Chapter 14 AUSTRALIAN CAPITAL TERRITORY
In the ACT the primary pieces of legislation dealing with the regulation and licensing of the building industry are:
- the Building Act 2004 (ACT) (Building Act); and
- the Construction Occupations (Licensing) Act 2004 (ACT) (COA Act).
Who can obtain a licence?
The COA Act sets out licensing requirements for construction practitioners who provide, have provided or propose to provide a construction service. A construction service is the doing or supervision of work in a construction occupation which includes builder, building assessor or surveyor, drainer, electrician, gasfitter and plumber.
A person, corporation or partnership may apply to be licensed in a construction occupation (including as a builder) or in a class of construction occupations). Corporations and partnerships must have a suitably licensed individual appointed as their nominee for the purpose of supervising the work of the corporation or partnership.
The application must be accompanied by information as to the applicant’s fitness, ability and capacity to complete any work to be authorised by the licence. A licensee must have obtained appropriate certificates and have the necessary experience. The precise requirements depend on the class of licence sought by the builder.
A licence is granted subject to the conditions contained in the Construction Occupations (Licensing) Regulation 2004 (ACT) and any other conditions imposed by the construction occupations registrar (registrar).
Can a licence be suspended?
A licence will be automatically suspended for a period of three months in the following circumstances (unless the cause of the suspension ceases to exist):
- where the licensee is bankrupt or insolvent;
- where the licence is held by a corporation and the corporation is wound up or is found guilty of offences relating to fraud, dishonesty or violence punishable by imprisonment for at least 1 year;
- where the licence is held by a corporation or partnership, there is no appointed nominee or the appointed nominee ceases to be an approved nominee for the construction occupation or occupation class; and
- where the licensee fails to maintain the required insurance cover for the construction occupation or occupation class.
Where a licence is automatically suspended and the cause of the suspension still exists at the end of the three month period, the registrar may cancel the licence.
The registrar may, by notification to the licensee, suspend a licence if the licensee engages in conduct that is likely to present a risk of death or injury to person, significant harm to the environment or significant damage to property.
What disciplinary action can be taken against a licensee?
There are a number of grounds under which the registrar can take disciplinary action against a licensee. These include:
- where the licensee (or a director, partner, nominee or employee of the licensee) contravenes the Construction Occupations (Licensing) Act 2004 (ACT) or the Criminal Code 2002 ACT;
- where the licensee knowingly or recklessly gives a person information that is false or misleading in a material particular;
- the licensee commits an offence involving fraud, dishonesty or violence punishable by imprisonment for at least one year;
- where the licensee becomes insolvent, enters administration or a scheme of company arrangement, or has a receiver or manager appointed;
- where the licensee is a corporation or partnership and has no nominee;
- where the licence has been automatically suspended and the cause of that suspension still exists; and
- where the licensee ceases to become eligible to hold a licence.
Where a disciplinary ground exists the registrar may take one or more of the following actions against the licensee.
- apply to the ACT Civil and Administrative Tribunal (ACAT) for an occupational discipline order;
- reprimand the licensee;
- order the licensee undertake further training; or
- impose conditions on the licence.
If ACAT makes an occupational discipline order, ACAT may:
- order the licensee to pay a financial penalty;
- suspend the licensee’s licence;
- impose conditions on the licensee’s licence; or
- cancel the licensee’s licence.
The registrar may also make a rectification order if the registrar is satisfied that a licensee has provided a construction service that is not in accordance with the COA Act.
What is an offence under the COA Act?
The following are offences under the COA Act punishable by fines:
- pretending to be licensed when unlicensed ;
- not having a licenced nominee whilst advertising to conduct a service;
- advertising without providing details of the builder and their licence (including the licensee’s name, licence number and ACN if applicable);
- providing a service while unlicensed;
- recklessly engaging an employee or subcontractor who does not have a licence; or
- contravening a condition of the licence.
The ACT also has a system of demerit points. If a builder incurs 15 demerit points in a three year period the registrar may suspend or cancel the licence or take other appropriate action. Demerit points will be accumulated where a builder has engaged in conduct which attracts the jurisdiction of the ACAT. The number of demerit points depends on the nature of the contravening conduct.
The registrar must issue a warning notice if the licensee has incurred 10 demit points in the previous 3 years.
The Building Act implies various statutory warranties regarding the manner in which the work will be performed, and the materials that will be used. These warranties are implied into:
- every contract for the sale of a residential building (even where the builder is not a party to the contract); and
- every contract to carry out residential building work to which the builder is a party.
The statutory warranties under the Building Act are that:
- the work has been or will be carried out in accordance with the Building Act;
- the work has been or will be carried out in a proper and skilful way and in accordance with the approved plans;
- that good and proper materials for the work have been or will be used;
- where the work has not been completed, and the contract does not state a date or a period for completion, that the work will be carried out with reasonable promptness; and
- if the owner of the land expressly tells the builder what the particular purpose of the work is, or the result that they expect to achieve and the owner is relying on the builder’s skill and judgment, then the work and any material must be reasonably fit for the purpose and reasonably expected to achieve that result.
Statutory warranties apply to building work in relation to a ‘residential building’ being a building intended mainly for private residential use, unless it is building work:
- carried out by or for the Territory, the Commonwealth or a Territory or Commonwealth entity;
- in respect of which an owner-builder licence has been granted; or
- the cost of which is less that $12,000.
The statutory warranties expire six years after the work is completed for work of a structural nature and two years after the work is completed for work of a non-structural nature. A claim for breach of statutory warranties may be made at any time prior to the limitation period for the claim expiring. It is important to note that in certain circumstances, a breach may occur at any time during the warranty period, allowing an owner to make a claim for the relevant breach up to ten years after the work has been completed.
These circumstances can include:
- the sale of the residential building by the original owner within the warranty period (as the statutory warranties will be implied into the subsequent contract for sale); and
- further building works (ie rectification works) undertaken by the builder during the warranty period that do not meet the standard required by the statutory warranties.
Koundouris v The Owners – Units Plan No 1917  ACTCA 36
- Mr Koundouris was employed as a licensed builder by Koundouris Projects to construct a residential unit complex in Canberra. The units were sold to individual owners off the plan.
- The complex had numerous defects, which were discovered after completion of the sales of the units. Mr Koundouris attempted unsuccessfully to rectify the defects following which the owners did so at their own cost.
- The owners commenced proceedings to recover the costs of the repair Mr Koundouris’ work. Mr Koundouris argued that he had no liability as the owners did not commence proceedings until after the expiration of the warranty period. The situation was further complicated by the fact many of the original owners had sold their units to third parties.
- The owners successfully recovered the costs of the rectification works due to a breach by Mr Koundouris of his statutory warranties.
- The court ruled that the additional repair work undertaken by Mr Koundouris, which failed to meet the standard required by the Building Act, constituted a further breach of his statutory warranties. The owners commenced proceedings for the further breach within the relevant limitation period.
- Each of the succeeding owners (who had bought from original owners) were able to claim against Mr Koundouris due to statutory warranties being implied in their own purchase contracts. In this case, the relevant breach occurred on settlement of each of the purchase contracts, meaning that all subsequent owners also commenced proceedings within the relevant limitation period.
Residential building insurance
When is residential building insurance required?
Specific insurance requirements apply to building work in respect of a building intended mainly for private residential use if the building has no more than 3 storeys at any point (excluding any storey used exclusively for parking). These do not apply to residential building work specifically excluded from the statutory warranties.
Before a commencement notice will be issued the Building Act requires a builder to ensure a compliant insurance policy or fidelity fund certificate is obtained for the work.
A fidelity fund certificate must be issued by an approved fidelity fund scheme in accordance with the Building Act.
What does residential building insurance cover?
For insurance to comply with the Building Act it must:
- be issued by an authorised insurer (or approved fidelity fund);
- provide for a minimum insurance cover of $85,000 for each dwelling;
- insure the owner and the owner’s successor in title;
- have the premium paid in full;
- cover the owner against the risk of being unable to claim due to the insolvency, disappearance or death of the builder;
- cover the owner for breach of the builder’s statutory warranties; and
- have a maximum premium of $500.
The Building Act provides that an insurance policy or fidelity fund certificate issued for residential building work may exclude claims other than where the builder is insolvent, dead or has disappeared. Therefore, in any other circumstance a consumer will be required to make a claim against the builder itself through the court system.
Where the principal is a developer, the insurance will comply if it insures the principal’s/developer’s successors in title, even though it does not insure the principal/developer.
When must a claim be made?
The insurance policy must apply for a minimum period of 5 years after a commencement notice is issued.
A claim must be made within 90 days of the claimant becoming aware of the existence of the grounds for the claim.
Disputes relating to administrative issues under the COA Act and the Building Act, such as a decision not to issue a certificate of occupancy or to refuse a construction occupations licence, may be brought before ACAT. General disputes in relation to breach of contract or negligence may be resolved in a court of appropriate jurisdiction.
Disputes in respect of a defective building or construction work or the negligence of a certifier under the Building Act must be commenced within 10 years after the certifier provides a certificate of completion.