Picking Apart ‘The Template’: How to Make Certifier Contracts of Engagement Work for You
By Justin Cotton, Partner and Head of Practitioner Advocacy at Lovegrove Smith & Cotton
There has been some angst about the introduction of compulsory contracts of engagement for accredited certifiers in NSW. The path of change is often bumpy, at the very least it is uncertain.
Although for the certifier, there may be the opportunity to ‘turn lemon into lemonade’ and make these contracts work for the certifier, while still protecting the consumer.
The change requiring the compulsory contracts of engagement commenced from 1 March 2013, with the introduction of section 73A of the Building Professionals Act 2005. This section makes it an offence for an accredited certifier to carry out certification work for a person unless that accredited certifier or their employer has entered into a written contract with the person and the contract complies with the regulations.
Notably though the offence thereby created does not apply to certification work started prior to 1 March 2013. There was also be a ‘grace period’ after March 2013 during which certifiers would not be prosecuted for not having a compliant contract so long as they were taking reasonable steps to acquire a contract that covers their certification functions.
Also, from 29 April 2012 the requirement for a written contract will apply to accredited certifiers before they are able to decide on an application for a compliance certificate under the Swimming Pools Act 1992 (swimming pools and the all important safety barriers). For Councils, the exception to this is if the Council has someone other than an accredited certifier performing inspections and issuing a certificate of compliance under that Act.
The Board Template
A standard form ‘template’ has been introduced by the Building Professionals Board. It is important to note that this is merely a guide to assist accredited certifiers or their organisations know the nature of the form required, the use of the template is not compulsory.
The first starting point is clause 19A of the Building Professionals Regulation 2007; this sets out the requirements “relating to contracts for certification work” and regard should be had to this clause when designing contracts of engagement. In this clause there is a specification as to what the contracts must contain.
According to the Board, some 80% of respondents to a recent online survey indicated there should be a written contract for services for certifying authorities. Indeed, many private certifiers in NSW are already using such contracts, and the writer has prepared contracts before over the last half dozen years for private certifiers.
For Council accredited certifiers they will be a new concept, but note that the Council will be entering into the contracts and simply providing the name or names of accredited certifiers who will be performing the Council’s certification service.
What is it for?
It is intended that the contracts of engagement be between the person who has the benefit of the Development Consent (generally, the Owner or Developer) and the accredited certifier carrying out the functions or the company or organisation that employs that accredited certifier.
The written contract is required for all certification work. This includes the determination of applications for a development certificate, with the term ‘development certificate’ including complying development or strata certificates, and Part 4A certificates (eg construction certificates, compliance certificates). Certification work also includes the carrying out of PCA functions, performing inspections under the EP&A Act 1979, and carrying out inspections under the Swimming Pools Act 1992.
When substantial change is made to industry regulation, it is almost always for policy reasons to cure a perceived malaise. One of the features that the certifier agreements must have is that payment for the PCA service or other accredited certifier functions (including the approval of development certificates and carrying out mandatory inspections) must be paid ‘up front’ or at the time that the application for the development consent is made or the accredited certifier is appointed. The only exception to this is where there are unknown costs incurred for contingencies or extra services required, these are required to be invoiced for within 21 days of completion of the extra work.
The idea here is to avoid a situation where an owner/developer can attempt to influence the outcome of certification by with-holding payment. So naturally the contract must contain details of the price of services, including a detailed breakdown of the charges, and when it must be paid (ie at the start of the contract), with a description of what extra or contingency charges could be billed and how the rates will be calculated.
In this way an accredited certifier (or more correctly, their company/ organisation) can protect themselves by allowing for payment for these contingency items, for example for any enforcement work that must be done (eg the issuing of a section 109L notice of intention to give an order) or any additional inspections required because of unforeseen problems.
The contract also needs to be signed by the parties before an application for a development certificate or a PCA appointment is lodged with the accredited certifier. This would seem the logical time to enter into the contract.
It is also intended that the owner/developer who has the benefit of the Development Consent contracts directly with the certification provider. This is to ensure that they choose their own certifying authority and have direct contact with the certifier rather than just via the builder. This ensures also that they are aware of the certification services that will be provided and the identity of the person doing so.
We suggest that usually it will be either a private certification company or a Council that will be signing the contract as “the certifier”, but these entities should list in the schedule the likely accredited certifier who will be carrying out the functions.
Should the identity of the named accredited certifier change, there should be the provision for there to be a communication to the Owner / Developer about who the new accredited certifier will be eg if another certifier is to carry out an inspection because the first certifier is suddenly unavailable. Also, a Council may decide to have a list of accredited certifier personnel who will be carrying out key inspections.
Advantages for Certifiers
As discussed above, the contracts of engagement can be tailored to suit the organisation providing the services, so long as the terms drafted do not contain anything that is barred by the regulations, and provided that those matters that the regulations require are also included.
It has already been discussed that the certifier receives a benefit by provisions that require payment for the services at commencement, and it protects the certifier from any influence occasioned by payments with-held. Further, the contract should spell out the right of the certifier to charge for additional time or contingencies, and this does not need to be a set fee, rather that can be an hourly rate.
The contracts can also corral or quarantine the respective rights and responsibilities of each party to the contract. This can also include the ability to serve notices of default if one party is in breach, for example if the owner does not provide information or access to land in a timely way, or does not pay for contingency services on time, and could even provide for termination of services if defaults are not remedied.
By Justin Cotton, Partner, Lovegrove Solicitors
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© Lovegrove Solicitors 2013