Building defects: New laws to target company directors

Company directors would be personally liable for financial penalties and rectifying building defects under proposed new legislation designed to crack down on dodgy builders and give property buyers greater protections in the ACT.

Building Quality Improvement Minister Gordon Ramsay outlined this and other proposals when addressing the building quality inquiry at the Legislative assembly on Wednesday (4 September).

Mr Ramsay had already flagged legislation targeting developers, including licensing, which the property industry had rejected as a distraction from a national response to the Shergold Weir report on building quality and unlikely to solve the issue of defects.

Under the new legislation, the regulator will be given more teeth, with building inspectors to have the power to direct builders and land owners to fix work that is non-compliant, and Access Canberra able to publish information about stop notices.

Rectification orders would be enforced by the courts and the Registrar would be able to issue a rectification order if made aware of a relevant breach of construction legislation within six months before the 10-year period the order can be issued expires.

Mr Ramsay said the Government’s approach was to expand rectification and other relevant powers to allow orders to be issued to people closely associated with an insolvent or ‘disappeared’ corporation.

“We have all seen instances where building corporations have produced substandard buildings, and when legitimately called to account, have wound up leaving the cost of rectification to the owners,” he told the inquiry.

Mr Ramsay renewed his calls to the Federal Government to act on the so-called ‘phoenixing’ of companies in the building and construction sector.

He said the legislation would also give industry and consumers more information and tools to progress rectification work if a building did not meet the standards that Canberrans expect.

Twenty-nine of the 43 reforms from the Government’s Building and Regulatory Review had been implemented with the rest to be completed over the next year, including consultation on licensing and accountability measures for people designing and building, as well as people contracting for off-the-plan sales.

The Government would also be looking at alternative dispute resolution models, insurance and other protections for clients and building owners, and security of payment issues.

“As I have said on multiple occasions, if you’re a builder or developer in the ACT and you do the right thing, we welcome you in our construction sector, however if you do the wrong thing, we will seek to remove you from the industry,” Mr Ramsay said.

Mr Ramsay said he expected significant pushback from industry but the Government could not allow industry to reform industry.

“Let me say here clearly on the record, part of my role is to provide the tools for the regulator to be a tough cop on the beat in relation to improving building quality in the territory,” he said.

Mr Ramsay has already overseen a number of reforms designed to improve building quality, and a crackdown on building sites across the ACT.

ACT Property Council chief executive Adina Cirson said the industry supported stronger compliance and enforcement but cautioned the Government on going it alone on proposals like this and the licensing issue.

“I don’t think it’s helpful for the Government to be bringing forward new issues every week to try and do this when they’ve got the Shergold Weir report to implement,” she said.'”Lets work together rather than wheeling out these new ideas every week.”

There needed to be a nationally coordinated approach to building quality reform, Ms Cirson said.

She said the ACT, being a small agile jurisdiction, could be a reform leader but it should progress these issues through the Australian Building and Construction Board that had been tasked with implementing Shergold Weir as agreed by state and territory ministers.

“We would urge the Government to continue that process and keep the focus on working at a national level to ensure consistency across all jurisdictions,” Ms Cirson said.

Master Builders ACT CEO Michael Hopkins said the MBA welcomed the Government’s commitment to improve building quality by holding directors of licensed companies to account.

“We look forward to working with government to review the draft laws when they are released,” he said.

“A key concern of industry will be making sure any attempt to deal with rogue operators does not impose an unnecessary burden or additional costs on the many company directors that are operating professional businesses.”