Articles

By Justin Cotton, Director, Lovegrove & Cotton – Construction and Planning Lawyers

 

In recent times this year the Victorian Building Authority has been sending letters to registered building practitioners including Builders and Building Surveyors, inviting them to have their companies registered as building practitioners.

This represents a fundamental change in Victorian building regulation because, up until now only individuals have been able to be registered in their personal names as domestic or commercial Builders, or as private Building Surveyors.

Of course that does not prevent companies operating as building or building surveying companies, but the registration and the insurance requirements have attached to the “natural person” individual.

With regard to building contracts, it is almost invariably the case that a building company will be the contracted Builder and the responsible entity in say, a civil dispute.  On rare occasions the contracted builder will be an individual or partnership trading under a business name (with an ABN), but this is the exception rather than the rule.  Regardless, a registered builder individual needs to be named in the schedule to the contract agreement.

If an Owner was to sue the Builder at VCAT for defective building work, the respondent party would be the building company that is described in the contract as “the Builder”, and not the registered builder director as an individual.  Any monetary judgment of VCAT or a court would lie against the company, not the individual as a director.

Furthermore, if a judgment is entered against the building company, a director individual can take the benefit of “limited liability” and hide behind the corporate shield of a limited liability company, except perhaps when it comes to domestic builder (warranty) insurance.  But that is another topic for another day.

The changes to Victorian law will come into effect from 1 July 2018.  From that date a company will be able to apply to be registered as a building practitioner, for example as a registered building company or a registered building surveyor company.

The state of the current law is that up until now companies have not been able to be registered as building practitioners in Victoria, and only individuals have been able to do this.  In regard to domestic building, a company can only enter into a “major domestic building contract” if at least one of the directors is a registered (domestic) building practitioner.  Further, the certificate of domestic builder (warranty) insurance has to be in the name of the registered builder individual, and not in a company name.

Building Surveyors have been able to approve Building Permits that name a building company as “the Builder” for the works, if at least one of the directors of the building company is a registered building practitioner in the appropriate class.

In a nutshell, the changes from 1 July 2018 will not only mean that companies can now be registered in the same category or class as their registered builder directors, a company will be prevented from entering into a major domestic building contract unless it is so registered.

The building company will not be able to be named as “the Builder” on a Building Permit for works above $10,000 unless it has a corporate registration as a Builder, and it will need to have an appropriate insurance certificate in the company’s name for it to do the work.

With regard to building surveying companies, similar rules have applied. A company has only had capacity to be appointed as the “Relevant Building Surveyor” if it has at least 1 director registered as a Building Surveyor.  From 1 July 2018, a company must be registered (ie corporate registration) in order to accept appointment as the Relevant Building Surveyor.

Companies that are already trading as building companies will be automatically registered on 1 July 2018 if at least 1 director is registered as a Domestic Builder and their registration is current by the day before that date, and if the company performed work under a major domestic building contract in the year up to 30 June 2018.

Further, for automatic registration to apply there must be evidence or appropriate insurance in the company’s name or that the company is eligible for insurance, and all directors must meet the financial and personal probity test.

This of course means that for domestic building, if the company does not have a current registered domestic builder director then it cannot be registered as a domestic builder company.  In addition to that, there may be a probity test (eg. the good character inquiry) in relation any other directors of the building company that are not registered builders.

If a company is not eligible for automatic registration the company can still “opt in” to be registered if it passes certain hurdles.  Those hurdles are to have at least 1 director that is currently registered as a building practitioner, all directors meet the financial and personal probity test and an “Opt In to Company Registration” form is completed and returned to the VBA by no later than 1 June 2018.

However, if a company does not follow this “opt in” route and is not eligible for automatic registration, then from 1 July 2018 the directors can complete the application form and apply to the VBA for full registration as a company practitioner.

This is a concern given that the 1 July date is looming and after that date a company would need a corporate registration to enter into new building contracts as “the Builder” or to be entered on a Building Permit for such new works.

There are some transitional protections here.  For instance, a company can continue on works under a major domestic building contract after 1 July 2018 even though it does not have a corporate registration, provided that the contract and/or Building Permit were signed or issued prior to the cut off date (1 July).

Also registered practitioner individuals will continue to be able to enter into contracts or appear on Building Permits under their personal names, perhaps employing a trading name, after that date – provided they have the appropriate registrations and insurance in their personal names.

For further advice or assistance in relation to building law matters including construction disputes and building regulation, do not hesitate to contact a legal team with expertise in this area.

Lovegrove & Cotton Lawyers to the Building Industry

For thirty years, Lovegrove & Cotton have represented builders, building surveyors and building practitioners in Melbourne, Canberra, Sydney and Queensland. Doyles Guide ranks Kim Lovegrove as one of the leading construction lawyers in Australia. Justin Cotton, likewise, is a leading Australian construction lawyer and widely respected in the building fraternity. Lovegrove & Cotton can help practitioners resolve any type of building dispute and are preeminent in the area of building practitioner advocacy. If you wish to engage the firm, feel free to contact us via our website or by emailing enquiries@lclawyers.com.au.