property. The meaning of protecting the rights of others is similarly broad and would include restrictions reasonably necessary to protect the property rights of others (Magee v Delaney (2012) 39 VR 50).

This restriction on the freedom of expression is confined to a very particular context, being only in connection with selling the right to participate in the statutory insurance scheme. I consider that this restriction is closely tailored to its purpose of deterring and preventing fraud or other misleading behaviour which may undermine the integrity of the statutory insurance scheme and risk consumers and builders being without the proper insurance. I consider there are no less restrictive means of achieving this purpose of preventing and deterring such conduct that leaves consumers at risk.

For these reasons, I consider s 137ZG falls within s 15(3) of the Charter as it is reasonably necessary to protect public order and the rights of others. As such, this provision imposes no limitation on the freedom of expression.

I note that any expression to be prescribed will be assessed for compatibility with the Charter through the requirement for the Minister to certify a Human Rights Certificate.

Right to a fair hearing

Suspension of builder registration and grounds for disciplinary action

Clauses 37, 38, 85 and 86 of the Bill insert new subsections into s 179 and s 180 of the Building Act adding further grounds on which a builder may be subject to disciplinary action or have their registration immediately suspended, namely where the Authority is not satisfied that the practitioner meets prescribed minimum financial requirements or where the practitioner has refused or failed to comply with a rectification order or rectification costs order without reasonable excuse. Clause 39 inserts new s 180A(2AA) into the Building Act to provide that the Authority must, with notice, immediately suspend the registration of the registered building practitioner if the Authority reasonably believes that the practitioner has ceased to meet the prescribed minimum financial standards for registered building practitioners. The expansion of the grounds for immediate suspension of registration and disciplinary action is relevant to the right to a fair hearing.

Section 24(1) of the Charter relevantly provides that a party to a civil proceeding has the right to have the charge or proceeding decided by a competent, independent and impartial court or tribunal after a fair and public hearing. The concept of a ‘civil proceeding’ is not limited to judicial decision makers but may encompass the decision-making procedures of many types of tribunals, boards and other administrative decision-makers with the power to determine private rights and interests. While recognising the broad scope of s 24(1), the term ‘proceeding’ and ‘party’ suggest that s 24(1) was intended to apply only to decision-makers who conduct proceedings with parties. As the administrative decisions at issue here do not involve the conduct of proceedings with parties, there is a question as to whether the right to a fair hearing is engaged.

In any event, if a broad reading of s 24(1) is adopted and it is understood that the fair hearing right is engaged by this Bill, this right would nonetheless not be limited. The right to a fair hearing is concerned with the procedural fairness of a decision and the right may be limited if a person faces a procedural barrier to bringing their case before a court, or where procedural fairness is not provided. The entire decision-making process, including reviews and appeals, must be examined in order to determine whether the right is limited.

While the Bill expands the circumstances in which a builder’s rights may be impacted, this is appropriate to give effect to the rectification order scheme and to ensure builders meet minimum financial standards, limiting the risk that builders will become insolvent while undertaking building works, potentially exposing consumers to significant financial detriment. The Bill does not alter the existing processes under the Building Act for determining suspensions and disciplinary actions, which afford a builder procedural fairness. A decision made by the Authority to immediately suspend a builder’s registration under s180A(1) of the Building Act or to take disciplinary action and impose a penalty against a building practitioner, such as placing a condition on their registration, is made pursuant to a show cause process (s 182 of the Building Act) and is subject to internal review (Part 11, Division 4, subdivision 2 of the Building Act). The builder is provided with the opportunity to provide oral or written representations during the show cause period (s 182A(1) of the Building Act) and on internal review (s 185B(2)) of the Building Act). New s 180A(2AA) is not subject to the same show process but is also subject to the internal review process.

Finally, any of the above decisions are subject to external review by VCAT (s 186 of the Building Act). This affords builders a hearing before an independent and impartial tribunal and satisfies the requirements in s 24(1) of the Charter.

As such, I conclude that the fair hearing rights in s 24(1) of the Charter are not limited by these clauses.

Immunities

The fair hearing right is relevant where statutory immunities are provided to certain persons as this right has been held to encompass a person’s right of access to the courts to have their civil claim submitted to a judge for determination. Similarly, insofar as a cause of action may be considered ‘property’ within the meaning of section 20 of the Charter, these below provisions may also engage this right.

Clause 4 of the Bill expands the immunity in s 127(1)(a) and (b) of the Building Act such that a Commissioner or any person engaged by the Authority is not liable for anything done or omitted to be done in good faith in carrying out a function, or in the reasonable belief that the act or omission was in the carrying out of a function under the Domestic Building Contracts Act.

The exclusion from personal liability under amended s 127(1)(a) and (b) of the Building Act will not interfere with the right to a fair hearing, because parties seeking redress are instead able to bring a claim against the Authority (s 127(2)). The provision also serves a necessary purpose by ensuring that a person appointed by the Authority is able to exercise their functions effectively without the threat of personal repercussions and overall interference that responding to court claims has. Additionally, the person appointed by the Authority will still remain personally liable for any conduct not performed in good faith. Accordingly, this provision does not limit the right to a fair hearing under the Charter.

The Bill also inserts new s 137ZZZD of the Building Act, which establishes a professional association, or a person appointed or engaged by a professional association is not liable for anything done or omitted to be done in good faith in accrediting a person for the purposes of new Part 6 of the Building Act. As this is an absolute immunity, acting as a bar to bringing a civil claim, the fair hearing right will be limited by this new section.

However, I consider that this limitation is reasonable and justified for the following reasons. While absolute in nature, the scope of this immunity is limited, only baring claims arising from the accreditation of a person for the purposes of new Part 6. It does not act to bar claims from being brought in relation to acts or omissions done by those people in carrying out their functions under Part 6 nor for conduct not performed in good faith. This immunity is necessary to ensure that professional associations, who would be otherwise be liable, are willing to make these appointments and to undertake assessments for the purposes of assisting the Authority. Unlike the transfer of liability effected under clause 4 (outlined above), it is not appropriate to transfer liability to the Authority in this instance where the Authority will rely on the judgment of a professional association.

For these reasons, I consider that the limitation imposed on the right to a fair hearing by these immunities is justified and so compatible with the Charter.

Right to be presumed innocent (s 25(1))

Section 25(1) of the Charter provides that a person charged with a criminal offence has the right to be presumed innocent until proven guilty according to law. The right is relevant where a statutory provision allows for the imposition of criminal liability without the need for the prosecution to prove fault. The right is also relevant where a statutory provision shifts the burden of proof onto an accused in a criminal proceeding, so that the accused is required to prove matters to establish, or raise evidence to suggest, that they are not guilty of an offence.

Strict liability offences

The Bill includes a number of offences that do not require proof of fault, for example, being that the relevant party acted ‘knowingly or recklessly’. The inclusion of these strict liability offences in the Bill may limit right to be presumed innocent under s 25(1) of the Charter.

These strict liability offences inserted into the Building Act are:

• New s 40A provides that specified persons must ensure that notice is given to the Authority before an application for an occupancy permit is made in respect of a residential apartment building;

• New s 137O, 137X and 137Y provide that a builder must pay the applicable insurance premium under an insurable building contract (including for a varied contract) or for speculative building work, before specified dates;

• New s 137U provides that it is an offence to represent to another person that a notice of cover has been issued by the Authority if it has not been;

• New s 137ZG provides that a person, not otherwise acting on behalf of the Authority, must not use a prescribed expression, or variation therein, in connection with selling the right to participate in the statutory insurance scheme;

• New s 137ZP provides that the developer must arrange for the issue or execution of a developer bond before the occupancy permit application date;

• New s 137ZQ provides that a developer must not make a statement or provide information in relation to the total build cost or amount secured by the developer bond to the Authority that is false or misleading;

• New s 137ZR provides that a person must not apply for an occupancy permit for a residential apartment building unless a developer bond has been issued or executed and that a person must not falsely represent that such a bond has been issued;

• New s 137ZT and 137ZX provide that a developer must nominate and appoint a building assessor, subject to specified conditions, and provide certain notices;

• New s 137ZU provides that a person nominated for appointment as a building assessor must provide notice of any association they have with the developer;

• New s 137ZZB(1) provides that a building assessor must not ask for or receive any benefit, aside for consideration for the performance of their functions;

• New s 137ZZB(2) provides that a person must not in order to influence a building assessor, offer any benefit beyond consideration for the performance of their functions or remove or threaten to remove a benefit;

• New s 137ZZC provides that the developer must give a building assessor particular information;

• New s 137ZZE provides that the developer must do certain things to arrange to a final inspection of a development;

• New s 137ZZI provides that an owners corporation must give notice to the owners in an apartment building of a building assessor’s report and other prescribed matters;

• New s 137ZZL(2) provides that a person must give reasonable assistance to a building assessor or builder appointed to rectify defective building work as required;

• New s 137ZZP provides that a developer must take the necessary steps to ensure the payment or release of a bond amount in accordance with a determination made by the Authority;

• New s 137ZZQ provides that the owners corporation must only apply any bond amount received for the approved purpose and otherwise deal with these funds in particular ways.

The Bill also inserts the following strict liability offence into the Sale of Land Act:

• New s 9ADA provides that a vendor under certain off-the-plan contracts must not require or permit the purchaser to take possession where an occupancy permit has not been issued.

Strict liability offences will generally be compatible with the presumption of innocence where they are reasonable, necessary and proportionate in pursuit of a legitimate objective.

Strict liability offences are considered legitimate where directed at preventing loss in particular contexts, such as consumer protection. These offences will deter existing practices within the building industry that have exposed consumers to significant risks of financial harm. This assists to enhance compliance with regulatory requirements and ultimately to protect consumers who may find it difficult to independently verify if the builder holds the proper insurance or whether a develop has paid the required bond or to compel a builder or developer to comply with a rectification order. These consumers are vulnerable to significant financial loss where proper insurance is not held or where building faults are not properly rectified. It is reasonable that the offences do not require proof of fault given significant consequences and loss that can arise regardless of whether a builder or developer acts knowingly or recklessly.

The offences are reasonable in that they do not exclude the common law defence of honest and reasonable mistake of fact, and they do not attract penalties of imprisonment. While the more serious offences, such as failing to have proper insurance (s 137O, 137X and 137Y), attract up to 500 penalty units for a natural person, which is at the high end of the liability spectrum for what a strict liability offence would generally attract, this is reasonable and proportionate noting the very large values of contractual commitments by builders and developers and their customers under domestic building contracts, and the significant costs to the community where builders fail to hold the required insurance and where builders and developers leave buildings with major faults without recourse by the consumer to cover the costs of the required additional building work. Accordingly, this maximum penalty provides a significant deterrent in response to identified practices of non-compliance in the industry to prevent builders and developers from operating without holding the required insurance or undertaking defective, non-compliant or incomplete building work. By contrast, offences which deal with more administrative or minor matters, such as s 137ZZI requiring an owners corporation to give notice to owners of a building assessor’s report, attract a far lower penalty in proportion to the consequences of failure to comply and need for deterrence.

For these reasons, the limitation to s 25(1) of the Charter imposed by the strict liability offences is reasonable and justifiable within the meaning of s 7(2) of the Charter.

Reverse onus provisions

The Bill inserts the following offences into the Building Act which contain an exception in the form of an excuse:

• New s 75M provides that a person must not contravene a rectification order without reasonable excuse

• New s 137ZZL(3) provides that a person must not, without reasonable excuse, refuse access to a building assessor or builder appointed to rectify defective building work.

These offences contain excuses (also known as exceptions) which place an evidential burden on the accused, in other words, the accused is required to present or point to evidence that suggests a reasonable possibility of the existence of facts that would establish the exception or excuse. The Supreme Court has held that evidential onus provisions on an accused to establish an exception does not transfer the legal burden of proof and do not limit the right to the presumption of innocence. Once the accused has pointed to evidence of a reasonable excuse, the burden shifts back to the prosecution who must prove the essential elements of the offence to a legal standard. Further, the exceptions relate to matters which are peculiarly within an accused’s knowledge and would be unduly onerous for a prosecution to disprove at first instance.

Should the right to the presumption of innocence in fact be limited by these provisions, I am of the view that any limitation is reasonable and demonstrably justified, in that it is a proportionate measure to the legitimate purpose of the offences, which is to protect consumers by ensuring the compliance of builders and developers with rectification orders (for s 75M) and facilitating access to buildings for the purpose of identifying, assessing or remedying building defects (for s 137ZZL(3)). Courts in other jurisdictions have held that the presumption of innocence may be subject to reasonable limits in the context of regulatory compliance, particularly where regulatory offences may cause harm to the public. Finally, the offences are not punishable by a term of imprisonment, and in the case of s 137ZZL(3), attracts only a minor penalty.

Accordingly, I am of the view that these offence provisions are compatible with the Charter.

Right not to be punished more than once

Section 26 of the Charter provides that a person must not be tried or punished more than once for an offence in respect of which they have already been finally convicted or acquitted in accordance with law. This right reflects the principle of double jeopardy. However, the principle only applies in respect of criminal offences ‍– it will not prevent civil proceedings being brought in respect of a person’s conduct which has previously been the subject of criminal proceedings, or vice versa.

Penalties and sanctions imposed by professional disciplinary bodies do not usually constitute a form of ‘punishment’ for the purposes of this right as they are protective in nature and not punitive.

The ability of the Authority to take disciplinary action against or immediately suspend the registration of a registered building practitioner (clauses 37, 38, 39, 85 and 86 of the Bill discussed above) does not engage this right. This is because the purpose of taking disciplinary action against or suspending the registration of a builder is to protect consumers from future harm, such as in circumstances where there has been a failure to meet minimal financial requirements or to comply with a rectification orders. As these sanctions are for protective rather than punitive purposes, they do not engage the right against double punishment set out in s 26 of the Charter.

Conclusion

I am therefore of the view that the Bill is compatible with the Charter.

The Hon Nick Staikos MP

Minister for Consumer Affairs

Second reading

Nick STAIKOS (Bentleigh – Minister for Consumer Affairs, Minister for Local Government) (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, the Domestic Building Contracts Act 1995, the Subdivision Act 1988, the Sale of Land Act 1962 and the Victorian Civil and Administrative Tribunal Act 1998 to implement major reforms to the building regulatory framework. 

The main purposes of the Bill are to: 

• integrate domestic building regulatory functions into the Victorian Building Authority (VBA) by  

• conferring the function of administering Part 4 of the Domestic Building Contracts Act on the VBA instead of the Director of Consumer Affair Victoria, and 

• transferring the Victorian Managed Insurance Authority’s (VMIA) domestic building insurance business to the VBA and provide that DBI must be obtained solely from the VBA;

• enhance financial protections for consumers through the establishment of a Statutory Insurance Scheme (SIS) to be administered by the VBA to provide domestic building insurance on a first-resort basis for domestic buildings with a rise in storeys of three or less;  

• introduce new financial protections for consumers through a developer bond scheme for apartments with a rise in storeys of more than three;  

• restrict the sale or occupancy of apartment buildings above three storeys with serious defects that have not been rectified or if the developer has not complied with the requirements of the developer bond scheme;  

• enhance the VBA’s enforcement powers including by empowering the VBA to order the rectification of building work that is incomplete, defective or non-compliant both prior to and after the issuing of an occupancy permit; and

• make miscellaneous, consequential and technical amendments. 

This Bill is the first step to implement the Building Reform Program to support delivery of Victoria’s Housing Statement. The Building Reform Program responds to numerous reports to government including the Cladding Taskforce Report, the Building Confidence Report and Expert Panel on Building Reform reports. The government intends that further Bills will be introduced in this term of Parliament to build on the initiatives in this Bill. When fully implemented, the Building Reform Program will transform the building regulatory system with a new legislative structure and changes to arrangements for the regulator, insurance, monitoring building work among other changes. 

Many of the reforms proposed by the Bill are modelled closely on regulatory measures that are operating successfully in other states.

Integrated regulatory model 

Responsibility for domestic building functions is fragmented across various agencies. Each is vested with different responsibilities, such as monitoring and enforcing compliance with the Building Act, providing dispute resolution functions and domestic building insurance. Fragmented regulatory responsibilities create confusion for consumers, who may not know which agency to turn to when a building work issue arises. Consumers are often passed around agencies before finding the right one to investigate or resolve their problem, leading to lost time and additional costs. Sometimes consumers give up and choose to incur costs to rectify building work themselves rather than pursue the builder for work that should have been done correctly the first time.  

It is evident that the fragmented nature of the building regulatory system, combined with complex, costly and slow dispute resolution processes and limited enforcement powers for the regulator to order defective building work to be rectified quickly has not met community expectations and weakened confidence in the building sector. 

This Bill addresses fragmentation by bringing regulatory functions under the Building Act, dispute resolution functions under the Domestic Building Contracts Act and domestic building insurance into the VBA. 

By combining these domestic building regulatory functions, the Government’s policy goal is to deliver a ‘one-stop-shop’ building regulator that will be more effective at resolving building work issues quickly. It closely links the new statutory insurance scheme for domestic building work with the VBA’s enforcement and disciplinary powers together with dispute resolution services.  

Linking these functions as proposed by the Bill creates a strong incentive on builders to rectify building work when ordered to do so because failure to comply with the regulator’s rectification orders can lead to the immediate suspension of the builder’s registration. If a builder’s failure to rectify has resulted in a consumer making a successful domestic building insurance claim, the VBA will be able to recover the cost of the insurance response from the builder. The links between domestic building insurance, enforcement powers, discipline, cost recovery and dispute resolution are critical to the regulator’s effectiveness and the success of the first-resort insurance scheme. 

Importantly not all regulatory functions will be integrated into the VBA. The functions of the Municipal Building Surveyor (MBS) and Private Building Surveyor (PBS) will not be altered with the establishment of the integrated regulator. Both the MBS and PBS will continue to play significant roles in the domestic building sector. Similarly, the role of the Architects Registration Board of Victoria with the registration of architects, and Consumer Affairs Victoria with respect to the registration of engineers, will continue without change. 

Domestic building insurance and the Statutory Insurance Scheme 

The Bill makes significant reform to domestic building insurance, which will be implemented over two stages. The first stage of reform will cover ‘last-resort’ domestic building insurance that currently operates in Victoria. The second stage of reform will introduce more significant change with the introduction of the new SIS, which will provide domestic building insurance on a ‘first-resort’ basis for domestic buildings three storeys and below. 

Last-resort domestic building insurance 

The first stage of insurance reform will deliver the integration of the VMIA’s domestic building insurance business into the VBA, provide for the VBA to undertake a domestic building insurance business and introduce enabling provisions to close the domestic building insurance market to private insurers. The Bill does this by conferring a function on the VBA to carry on an insurance business relating to domestic building work. The Building Act will be amended to replace the VMIA with VBA as a designated insurer for domestic building insurance.  

The Bill provides transitional arrangements to ensure building owners with domestic building insurance policies written by VMIA will continue to receive the same coverage under those policies after the transfer to the VBA takes place. All assets, liabilities, rights and other matters associated with VMIA’s domestic building insurance business will transfer to the VBA. An insurance account will be established in the Building Act into which payments for domestic building insurance purposes are to be made. Payments can be paid out of the insurance account to meet domestic building insurance liabilities. The account must be managed in accordance with prudential requirements.  

The transition to these arrangements will be subject to detailed implementation work by departments and agencies. Affected insurers and builders will be consulted as part of implementation work, including if the government chooses to close the last-resort domestic building insurance market. Information will be available to industry and the public ahead of the commencement of these new requirements. 

The Statutory Insurance Scheme 

The Bill’s second reform to domestic building insurance is the establishment of a new SIS. The introduction of the SIS is a significant initiative supporting the Bill’s policy objective to improve consumer protection by delivering the rectification of incomplete, defective or non-compliant building work quickly and, in the case of the SIS, removing the consumer from any requirement to participate in dispute resolution processes. The integrated model, together with rectification orders and insurance reform, are critical to delivering this policy outcome for domestic buildings under three storeys. 

The SIS will provide domestic building insurance on a ‘first-resort’ basis for buildings under three storeys. Domestic building owners will be able to make an insurance claim even when the builder is operating in the building industry and without needing to undertake a dispute resolution process. The existing last-resort insurance triggers allowing for claims in cases where the builder has died, disappeared or become insolvent, will continue to apply under the new arrangements.  

The SIS will be administered by the VBA as a government monopoly. This is essential to ensure a close link between insurance, the regulator’s enforcement powers, disciplinary powers and cost recovery powers. These links incentivise builders to rectify building work when ordered to do so and are critical to the financial viability of the SIS. This is because the SIS depends on the regulator’s power to order builders to rectify building work to reduce demand for insurance payout. If insurance responds due to a failure by the builder to rectify building work, the regulator is empowered to take disciplinary action or cost recovery action against the builder. 

The Bill provides important aspects of the SIS and heads of power for detailed matters to be prescribed in regulations. The SIS will cover insurable domestic building contracts where the value of the work is $20,000 or above. Building owners will be entitled to make a claim if they have suffered loss in connection with domestic building work that is incomplete or defective or non-compliant. Developers and builders, including those engaged in speculative domestic building work, will not be entitled to claim assistance, reflecting the policy objective of strengthening consumer protections for the end user or owner occupier. The VBA will be responsible for preparing a Premium Order, which will set out premiums to be paid for insurance cover. The VBA will also be able to tender for the rectification of building work covered by the SIS if the builder has failed to comply with an order to rectify the work. 

The SIS will extend insurance coverage to building owners – known as deemed cover – even if the builder has not purchased an insurance policy. This amendment protects consumers from practices exposed with the collapse of Porter Davis homes. The existence of deemed cover permits flexibility for builders to pay the applicable insurance premium after an insurable domestic building contract has been entered into. The Bill provides this flexibility by giving builders 10 business days to pay the premium after entering a contract. Deemed cover and the flexibility given to builders mean offences in the Domestic Building Contracts Act against builders demanding or receiving money without ensuring the domestic building work is covered by domestic building insurance are no longer required and will be repealed by the Bill.

Detailed terms of insurance cover will be prescribed in regulations. The regulations will include matters such as the maximum amounts of cover available to a building owner under an insurance contract, periods of insurance cover and any exclusions, among other matters. The terms of optional additional cover will also be prescribed. 

Orders for the rectification of building work 

The Bill strengthens the VBA’s enforcement tools by giving it the power to order the rectification of incomplete, defective and non-compliant building work. The VBA will be able to issue a rectification order to a person who carried out the building work and developers. The scope of who carried out the building work is to be broadly interpreted and can include registered domestic or commercial builders as well as builders without building practitioner registration, subcontractors and others responsible for carrying out incomplete, defective or non-compliant building work. A rectification order can be issued with respect to any building class and at any time during the construction phase of the build and up to 10 years after the issuing of an occupancy permit. 

The rectification order process closes a significant gap in the VBA’s enforcement powers. Prior to this Bill, the VBA was not able to order builders to rectify defective building work after the issuing of an occupancy permit and had limited power to order the rectification of defects during construction. It was not able to order builders to complete incomplete work. And it was not able to order developers to rectify building work. The rectification order process closes these gaps. 

The rectification order power is designed to allow the VBA to respond quickly and order the rectification of defective building work at both pre- and post-occupancy permit stages. Those issued a rectification order must comply within specified timeframes and cannot seek a stay to the operation of the order. In the case of defective building work, it is intended that the VBA provide the relevant person a period of time, for example 14 days, to respond to the VBA’s intent to issue an order and raise any issues with the VBA. The VBA will also produce guidance documents on the use of rectification orders for defective work to provide transparency for all parties. These will be required by Ministerial Direction.

Rectification Orders play a critical role with respect to various functions the Bill confers on the VBA. It will be a core feature of the SIS in that builders will be ordered to rectify or complete building work subject to a building owner’s insurance claim. Failure to comply with a rectification order in this context will trigger an insurance response. Failure to comply with a rectification order for serious defects can lead to restrictions on the sale, occupancy or registration of plans of subdivision for apartments with a rise in storeys of more than three. Reflecting the VBA’s greater consumer protection role under the integrated model, the rectification order can be used to order the rectification of incomplete and defective work. These powers bolster the VBA’s existing role in monitoring compliance with the Building Act, Regulations and the National Construction Code. 

The ability to issue rectification orders will only be available to the VBA and will not affect enforcement powers available to MBS or PBS. Rather, the rectification order power complements those powers by enabling the regulator to step in when the powers of the MBS or PBS are not suitable for resolving the building work issue. 

Developer bond scheme 

Another significant consumer protection measure in the Bill is the introduction of a developer bond scheme. A gap currently exists with respect to financial protections for home owners in apartment buildings with a rise in storeys of more than three because these buildings are not covered by domestic building insurance. The bond will address this gap in the interim ahead of the introduction of decennial liability insurance for these apartments in future. 

The developer bond scheme is modelled on the Strata Building Bond and Inspections Scheme in NSW. A developer of an apartment with a rise in storeys of more than three will need to secure a bond of two percent against the cost of the building work for the purpose of funding defect rectification costs. The bond will be lodged before the developer applies for an occupancy permit. The VBA will be responsible for approving access to the bond. The bond itself can take the form of a bank guarantee or a bond issued by an insurer approved by the VBA, or any other form prescribed in the regulations. 

An inspection regime will be introduced to support the bond. The first inspection will occur 15 to 18 months after the issuing of an occupancy permit. The second inspection if required will occur between 21 to 24 months after the issuing of the occupancy permit. If defects are identified during the first inspection and are not rectified by the second inspection, the owners corporation will be able to apply to the VBA to obtain access to the bond to rectify identified defects. Details such as the method for how the cost of building work is to be calculated; the registers of persons qualified to be appointed as building assessors; and the form and contents of an interim and final report produced by an assessor, will be prescribed in the Regulations. 

Assessments will be carried out by building assessors nominated by the developer, and approved by the owners corporation or appointed by the Building and Plumbing Commission. Assessors will be required to act impartially and will be given necessary powers to enter premises to carry out inspections.

Restrictions on the issuing of occupancy permits, registration of plans of subdivision and recission of off-the-plan contract sales 

To support the developer bond scheme, the Bill introduces restrictions on the occupancy, subdivision or sale of apartments if serious defects have not been rectified. 

Developers will be required to notify the VBA of their intent to apply for an occupancy permit between six and twelve months in advance. This will enable the VBA to conduct an inspection of the apartment building where the construction time is greater than 6 months; or 30 days in advance if the construction time is less than 6 months. If the VBA inspection identifies the existence of serious defects and issues a rectification order, the developer will not be able to apply for an occupancy permit, nor register a plan of subdivision, nor complete an off-the-plan sale until the rectification order has been complied. Purchasers under an off-the-plan contract will also be able to rescind the contract if an occupancy permit has not been issued or a developer bond has not been paid. These restrictions create an incentive for the developer to improve quality controls to avoid delays to the completion of building work and, if a serious defect is identified, quickly rectify the building work. 

Miscellaneous amendments 

The Bill makes miscellaneous amendments. The Bill includes provisions to prescribe minimum financial requirements for builders. The purpose is to support the VBA’s underwriting activities connected with its insurance functions. This means minimum financial requirements will replace eligibility for domestic building insurance as a requirement to be satisfied by all registered domestic builders. Regulations will prescribe these requirements and will be subject to stakeholder consultation. The Bill makes consequential changes to various sections of the Building Act, reflecting the change from domestic building insurance eligibility to satisfaction of minimum financial requirements.

The Bill introduces new VCAT review jurisdiction with respect to decisions made in relation to the SIS, rectification orders and developer bonds.  

The Bill makes various other technical and consequential amendments. 

I commend the Bill to the house.

Cindy McLEISH (Eildon) (10:44): I move:

That the debate be now adjourned.

Motion agreed to and debate adjourned.

Ordered that debate be adjourned for two weeks. Debate adjourned until Wednesday 19 March.