Builders licensing

HIA's Position statement

1. HIA supports business licensing for builders undertaking:
• domestic building work
• multi-residential building work, and that domestic, multi-residential and high rise licences be separate categories
• commercial and other building work – and that non-residential licenses be a separate category from a residential builders’ licence.
2. HIA supports business licensing for trade contractors:
• engaged (contracting) directly with consumers (subject to a monetary threshold)
• engaged (contracting) directly with ‘commercial’ consumers.
3. HIA supports business licensing for project managers who undertake building work.
4. HIA does not support licensing of trade (sub)contractors who work exclusively for builder/principal contractors but (sub)contractors should be accountable for the quality and compliance of their work.
5. HIA supports occupational licensing of trade (sub) contractors who undertake high risk work.



Monetary threshold

6. HIA supports a monetary threshold for building work, above which a licence is required.
7. The monetary threshold should align with the warranty threshold, if there is one, for residential building work.



Licence eligibility

8. HIA supports licence eligibility for the requirement for builders and subcontractors being based on, but not solely subject to each of the following:
• Technical competency.
• Industry experience.
• Business skills.
• Financial viability – for example, insolvency should trigger an automatic suspension of licence.
• Business financial checks to be undertaken annually by warranty insurance providers, not consumer/licensing agencies.
• Personal probity.
• Warranty insurance eligibility.
• Other insurance requirements.
i. CPD not being required for renewal purposes.

Background

• Regulation of the building industry is constantly scrutinised and often under review.
• Residential builders in all states need to be licensed or registered. However, licensing requirements across Australia are not consistent. Licensing is a state and territory function with each respective government having its own regulators and own rules, criteria and categories.
• Licensing can: restrict entry into a profession by imposing skill, education or probity requirements on practitioners; contribute to a consumer protection regime; provide indications as to the quality of the licensed person’s skills; be used as a means to enforce rules of industry behaviour; and, be a source of revenue for governments.
• Licensing can be divided into two categories: Business and Occupational.
• Business Licensing is generally associated with the practice of contracting to do work (with a consumer or another business). Business licensing therefore contemplates the business (financial) capacity, probity, conduct and being a ‘fit and proper person’.
• Occupational (skills) Licensing reflects the nature and related risks of the actual work being performed, and therefore contemplates skills, competency, knowledge and experience.
• A licence will affect the type of residential building work a practitioner can carry out, potential minimum financial requirements and potential disciplinary actions.
• Although there are benefits in licensing, licensing also constrains the market’s ability to provide services. By restricting entry, licence holders maintain an entrenched market position thus reducing competition.
• In this regard, the need for licensing of any particular trade activity should be assessed against the risk involved. If licensing is justified according to risk, an important task is to identify those risks that require regulation.
• Where there is a high monetary threshold for licensing, a greater range of building work will not require a licensed practitioner. This might have the consequence of increasing competition amongst non-licensed practitioners at the lower-end of the market, but in turn could have potential to expose consumers to increased risk from non-licensed practitioners.
• However, removing compliance costs for the lower end of the market will result in lower costs, for the business and the consumer, providing greater choice for consumers and more targeted regulation where it matters the most.
• An added complexity is that other regulatory frameworks overlay state and territory based licensing requirements, for example, differences between the contract value threshold for when a licence is required and the requirements to obtain Home Owners Warranty Insurance in conjunction with training and experience requirements.
• Despite the existence of a national training framework, the number of years of experience required and the level of training qualifications required to be licensed also varies across jurisdictions.
• Not all jurisdictions licence both commercial and residential builders and amongst those that do, there is a wide variation in the way licenses are graded or classified. From a consumer protection point of view, the grading of licences assists market choice by indicating the most appropriately qualified builders for their needs.