“Drove the Chevy to the Levy but Building was Slow: The Contstruction Forecast and Changes to the Building Act”
By Justin Cotton, Partner, Construction and Practitioner Advocacy, Lovegrove Smith & Cotton, Construction and Commercial Lawyers
June 2014
Given the need to cater for a 2% per annum population growth in Victoria (the highest in the nation), there is evidently the need for spending on infrastructure and a robust construction industry.
The Victorian government is keen to herald developments in roading and infrastructure. For example, the east-west freeway link already underway, the new railway development from the ‘domain interchange’ that will more easily link the city to the north western suburbs and airport, and the major upgrade for commercial and residential precincts in the Fisherman’s Bend area.
As discussed recently at a construction industry breakfast in May this year, it is all very well building more infrastructure and roads, but there also needs to be encouragement to the construction industry so that new homes may be built, to allow for this high population growth.
After a few years of construction being relatively flat in Victoria, the outlook is now starting to appear somewhat brighter with some cause for cautious optimism. While new domestic renovation projects are at high (almost record) levels, and high rise apartment construction is on the increase, the building of new detached houses is on the wane.
To meet the expected population growth at the current 2% per annum levels, it is necessary to build some 47,000 new dwellings each year. That is the minimum figure to ‘break even’ against population growth. For the last year the numbers were slightly below that and expected to remain around that figure for the next year or two.
In some ways, it is yet to be seen what the new changes to the building legislation as flagged in the Building Legislation Amendment Bill 2014 will mean for the construction industry in terms of the number of building approvals and increased building activity.
Notably many of the changes to the building laws in this amendment Bill are due to commence on 1 July 2014, with other changes due to start 12 months thereafter. The changes are far reaching and apparently more based on the Queensland model and the Building Services Authority in that State.
That is to say, the Victorian Building Authority (“the Authority”) will be in the role of industry regulator, the registration body for building practitioners (with Architects also being drawn into its fold), will be the investigator and prosecutor of errant building practitioners, and will also take over the warranty insurer role from VMIA (for Builders).
These new developments are largely about increased regulation of the construction industry to give more confidence and protection to consumers under construction contracts. Whilst in some cases this is undeniably a positive step, this will also inevitably lead in many circumstances to more ‘red tape’ and associated time and costs to the industry.
- More restriction on owner builders (currently the source of many building defect disputes at VCAT);
- “Show cause” notices that can be served on building practitioners requesting a response to allegations;
- A register of disciplinary actions taken against building practitioners (similar to the existing NSW model available on their Building Professionals Board website);
- Personal probity and financial probity criteria for practitioners who wish to become registered with the Authority (similar to the Queensland model);
- A code of conduct that will apply to building surveyors (similar to accredited certifiers and their code in NSW);
- Rectification Orders that can be issued on builders following inspections of domestic building sites by Authority appointed inspectors;
- The ability of either Builders or Owners to appeal/review Rectification Orders (or their contents) to VCAT (and capacity will need to be set aside at an already stressed VCAT for these cases to
be heard); - Expanded rights of owners to claim on domestic builder insurance in some circumstances;
- A building permit levy that must be paid to the relevant building surveyor in the amount of 0.064 cents in the dollar of the cost of building work for which a building permit is required, that is
to be calculated by the building surveyor based on the project cost and paid before the building permit is approved.
The last change (the building permit levy) could be seen as not dissimilar to ‘development contributions’ payable when Construction Certificates are lodged in NSW. Nevertheless, it was singled out at a recent industry breakfast as just one example (alongside other changes) that could slow down the building permit process and add time and cost to the domestic construction industry in Victoria.
In coming weeks we will present more articles focusing more specifically and more in depth on certain aspects of the forthcoming building laws in Victoria.
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© Lovegrove Smith & Cotton 2014
