Ordered that second-reading speech be incorporated into Hansard on motion of Ms TIERNEY (Minister for Training and Skills).
Ms TIERNEY (Minister for Training and Skills) — I move:
That the bill be now read a second time.
Incorporated speech as follows:
This bill continues the reforms to Victoria’s building system commenced with the Building Legislation Amendment (Consumer Protection) Act 2016.
Implementation of a package of measures to improve dispute resolution (and make the process accessible for both domestic building consumers and builders), registration requirements, and disciplinary processes and strengthen disciplinary sanctions is underway. The impact of these changes will benefit Victorians.
The government foreshadowed that further reforms were required. These include measures to implement the remaining recommendations of the Victorian Auditor-General’s Office (VAGO) and to further improve regulation of the building system. This bill delivers these reforms.
Victoria’s building industry is robust and continues to report high levels of building approvals across both residential and commercial sectors. The aim of the further reforms contained in this bill is to continue the pathway of reform leading to a regulatory system in which consumers, building practitioners and industry can have confidence. These reforms are necessary to support continued growth for the benefit of all Victorians.
The bill will amend the Building Act 1993 to respond to the remaining findings of the Victorian Auditor-General in relation to building practitioner registration, the building permit levy system and the role of local government; it also addresses issues that emerged following the investigation into the Lacrosse building fire in 2014 and the recent demolition of a hotel in Carlton. The bill enhances regulatory powers to enable the Victorian Building Authority (VBA) and other regulators to be more effective and provides stronger offence provisions with higher penalties to act as powerful disincentives to people who do the wrong thing.
I will now outline the major provisions of the bill.
Reforms to practitioner registration
The bill proposes to permit the registration of corporations for the first time. The main purposes of registering corporations is to ensure that the probity of corporations with whom consumers do business can be checked so consumers can have greater confidence in the builders they engage.
Corporate registration will also enable the VBA to take any necessary disciplinary action directly against a company in addition to an individual building practitioner.
In addition, it ensures the legal entities who enter into a major domestic building contract and take out domestic building insurance will be the same. This will provide greater assurance to consumers that their building work will be covered by the correct insurance. This consumer protection mechanism will be further strengthened with new provisions that require the building surveyor to check the insurance details of the proposed builder against the builder named in the major domestic building contract.
Registration will be mandatory for companies that wish to enter into major domestic building contracts or to accept appointment as the relevant building surveyor.
To become a registered building practitioner, a company will require at least one nominee director whose personal registration authorises that person to carry out work in the class in which the company is seeking registration. In the event that a nominee director is no longer available to perform this role there will be a 30-day grace period during which the corporation will remain registered until the nominee director can be replaced.
The VBA will be given the discretion to extend the grace period and to attach conditions to any extension. This will ensure that consumers are not disadvantaged as building work will be able to continue while the company replaces the nominee director.
The nominee director of a registered corporation will be under a duty to ensure that the corporation complies with the Building Act and the building regulations.
New clear personal and financial probity grounds will be used by the VBA to decide whether an applicant is a ‘fit and proper person’ to be registered.
Transitional provisions for corporate registration will aim to ensure smooth transition into the new system. A transitional registration will last until the first of the corporation’s directors’ registrations comes up for renewal, at which time the corporation will be subject to a full assessment.
New maximum penalties for corporations have been set. Consistent with principles in the Sentencing Act 1991, these penalties for corporations are set at five times higher than those of natural persons.
The bill will replace existing ‘holding out’ offences with new offences prohibiting a person or corporation not registered in a particular class of registration from representing or implying that they are in fact registered. This is intended to provide a broader, principles-based prohibition on such misrepresentations regardless of their nature, rather than just protecting specific titles which can become outdated.
Regulation of building surveyors
Industry and consumers have long called for more flexibility in the building permit system and the appointment of a building surveyor. Under the current arrangements, building work may be delayed if a building surveyor is on leave at the time a building practitioner notifies that a mandatory inspection stage has been reached.
Corporate registration for building surveyors will provide greater flexibility in deployment of the corporate building surveyor’s personnel. If a registered corporation is appointed as a relevant building surveyor the corporation will need to designate an individual who will be responsible for carrying out the work of the building surveyor.
If the designated building surveyor goes on leave, or leaves the company, another building surveyor can be appointed as the designated building surveyor.
Notice of the change in the designated building surveyor will need to be given to the person who appointed the corporation as the relevant building surveyor as well as to the local council and the VBA.
The bill also provides that a private building surveyor, as the relevant building surveyor, will be able to refer work to another building surveyor provided that the other building surveyor and the person who appointed the original building surveyor both agree. Consistent with the requirements for corporations, the VBA and the relevant local council will have to be notified of the referral for it to be effective.
This proposal is similar to provisions in other jurisdictions.
Registration and disciplinary history to be available
Building on the earlier reforms to empower consumers through improved information on the building process, this bill includes provisions to make information on a practitioner’s registration and disciplinary history more accessible to consumers through proposed improvements to the VBA’s online Register of Building Practitioners. Better information will assist consumers to make more informed decisions about their choice of building practitioner.
Reforms to the building permit system and building permit levy
The Victorian Auditor-General’s Office found that it is difficult to ascertain whether all building permit levy due is remitted to the VBA. VAGO found that some building surveyors were retaining the building levy for working capital contributing to shortfalls in levy received by the VBA. The current monthly reporting by building surveyors to the VBA also leads to a time lag in provision of information required by the regulator to effectively regulate.
This bill introduces a new system for issuing building permits and paying the building levy. Under the new system, before the building surveyor can issue a building permit, a building permit number must be issued by the VBA. The VBA will only issue the building permit number upon receipt of certain prescribed information and the building permit levy.
The bill will repeal provisions that require building surveyors to remit the building permit levy and information to the VBA on a monthly basis, removing some of the regulatory burden on building surveyors.
The VBA must issue the building permit number within five (5) business days of receiving the required information and the levy.
New provisions will also enable the VBA to reassess the building permit levy if it becomes aware that the owner provided incorrect or misleading information to the building surveyor. A penalty levy of up to double the amount of building permit levy that should have been paid can be applied.
Reassessments of building levy and imposition of a penalty levy by the VBA will be reviewable at VCAT.
Ongoing improvements to the VBA’s online systems will facilitate compliance with these requirements and the efficient issuing of permit numbers by the VBA. Commencement of these provisions will occur only after the VBA has undertaken thorough testing of its IT systems with a broad cross-section of industry participants including building surveyors. It is for this reason that mid-2019 is the default commencement date for these provisions.
It is also expected that these improvements, together with the range of new powers for building surveyors to request additional information, will assist the VBA to collect data in relation to the actual cost of building work.
Builder named on building permit responsible for compliance
The bill proposes to require certain people to be specified on the building permit as the builder. In most cases where building work costs over $16 000, this will be a registered building practitioner (either an individual or a corporation), although it could also be an owner-builder if they are lawfully able to carry out the building work. The person specified as the builder on the building permit will be under a duty to ensure that building work complies with the act, the regulations and the building permit.
This is designed to provide a clear structure of responsibility and control over any building project and will enable the VBA and building surveyors to better target enforcement activity. The bill also includes a process for changing the name of the builder named on the building permit where the original builder’s engagement is terminated and a new builder is engaged.
New indictable offences
The recent demolition of the Carlton Inn (also known as the Corkman hotel) highlighted that the current offences in the Building Act, which provide for fines alone, are not a sufficient deterrent for people in the business of building who knowingly do the wrong thing.
For this reason the act creates indictable offences which will apply in two circumstances.
The first is where a person in the business of building carries out building work for which a building permit is required where the person knows that a building permit is required to carry out that work and that a building permit to carry out the work is not in force.
The second is where a person who is in the business of building carries out building work if the person knows that the building work is not being carried out in accordance with the act, the building regulations, or the building permit issued in relation to that work.
For these offences ‘a person in the business of building’ includes a person who is in the business of managing or arranging the carrying out of building work.
For the first time, terms of imprisonment are attached to these offences. This will make sure that non-compliance is not treated as a mere cost of doing business.
If found guilty of one of these indictable offences, the provisions of the Confiscation Act 1997 will also apply to ensure people cannot profit from their wrongdoing.
Stronger injunction power
The bill also provides stronger injunction powers.
These powers will allow an injunction to be sought against a person who has engaged or is proposing to engage in conduct that would contravene the act or orders made under the act, or a person who aids, abets, counsels or procures another person to do so. The power will be wideranging and enable a court to make any orders it considers appropriate to address the contravention or proposed contravention. These orders could, for example, restrain illegal building or demolition work; require building or protection work to be performed; require a building to be rebuilt; or require an unregistered building practitioner to cease trading.
Better regulation of building inspections
The VBA has become aware that some building surveyors may be sending unqualified people to check the building work for which they have been appointed. This is unacceptable. The bill therefore expressly limits inspections of building work under the Building Act to building surveyors, building inspectors and others who are prescribed.
The act currently requires a person in charge of building work to notify a relevant building surveyor after completion of a mandatory inspection stage. Building surveyors have told us that in practice there is poor compliance with this provision which can hamper the capacity of a building surveyor to fulfil their statutory obligations.
The bill responds to this issue and encourages improved compliance by requiring the person named as the builder on the building permit to ensure that the relevant building surveyor is notified of the mandatory inspection stage. The bill also requires a relevant building surveyor to report any failure by the builder to comply with these requirements to the VBA.
Relevant building surveyors will be required to make a record of their inspections and to produce these upon request to the VBA, a municipal building surveyor or owner.
These measures will provide greater assurance to consumers that the person who carries out an inspection of building work is qualified to do so, that inspections occur at the times required and that there is an accessible record of inspections.
Stronger entry and information-gathering powers
To enhance the ability of the VBA and local councils to be strong and effective regulators, the bill proposes to replace the current entry powers in the Building Act with broader and more effective entry and information-gathering powers.
The three main aims of reforming the entry and information-gathering powers are to:
ensure the entry and information-gathering powers effectively support both the industry regulation and public safety objectives of the Building Act;
facilitate proactive monitoring of compliance, rather than just taking a reactive approach to enforcement; and
ensure regulators can gather the evidence they need to effectively enforce the Building Act and related regulations.
The people authorised to use powers will be structured into two groups: the first group will apply to regulators such as the VBA, Energy Safe Victoria and municipal building surveyors who have power to investigate and prosecute offences and, in the case of VBA, to discipline, registered building practitioners. Accordingly, the wideranging powers to gather evidence will be targeted at these bodies reflecting they need such powers to prosecute contraventions.
The second group, relevant building surveyors, chief officers and persons they authorise will have powers that are needed when conducting inspections authorised under the act.
The bill will replace performance auditors and persons authorised to inspect building work with a single ‘VBA inspector’. VBA inspectors will be able to monitor compliance with the Building Act by conducting inspections. They will also be able to conduct investigations with a view to gathering evidence to prosecute an offence or for the VBA to undertake discipline. An existing power to require plumbers to attend inspections will be extended to include registered building practitioners and owner-builders.
Information-gathering powers will be extended to facilitate more effective monitoring of compliance with the Building Act and regulations.
Entry powers will also be reformed to allow greater entry into building sites and business premises. In line with arrangements in other states and territories, it will no longer be a requirement for regulators to give 24 hours notice of intended entry. However the government expects that all regulators (including the VBA, Energy Safe Victoria and municipal building surveyors) would adopt a policy of giving notice where they consider this appropriate.
New safeguards will be in place, particularly in relation to residences. These will require a warrant for entry to a building that is used for residential purposes unless there is an emergency or the consent of an occupier has been obtained. There will be a new power to obtain warrants to enter residential buildings or land to monitor compliance.
The emergency entry power will be able to be used in relation to residences where the safety of the public or the occupants is at risk or an emergency order applies to the property. This is intended to overcome difficulties seen following the Lacrosse fire in gaining entry to apartments to check for suitability for occupation, damage to fire safety equipment such as sprinklers and other safety issues.
There will also be record-keeping requirements and complaints processes with respect to the use of entry powers.
Clarification of the role of local government
The Victorian Auditor-General has pointed to some uncertainty concerning the role of councils in administering and enforcing the parts of the act for which they are responsible, where private building surveyors have been appointed in respect of building work within the municipality. The bill therefore amends section 212 of the act to provide that the appointment of a private building surveyor does not limit the administration and enforcement responsibilities of the local council.
This amendment is not intended to alter the fact that the manner in which a council exercises its responsibility for administration and enforcement may be affected by the appointment of a private building surveyor to building work within the municipality. For example, a municipal building surveyor, on behalf of council, might contact a private building surveyor appointed in respect of building work in the municipality, as a result of which the private building surveyor may then take the required action to ensure that the building work is brought into compliance.
Reformed building notice and building order provisions
The fire at the Lacrosse building highlighted difficulties regarding the service of emergency orders and building orders to vacate buildings in a multi-storey building which may or may not be occupied by the owners of the apartments.
The bill therefore provides that constructive service of emergency orders and building notices and orders to vacate buildings will be possible by affixing the notice or order to the building to alert occupiers of the building to the requirements.
In addition the bill provides that the owners corporation is responsible for carrying out building work under an emergency order or building order. This reflects that, under the Owners Corporations Act 2006, the owners corporation is responsible for taking out insurance on the building and is therefore likely to be better positioned to cause these works to be carried out compared to individual lot owners, particularly where there is substantial damage. The owners corporation will be able to recover costs for work on individual lots from lot owners. This also reflects the current situation for responsibility for general maintenance of a multi-storey residential building.
Occupation and use provisions of emergency orders issued by municipal building surveyors currently only last for up to 48 hours. In some circumstances this time limit is not adequate. The bill therefore provides a means by which the effect of an emergency order can be extended through the municipal building surveyor issuing a building notice within the 48-hour period.
Other amendments to improve the building regulatory system
Time limit to prosecute an offence
Currently the VBA is only able to prosecute offences within three (3) years of the certificate of final inspection or occupancy permit being issued. This meant that following the investigation into the Lacrosse building fire, the VBA was able to investigate disciplinary action but was not able commence any prosecutions against building practitioners who might have been found to have committed a breach of the act or the regulations.
The bill extends the period for bringing a prosecution to two (2) years after the date on which the commission of the alleged offence first came to the attention of the VBA, a person authorised by the local council or Energy Safe Victoria.
However proceedings will not be able to be commenced more than 10 years after the commission of the alleged offence.
Maintenance of safety services and fire exits
The Lacrosse building investigation has also highlighted that Victoria has low penalties for obstruction of fire exits and failure to maintain safety services and equipment when compared to other jurisdictions. The bill enables increased penalties under the regulations for such obstructions or failures.
Increase in maximum financial penalty by way of disciplinary sanction
As a result of the abolition of the building practitioners board, the substantial legal cost orders often made by the board will not occur under the new show-cause process administered by the VBA. The bill proposes to increase the maximum financial penalty available by way of disciplinary sanction to 150 penalty units for individuals and 750 penalty units for corporations. This change better aligns penalties with those in New South Wales and Queensland.
This bill further demonstrates the government’s commitment to deliver reforms that address longstanding flaws in the building system. It also demonstrates our commitment to respond to emerging issues that risk undermining the strength of the state’s building industry. It provides greater regulatory powers in areas where they are needed, so that regulation can be targeted and the VBA is supported to be a more effective regulator.
The reforms in the bill have been developed following extensive consultation and taking into consideration the findings and recommendations of the Victorian Auditor-General’s Office.
The bill enhances information-gathering and entry powers for regulators, clarifies the role of local government under the Building Act, makes changes to the building permit levy system and to the system for making and serving building notices and orders, provides powerful deterrents for people who do the wrong thing and makes various other improvements to the legislative framework.
These reforms together with the package of initiatives commenced through the Building Legislation Amendment (Consumer Protection) Act 2016 will achieve a clear, fair and more accountable system for registered building practitioners and consumers alike.
I commend the bill to the house.
Ms TIERNEY — I wish to advise the house of the following house amendments. The amendments will provide for indictable offences under the Building Act 1993 to be tried summarily in the Magistrates Court for both individuals and corporations; ensure the designated building surveyor or a body corporate private building surveyor can be changed after the initial designation; avoid imposing unnecessary new regulatory burdens on people applying for building permits to carry out domestic building work as information on the builder and insurance might not be known at the time of application for the building permit; clarify that only natural persons can act as municipal building surveyors; ensure architects who have certain duties under the Building Act 1993 can be disciplined administratively if they fail to comply with those duties; and ensure that transitional measures operate effectively with respect to building permits that are already on foot.
Debate adjourned for Mr DAVIS (Southern Metropolitan) on motion of Mr Ondarchie.
Debate adjourned until Thursday, 16 March.