Tuesday, 1 April 2025

Bills

Building Legislation Amendment (Buyer Protections) Bill 2025

Second reading

Debate resumed on motion of Nick Staikos:

That this bill be now read a second time.

Nick STAIKOS (Bentleigh – Minister for Consumer Affairs, Minister for Local Government) (13:19): Under standing orders I wish to advise the house of an amendment to this bill, and I request that it be circulated.

Amendment circulated under standing orders.

Richard RIORDAN (Polwarth) (13:19): I have the honour today of standing up to put the case for the Building Legislation Amendment (Buyer Protections) Bill 2025. Over the last couple of weeks the opposition has had an opportunity to work with stakeholders on what this bill means. At the outset can I say that there is no doubt there is need for reform and improvement in the way that we deal with the relationship between consumers and builders, particularly in the domestic home building market. There are clearly two main areas which this bill seeks to address. They are around the standard standalone domestic home and the product of a more than three- or four-storey apartment building with multiple units, so we are talking domestic up to three storeys and above three storeys into a more commercial application. Nonetheless, these places that are built ultimately become people’s homes. They are often the most valuable asset that those people living under that roof will have, and their hearts and souls are invested in these properties. It is only right that the government has a legislative framework that seeks to protect those investments and those homes that people have.

I make the observation that in recent years we have had a growing housing crisis. We have talked many times in this Parliament about the fact that this government has single-handedly failed to get the amount of homes built and underway needed in this economy to keep people housed. We see it in the figures. We have got record amounts of homeless people and we have got a public housing waiting list that is growing at some 2500 families a quarter, which is at a record speed. We have now got basically an MCG full of homeless people. We have also got despair and angst amongst younger generations who feel that the object of home ownership is far from their grasp because of increasing costs. Some recent work on this very topic released by KPMG makes it clear that if you are in the bracket of affordable housing that includes a home worth from about $400,000 up to about $850,000, it is almost impossible at the moment to construct that with the options this government is putting forward.

For those people lucky enough to be in a position to build a home or buy a brand new home off the plan or however they acquire it, it is vital that they get what they think they paid for. Many Victorians were caught out in recent years when the VBA, the Victorian Building Authority, single-handedly failed in its monitoring of insurance. Ultimately that has led to this Building Legislation Amendment (Buyer Protections) Bill 2025 this year, which many in the industry have cynically called the ‘Porter Davis bill’. They have called it that because this is the government’s knee-jerk response to what was a completely unsatisfactory problem, a problem in which the huge bureaucracy we already had in place to oversee and regulate the building industry completely failed, and that failure had a huge impact on many, particularly younger couples acquiring their first homes. It makes sense that a responsible government would look at what went wrong and seek to amend the legislation, so this bill has come to Parliament. But through the process of understanding the pros and cons of this bill, what has become very clear is that, as is so often the case, this government has decided that it can solve a problem by renaming it, so it is going to rename the Victorian Building Authority and give it a brand new name, the Building and Plumbing Commission. Most people out there who have disputes about their homes will fully understand that a name change in itself is not going to save them from peril.

That is one key element of this bill. The other key element is to essentially shift more of the blame in the relationship between the customer – the person acquiring the new home – and the builder, to move the relationship to be one of blame against the builder rather than strengthening a good contract. Those in the commercial world understand that good contracts have a good balance between consumer and supplier. It makes sense that you get that relationship highly tuned and developed and that then, when you have the contract well developed, you put the monitoring in place. This bill, sadly, fails abysmally at getting the contractual relationship right. This government undertook a review of the Domestic Building Contracts Act 1995. They finished that review in February last year and have not revealed any of the details of that review in the lead-up to the release of this piece of legislation. The industry is quite rightly concerned – and so would consumers be – that the fundamental basis of the relationship between a home owner and a builder has been completely ignored. And not only has it been ignored, it has not been discussed and it has not been put out for proper public consultation. As a result this government has leapfrogged to managing how they are going to penalise the building industry and the construction industry rather than making sure the fundamental base, the foundations of the relationship, have been sorted first.

We will go into greater discussion on what some of those reforms are, but essentially the government has leapfrogged getting the foundations right and moved straight to blaming one side of the equation as a solution. That comes with consequences, and those consequences we will also discuss as the opposition details its position. Our position will be, sadly, to oppose this bill. We will be opposing this bill because it fundamentally will not deliver to the consumers of Victoria the protections. In discussions with the industry and the real estate agents and those dealing in this space all the time, what is fundamentally letting Victorians down is the monitoring of the construction industry. Through the process of construction and building, have we got the monitoring in place? Are we checking at the high-risk points, whether it is at the foundation stage, at the water and drainage stage or the final finish? Are we implementing and beefing up the capacity for the industry to have those key crunch points that cause disputes monitored and regulated? This bill does not deliver on that. This bill does not do anything for the end consumer apart from seeking to make a more complicated dispute resolution system rather than trying to avoid the problems to start with through a strong contractual foundation, and that is of great disappointment.

Not only will we be opposing this bill, but we have a reasoned amendment. I move:

That all the words after ‘That’ be omitted and replaced with the words ‘this house refuses to read this bill a second time until details of the consultation on the Domestic Building Contracts Act 1995, along with any proposed reforms, have been released to the industry.’

The reason that this is an important reasoned amendment is this bill in its current form clearly puts the cart before the horse, and it is nonsensical to progress this further until such time as we know what the arrangements are that we are dealing with between consumers and the construction and building industry. I think that is entirely reasonable.

In preparing for this bill my assistant Wayne Farnham and other members of the opposition met with many industry representatives from Master Builders Victoria, the Housing Industry Association, the Urban Development Institute of Australia, the insurance industry and a raft of small, large and medium construction companies, all of whom were amazingly disappointed with the lack of consultation that this government had with all the various players. These are the key players in the task that Victoria faces of getting more homes built, and it is of great concern when one of the primary feedbacks is, ‘We’ve met with the government, but they just have not listened to any of the feedback that we have been giving them.’ They have not been able to answer many of the questions we need. Not only are they sitting and flying blind on where we are with the details around any reforms to the contracts act, but, more worryingly, in this legislation there is endless reference to changes in regulations, and none of those regulations have been detailed or foreshadowed in any detail to the building industry. As I will go through shortly with some of the more direct feedback from the industry, what the industry is saying is it is expected to sign up with just not enough detail and information made clear. One of the most obvious examples of where detailed information has been just left out is around defects. What we are actually dealing with with this bill are the consequences of defects or inherent structural or building problems, yet this legislation fails to deal with them – whether minor, major, structural, inherent or whatever definitions they want to put around them – with any certainty or in a satisfactory way.

I guess the other important fact that the government have ignored but the industry and those dealing with these problems have made clear is that, by and large, while the system that we have today has some very large problems in it and has caused some great distress to many homebuyers, at the end of the day they are still a small percentage of those that are engaging in a relationship between homebuyer and home builder, and by and large the industry has been quite capable of dealing with them. Where it has gone wrong, where it has gone pear-shaped and where consumers have been left out of pocket or, worse, out of home, the industry itself wants to see that reform. The industry itself wants happy customers. They do not want operating in their industry people that do not provide good service, do not correct defects and do not make good on contracts made. Conversely, the industry also needs to have protection from malicious or vexatious customers who at times might play the system in order to get their own way. That is why having good contracts is such an important foundation to solving the overall problem of defects and building problems getting in the way of a good product and a safe home for people to live in.

I want to now take the house through some of the more specific details of the Building Legislation Amendment (Buyer Protections) Bill 2025 that have been identified by some key people in the industry. To be honest, I would need more than the 17 minutes that I have left to detail the numerous problems, but I just want to put on the record some of the work that has been done by the industry in giving us advice on this and bring it to the house’s attention. For example, in clause 33, ‘Proof of insurance for persons intending to rely on automatic deemed registration’, and clause 34, ‘Financial probity requirements’, one of the concerns is that the term ‘minimum financial requirements’ is very vague. Financial requirements may be burdensome for smaller builders or sole traders who are currently managing their own books and who would need to engage accountants for this work.

One of the problems with what this bill will do is that we will move from an insurance system of an insurer of last resort to an insurer of first resort, and there will be a monopoly insurance system. What was formerly under the Victorian Managed Insurance Authority will now be under the Building and Plumbing Commission. This is important because – once again, without proper consultation – the industry fears that the government has set up a system that will be okay for large-volume builders, who perhaps have huge back office administrative capacity and skill sets, to comply with what they want to understand about the builder that they are insuring. The concern of the industry is that if you are a smaller operator – you may in fact be the builder, on the tools yourself, on jobs with only one or two employees and are also, after hours, the administrator and office manager, which is often the case for many small builders – this could potentially be hugely onerous.

Unfortunately right across the economy over the last 10 years small business has suffered at the hands of this government’s large, bureaucratic approach to admin. I am talking about pages and pages of forms or websites that do not always function if you do not have great internet connection as you are operating your business in a country community. There will be a huge disadvantage for a smaller operator in being able to meet the financial objectives. As the industry has highlighted, most probably this will be a new added cost to doing business – getting insurance and providing a builder – because the builders themselves are going to have to engage more back office power in order to get the requirements right to get the insurance in place. We are not delivering; this particular section of the bill will really add no extra benefit to the process.

Clause 36, ‘Grounds for disciplinary action’, inserts new subsection 179(1)(ea), allowing for disciplinary action if the VBA finds that a building practitioner does not meet the required financial standards. There is great concern that a well-operated small business builder operator may have their registration cut or severe financial pressure put on them because they are unable to keep up with the bureaucratic requirements of this government. Clause 38 refers to that as immediate suspension of registration. That can cause huge financial distress and hardship to a builder who may only have one or two houses on the go. Cash flow is everything in this business, and if you have that registration suspended, if you are a builder out at Horsham or in far East Gippsland or a long way from Melbourne, you will be severely disadvantaged in getting those processes and paperwork that the now government monopoly will insist that you provide.

Other concerns have been that suspension or disciplinary action could be fatal for a builder and should only be used as a last resort rather than a first line of action. The industry is very concerned that while the government have failed to be prescriptive on regulations and expectations, they have been very prescriptive on their penalties and costs that could be inflicted upon builders who are not necessarily able to respond in an appropriate way to the government’s demands. Under clause 44, ‘Definitions and interpretation’, a new definition is to be inserted. It states:

insurable domestic building contract means a domestic building contract –

(a) for the construction of –

(i) one home; or

(ii) 2 or more homes in a building with a rise in storeys of 3 or less; and

(b) under which the builder will receive more than $20 000 … for the carrying out of the domestic building work …

Some of the concerns around that are that the phrase ‘for the construction of’ potentially puts a limitation on contracts for certain types of domestic building work being categorised as insurable domestic building contracts. It is not clear how associated work, renovations, alterations, extensions, repair work, demolition work and other typical work projects that a builder may be engaged in on an existing site will be treated. This is an example where had the government properly negotiated with and listened to and responded to the industry’s concern, it could have had that cleared up. But as it stands now the work that this bill refers to is ‘for the construction of’. Quite frankly, if you have got to pull down an old garage, that is destruction of the garage; it is not construction of the garage. That would be just one example. Deconstructing parts of a house in order to build something new is not unusual, yet this bill has fundamentally failed to deal with that basic expectation in the building and construction industry.

Clause 56 inserts a new part 9A, ‘Statutory insurance scheme for domestic building work’, which includes a definition of an associate of a developer as a director of a developer, an employee agent of a developer or their spouse, domestic partner, parent, brother, sister or child. Once again this government, when we have fishing bills and other legislation in the house dealing with small to medium enterprises, loves to rope everybody in without necessarily thinking through the consequences. The concern from the industry is around the definition of ‘associate’. It is far and wide reaching. For example, if the builder is an individual, a company in which the builder’s spouse or child holds a controlling interest will be an associate of the builder. If the builder is a company, then the spouse or child of an officer of that company will be an associate of the builder. This definition is relevant when assessing who is entitled to assistance under the scheme. Basically what the industry is concerned about is that it is not uncommon for a small builder to build a family member’s home but they are going to be excluded from having insurance on that product, and that seems entirely unfair. It is also being suggested by the industry that if a builder died and had provided a home to a family member of some description, the whole arrangement would be without insurance, and that seems inherently unfair.

The concerns are many and varied, but just to continue with a few more of them: section 137J, ‘Building work to which statutory insurance scheme does not apply’. This section expressly excludes categories of work which the insurance scheme will not apply to. Notably this includes domestic building work for the construction of residential apartment buildings in subsection (e): domestic building work that is prescribed domestic building work or that belongs to a prescribed class of domestic building work is also excluded. In this whole area of apartments there has been great concern added, because the government still has not got its head around what you do with large-level apartments. Considering that this government’s thrust for housing Victorians in the future is in fact in multilevel apartments, you would have thought that they would have put a lot more thought around how we make sure that we do not have water leaking from the top apartment to the bottom apartment and everything else in between, for example. We saw it through the minister’s amendment today where they managed to, on what is arguably one of the most important compensations for Victorians, get the percentage wrong. Anyway, we have learned today that it is officially the 2 per cent figure. The 2 per cent bond, is the only way the government plans to keep Victorians who buy apartments safe from any problems that may arise.

Once again, water-based issues, whether drainage, water in or water out, whatever the case may be, are one of the largest causes of disputes in apartment buildings as well as normal domestic buildings. If you can imagine for a moment: if you do not get the regulation and the key milestones of a major building monitored properly and inspected properly all through the process, sticking a 2 per cent premium on the cost of that apartment for the end consumer to ultimately pay is not really going to solve the problem if the problem is buried deep within the fabric and the structure of the building. At the end of the day that is the only protection the consumer is getting out of this bill in a major apartment. The government has not said, ‘Oh well, we’ve done a bit of research, we’ve done a bit of homework and we realise that, if we put more energy and focus into certain key milestones along the construction of a building, we’ll be able to really drive down any of the defect problems.’ No, they have not done that. What they have done is the lazy option. They have said, ‘Okay, what we’re going to do is we’re going to add just 2 per cent extra to the cost of building this apartment. We’re going to put that in a bond, and we’ll let that eat away.’ Now, you do not have to be a construction engineer or a building expert to realise that the 2 per cent is not going to keep away some of those horror stories that we have seen on A Current Affair and in other media, where cheaply and poorly and shoddily built apartment buildings have really caused great distress to their apartment owners. This does not solve that, and so that is of great concern. Really, greater knowledge of what the problems are and how to solve them have been ignored by this government in this bill.

This is just a smaller item, but it again speaks to the fact that it should not be an issue for the industry had the government paid attention to some of the consultation they allegedly did in the lead-up to it. This is under section 1370, ‘Builder must pay insurance premium’. Well, of course they expect to pay insurance premiums, but they are now compelled to pay the premium before the first 10 business days after the contract was entered into or the domestic building work starts. If a builder is carrying out speculative building work, the premium must be paid before the work starts. Some of the concerns around that are that ultimately this means that most builders will fall into the category of needing to pay for the premiums within 10 days after the contract is entered into. However, the project is generally not financed or approved until quite some time after that – up to 30 days even. The concern is that once again builders and small builder operators will be forced to further cash flow and fund the project when they are clearly not up to it.

Section 137Q, ‘Premiums order’, relates to the premiums and other amounts payable or methods by which the premiums or other amounts are payable. The authority must obtain the minister’s approval by which method the premiums are to be calculated.

Quite frankly, this government has a disastrous reputation when it comes to calculating premiums, whether it is the TAC or WorkCover. What we have learned over the last 10 years is you can bet your bottom dollar that a Victorian Labor government insurance monopoly will head in only one direction, and that is premiums up. Victoria has traditionally had some of the lowest premiums; we are now going to have some of the highest. One of the reasons that will be driving that is there is another little trick this government has regularly done, and that is to see the monopoly insurers at WorkCover and the TAC just become cash cows – playthings of the Treasurer. It would be of great concern to the industry and to everybody trying to get their foot in the door of their first home if these insurance costs just kept cranking up. The industry has no faith that – while we put clear, transparent actuarial principles in place to safeguard first home buyers in particular and home owners generally – they are not being taxed through the back door to help prop up this government and this broken budget that we have here in Victoria. That is an important concern that the industry has, and this government has been very, very light on explaining what principles will be used to make sure that the insurance levels people are paying are fair and just and equate to the potential risk that would be associated.

That is a list of some of the concerns, and I am sure many of my colleagues will continue to relay to the house concerns from the industry. But the fact is that it runs many, many pages thick, and each one of those could have and should have been addressed by the government in dealing with this.

Some of the key points we will finish off in the last couple of minutes that I have to deal with this. This bill is moving to first-resort insurance rather than the last resort. At the moment the overwhelming majority of defects and faults that occur in domestic building are dealt with between consumer and builder. Most are resolved in a low-cost, efficient and effective way. What the opposition is concerned about is that, rather than getting that contractual relationship right where builders and consumers can deal honestly with each other and openly and get a problem solved, this government wants to move to a new authority and a new agency to deal with it, so we are automatically implementing extra cost and inefficiency into a system that 95 per cent of the time works well. That is an important key change.

It is never easy to support, from the Liberal Party’s side of the chamber, creating a government monopoly. There is some competition in the market there. It has a position, it serves a particular cohort of builders very well, and by and large the prime motivation there is to work with good builders who are very low risk. They can keep the premiums down, so there is a check on the premiums. And the system has not worked too badly. On investigation for this, it seems that the private insurance incentive that is in there is a very useful check and balance against the excesses of an entirely state-run insurance scheme.

There is great concern in the industry that in a time when we need to absolutely get more homes built and we want more and better homes built, one of the keys to doing that is engaging and working with the small builder market. The concern around this is the expanded 10-year warranty system that is at the heart of this bill and the lack of regulation in the bill about what a defect is and what warranty obligations are. The warranty obligations are going out to 10 years. This is a huge concern, because no-one knows how responsible a builder will be in 10 years time. In fact, for many people, if you are an older builder, would you want to take on a job if you were nearing retirement that is going to potentially dog you for another 10 years? That is not fair. That is going to force people out of the industry at a time when we need more and more people engaged in the industry. With 2 seconds left, the opposition will be opposing this bill this week.

Katie HALL (Footscray) (13:49): While listening to the member for Polwarth all I heard was ‘industry, industry, industry’, no talk of the victims. I do not know how members opposite can look their constituents in the eye when they come into their electorate office and tell devastating stories where everything they have ever had they have spent on a home and they have been victims of dodgy builders. We know where the Liberal Party stands now, and that is with dodgy builders, because consultation does not mean capitulation, and that is certainly what the Liberal Party did in 2013 when they introduced their own bill to deal with these issues. The Housing Industry Association did not like it, so they pulled the bill.

I am very pleased to make a contribution to the Building Legislation Amendment (Buyer Protections) Bill 2025, and as Parliamentary Secretary for Homes, I am so proud of the work that has been undertaken by everyone involved in getting us to this point. Before I speak to the contents of the bill, I will speak briefly to the amendment circulated by Minister Staikos earlier. Due to a printing error, the second reading of this bill stated that the amount to be held under the developer bond scheme was 3 per cent of the construction costs. We have introduced a house amendment to reflect the government’s policy that the amount paid by the developer into the developer bond scheme will be set at 2 per cent of the construction costs for a building four storeys or higher. It changes the wording of clause 96 of the bill, which inserts a new section 137ZP(3) into the Building Act 1993. The section currently states that the amount to be secured by a developer bond for a residential apartment building would be 3 per cent of the total build cost for the residential apartment building. With this amendment the section will read that the amount to be secured by a developer bond for a residential apartment building is 2 per cent of the total build cost for the residential apartment building. This position was reached after extensive stakeholder consultation with building industry bodies.

This bill is a landmark reform that goes so much further than simply reforming the Victorian Building Authority or making changes to building insurance. Fundamentally this bill is about giving Victorians confidence in our housing system – confidence that they will get what they pay for and confidence that our regulatory systems will do the right thing by them if their builder has not.

Housing is at the core of my work as parliamentary secretary but also of the work of the Allan Labor government. No other government has set out with a vision like ours, a vision for more homes and more opportunities for all Victorians. From our Help to Buy scheme, which has formed a crucial part of the federal government’s reforms, to activity centres and precincts, the Suburban Rail Loop and a multipolar approach to densification, we are pulling all the levers necessary to increase the supply of housing where it is needed most.

These efforts, however, will be for nought unless consumers have confidence in the quality and accountability of our residential building sector. At the outset I want to make it clear that the Allan Labor government recognises that the vast majority of builders and developers do the right thing. This bill does not set out to demonise a vital industry or its workers. In fact clearer regulations and processes to weed out and punish dodgy builders will help strengthen the industry through increased consumer confidence and removing any advantages gained by improper practices.

Purchasing a home is often the biggest purchase any of us will make in our lifetime. It is preceded by years of stringent saving and sacrifice, of early morning inspections and of late-night research sessions. Saving for a home and all the steps that come before settlement are inherently stressful. With keys in hand, the next most stressful moment should be deciding where to put your furniture. But sadly for too many Victorians this is not the case; the most expensive decision of their life also becomes the most harrowing experience of their life. The consequences of poor building practices extend so much further than simply structural defects. The cost to individuals, to families and to communities is immense. This cost is not just financial but emotionally traumatising as well.

As an MP I have met with dozens of residents who have suffered greatly at the hands of dodgy builders and developers. These residents are working people who have done nothing wrong, and in fact they have done everything right. They, like so many, have been victimised by builders and developers who have acted in such a negligent way, with such a lack of empathy and basic human decency, it feels cathartic to take this opportunity to speak to legislation that will prevent them from hurting others. Indeed one of the first constituents to walk through my door when I was first elected was a Vietnam veteran who had spent his life savings on an apartment only to discover that he was living in a fire trap of flammable cladding. And so began my work with residents who needed help.

More recently I met with residents from an apartment complex in West Footscray – the development ironically named Eternity Apartments. Residents, many of whom bought off the plan, were sold on an environmentally sound design that included native timber facades, green walls, solar hot water, bike racks, smart meters, rooftop terraces and more. What they got was unrecognisable from the renders and the brochures. They got a rotting timber facade, a soulless concrete rooftop and not a single one of the amenities I just listed. And that was the good news. Structural defects are rampant in units and common areas. The elevators were not complete for over three months despite an occupancy permit being issued by the building surveyor, acting in lockstep with the developer. The builder was also registered as the developer. He was the architect and an owner. Of course he is an owner in name only. What he really owns is a disability accommodation provider that owns 26 per cent of all units in the complex, exactly enough to prevent any major resolutions being passed by the owners corporation – resolutions that may seek to take a developer to court, order rectification works, raise funds or in any way hold this bloke to account. And here is the kicker: the developer is suing the owners corporation for lost income because he cannot rent out some of the specialist disability accommodation because it is noncompliant. The change of use from residential to part SDA was also not registered. The fire engineering report is now invalid, as the assessment was not made with the needs of those with specialist accommodation in mind. And remember, the lifts were not functional for months after their supposed completion.

Not far away, also in West Footscray, the notorious ‘as seen on 60 Minutes’ developer Shangri-La was responsible for a building that had completely inadequate waterproofing. The rectification of the building has been completed, no thanks to the developer. Shangri-La were supposedly in liquidation but have now seemingly phoenixed and set up shop as SLC Bayside.

This bill is about accountability. Dodgy builders must be held to account for the harm, the distress and the pain caused to decent, hardworking people. This bill sets out to do this through several mechanisms. The first and primary mechanism is through the creation of an integrated regulator, the Building and Plumbing Commission or BPC. The BPC will take on functions currently performed by the Victorian Building Authority, the Victorian Managed Insurance Authority and Domestic Building Dispute Resolution Victoria to create a one-stop shop for homebuyers, renovators and practitioners. The BPC will have tough new powers, including and especially for enforcement. If serious defects identified by the BPC are not rectified, the regulator can suspend licences, stop the issuing of occupancy permits and prevent off-the-plan sales for apartment buildings. In other words, if it is not fixed, it is not for sale. The current regulatory system is overly complex, making already difficult situations even more so for consumers.

There is so much I could say about this bill, but the reason I commend it to the house is for the constituents who have come through my door and raised such shocking experiences dealing with dodgy builders. The Liberal Party and the opposition should be ashamed that they are siding with the dodgy builders and not with the victims of these terrible defects that present themselves to their electorate offices.

Tim McCURDY (Ovens Valley) (13:59): In the couple of seconds I have I will first of all be very critical of the member for Footscray’s contribution. She certainly made out the member for Polwarth ‍–

The DEPUTY SPEAKER: Order! The member will have the call when we return. I am required under sessional orders to interrupt business now for question time.

Business interrupted under sessional orders.