Building dispute process - what are the steps? (Vic)

Background

In July 2002 new laws were introduced that allowed insurers to issue warranty insurance policies under which:

• Claims can only be made by the consumer if the builder dies, becomes insolvent or disappears
• A non-structural defects period of 24 months from completion was included
• Coverage for structural defects is 6 years from  completion
• There is a 20% cap of the original building contract amount on claims for non-completion
• The contract price threshold requiring  warranty insurance rose from $5000 to $12000

These new provisions replaced the previous system where the insurance provider was the first option and would assess defects claims and may have directed the builder to rectify.

The system now is managed and delivered jointly by Consumer Affairs Victoria and the Victorian Building Commission under Building Advice and Conciliation Victoria (BACV). The BACV service in the past has only been accessible to consumers but now has limited access for builders.

Services through BACV include advice, conciliation and technical inspections of building work. Consumers can be provided with a free inspection; however this inspection service is not available to builders.

Process

If a client or ex-client that you have carried out work for under a major domestic building contract claims defective or incomplete work they may go to Consumer Affairs to report this. Consumer Affairs will attempt to resolve the dispute between the owner and the builder, if this not possible they may refer the matter to the Building Commission for an independent inspection report and on-site conciliation.

The independent inspection, organised by the Building Commission, will focus only on those aspects of the building that have been reported as defective. The report will recommend what should be done to rectify any defects and will estimate the time required to complete rectification work. Both the owner and the builder will receive a copy of the report to help resolve the dispute.

Section 43F of the Domestic Building Contracts Act 1995 covers the requirements of this type of inspection. It is important to note that under legislation the builder does not have to acknowledge or comply with this report, but if it is found that the builder is at fault the matter may be referred to the Building Practitioners Board for disciplinary action against the builder.

Although the builder cannot access this free service, under Section 44 of the Domestic Building Contracts Act 1995 the builder can pay $300 for the same type of report to determine if the building work is defective or incomplete.

Again, if it is found that work is defective and the builder refuses to rectify, the matter can be referred to the Building Practitioners Board in relation to unprofessional conduct despite the fact the builder is not required under legislation to comply with the Section 44 report.

The advantage of this type of report is that it is a truly independent report, as the Commission will not favour either party as could happen if a general consultant is engaged who may favour the person that initiates the report.

It can also be a more economical option, as the cost of the Building Commission report, around $300, can be a fraction of what you may pay a general consultant, as long as further information is not required i.e. geotechnical reports etc.

No resolution

If the matter cannot be resolved either through an inspection initiated by the owner as part of the BACV process or accessed by the builder through the Building Commission, then either party can take the matter to the Victorian Civil and Administrative Tribunal (VCAT). This would be at the own expense of the person who starts the proceeding and it can be extremely costly depending on the nature of the complaint.

For further information HIA members can contact HIA’s Building Services staff on 1300 650 620 or hia_technical@hia.com.au.   

If you would like to become a HIA member, contact 1300 650 620 or enquiry@hia.com.au

Ref No. VIC LEG 08-12

The above is intended to provide general information in summary form. The contents do not constitute specific advice and should not be relied upon as such. Formal specific advice should be sought by members with respect to particular matters before taking action.  ABN 99 004 631 752