Chapter 14 QUEENSLAND
In Queensland the primary pieces of legislation regulating the building industry are the:
- Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act)
- Queensland Building and Construction Commission Regulation 2018 (Qld) (QBCC Regulation);
- Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act); and
- Building Industry Fairness (Security of Payment) Regulation 2018 (Qld) (BIF Regulation).
All builders must be licensed under the QBCC Act whether they perform domestic building work or commercial building work. The QBCC Act and the Regulations list 72 classes of licence, which may be issued in four categories: contractor, nominee supervisor, site supervisor and fire protection. A licence may be issued authorising a licensee to carry out all classes of building work, or be restricted to one or more of the classes of building work.
Who is entitled to a licence?
An applicant must:
- be fit and proper to hold a licence;
- have qualifications and experience in relation to a licence of the relevant class;
- meet the relevant financial requirements;
- be able to lawfully work in Queensland;
- pay the appropriate annual licence fee;
- not fall into one of the exclusions under the QBCC Act;
- not be disqualified or banned from holding a licence; and
- not have an unpaid judgment debt for an amount recoverable by the Queensland Building and Construction Commission (QBCC) in relation to the statutory insurance scheme (see below).
Where a licensee fails to meet one of these requirements, the QBCC may cancel or suspend their licence. The decision to suspend or cancel a licence is reviewable by the Queensland Civil and Administrative Tribunal (QCAT).
Who must have a licence?
All persons who ‘carry out’, ‘undertake,’ or ’cause’ building work (including building work services) to be carried out are required to hold a licence under the QBCC Act (except if they perform building work excluded from the ambit of the Act by Regulation). ‘Building work services’ includes management, advisory, administrative or supervisory services. The definitions are intentionally broad and are designed to require all persons involved in building to hold a licence.
Financial requirements for a contractor’s licence
With some exceptions, most contractors’ licences require the holders to satisfy the financial requirements under the Queensland Building and Construction Commission (Minimum Financial Requirements) Regulation 2018 (Qld) (MFR Regulation).
A contractor’s licence is defined in the QBCC Act as one which may be issued authorising the licensee to carry out all classes or specific classes of building work.
The holder of a contractor’s licence must provide to the QBCC its financial information for each year. The extent of the financial information (and other requirements) required to be given depends on the category the licence holder is classified under.
Holders of category SC1 and SC2 licences are required to provide a declaration about their revenue and net tangible assets (NTA). Category 1, 2 and 3 licence holders are required to provide their internal management accounts. Category 4, 5, 6 and 7 licence holders are required to provide signed financial statements.
Penalties apply for failure to comply with the financial reporting obligations under the MFR Regulation.
Applicants for contractor’s licences are required to provide certain information with their application to show compliance with the financial requirements of the MFR Regulation.
Consequences of doing work without a licence
An unlicensed person who carries out building work acts unlawfully and is subject to a penalty.
Further, a person who carries out building work without a licence of the appropriate class:
- is not entitled to any monetary or other consideration for doing so (although that person could still claim reasonable remuneration limited to the amount paid by the person in supplying materials and engaging third party labour); and
- is not entitled to utilise the BIF Act.
Commercial building contracts
Part 4A of the QBCC Act regulates building contracts other than domestic building contracts.
- requires all building contracts to be in writing;
- contains provisions regulating giving directions;
- sets out limits for retention amounts and securities for contracts and subcontracts;
- sets out requirements for notification before exercising set off rights;
- regulates the suspension of works;
imposes penalty interest rates for late progress payments;
- makes payment provisions void if they provide for progress payments later than 15 business days after submission of a payment claim for construction contracts and later than 25 days for subcontracts; and
- contains special provisions for construction management trade contracts and subcontracts and commercial building contracts.
Penalties for breaches of specific provisions of Part 4A are set out in the relevant sections.
Domestic building contracts
Domestic building work is defined as:
- the erection or construction of a detached dwelling;
- the renovation, alteration, extension, improvement or repair of a home;
- removal or re-siting work for a detached dwelling; or
- the installation of a kit home on a building site.
A detached dwelling is a single detached dwelling or duplex. However, the Court of Appeal in Queensland has held that the singular includes the plural with the consequence that consumer protection provisions apply to contracts for the construction of multiple houses.
Domestic building contracts are regulated under schedule 1B of the QBCC Act.
There are two levels of regulated contract:
- level 1 where the contract price is between $3,300 and $20,000
- level 2 where the contract price is $20,000 or more.
The building contractor must ensure that a level 2 contract:
- is in written form dated and signed by or on behalf of the parties;
- contains a description of the works and includes all plans,
- specifications and approvals;
- states the names of the parties and licence number of the builder;
- sets out the statutory warranties that apply (see Statutory warranties below);
- specifies dates, including the date for commencement and completion;
- includes the price, or how the price will be determined, and a warning in a prominent position on the first page of the contract schedule as to how the price may change;
- states in a prominent position on the first page of the contract schedule whether the contract price is fixed (or, if not fixed, the method of calculating the contract price); and
- contains a conspicuous notice informing the building owner of the right to withdraw from the contract.
In addition to including the specific terms listed above, the building contractor must also provide:
- the consumer building guide (before the owner signs);
- a readily legible signed copy of the contract including any plans and specifications to the building owner (within 5 days after entering into a contract);
- a commencement notice signed by the contractor to the building owner (within 10 business days of starting work) stating the date the work started and the date for practical completion;
- a copy of each certificate of inspection issued by the building certifier as soon as practicable after receiving the certificate;
- details of delays affecting time estimates; and
- any relevant foundation data (information which may adversely affect the footings or slab).
Cooling off period
Schedule 1B provides for a cooling-off period, which gives the consumer the option to withdraw from the contract within five days of receipt of the signed contract or of receipt of the consumer building guide, except where legal advice has been obtained or where the parties have previously entered into a similar contract.
Consequences of non-compliance with schedule 1B of the QBCC Act
Monetary penalties apply for a failure to comply with many of the requirements of schedule 1B of the QBCC Act.
The following warranties are implied into every contract for domestic building work:
- that all materials supplied will be good and suitable for the purpose for which they are used;
- that all materials supplied will be new (unless otherwise stated in the contract);
- that the work will comply with all relevant laws and legal requirements;
- that the work will be carried out in an appropriate and skilful way and with reasonable care and skill;
- that once the work is completed, the detached dwelling or home will be suitable for occupation;
- that the work will be carried out in accordance with any plans or specifications (as the case may be);
- that any provisional sum has been calculated with reasonable care and skill, having regard to all the information reasonably available when the contract is entered into; and
- that the work will be carried out with reasonable diligence, if the contract is a cost plus contract and does not have a stated completion date or period.
Warranties cannot be excluded from a contract for domestic building work. Any provision of an agreement that seeks to exclude a warranty is void. The original consumer and subsequent building owners can enforce the statutory warranties.
The warranty period for a regulated contract is:
- for a breach that results in a structural defect, six years; or
- in any other case, 1 year.
The warranty period starts on completion of the work, or if the work is not completed:
- the date of termination – if terminated;
- the date on which work ceased – if not terminated; or
- the date the contract was entered into – if the contract is not terminated and work was not started.
If the breach of a statutory warranty becomes apparent within 6 months of the end of the warranty period, the relevant party may start proceedings a further 6 months after the end of the warranty period.
Part 5 of the QBCC Act sets up a compulsory statutory insurance scheme known as the Queensland Home Warranty Scheme (Scheme). The Scheme requires all builders carrying out residential construction work directly for a home owner with a value of over $3,300 to arrange for appropriate home warranty insurance to cover the work for the benefit of the consumer and subsequent owners of the work.
‘Residential construction work’ is defined in detail in the QBCC Act and the QBCC Regulation and includes construction of a new home as well as renovations or extensions.
The scheme provides protection against:
- non-completion of the work covered by the contract;
- defective construction;
- subsidence or settlement of insured work; and
- acts of vandalism or forcible removal and fire, storm or tempest.
The insurance is effective for 6 years and 6 months from the date the contract is signed or the date of payment of the insurance premium or the date of commencement of construction (whichever is the earlier). The statutory policy (the terms of which have varied over time) sets strict time limits for notification of claims.
The QBCC provides consumers with assistance in resolution of disputes with licensed building contractors.
The QBCC performs a disciplinary function and may prosecute builders (licensed or unlicensed) in either the Magistrates Court or QCAT.
Domestic building disputes may be resolved in a Court of appropriate jurisdiction or QCAT. The Commercial Arbitration Act 2013 (Qld) does not apply to domestic building disputes.
Project Bank Accounts – before 1 March 2021
Chapter 2 of the BIF Act mandates the establishment of Project Bank Accounts (PBAs) for certain building contracts where:
- the principal is either (i) the State or (ii) a State authority that has decided a PBA is to be established for the contract;
- more than 50% of the contract price is for building work;
- the contract price is between $1 million and $10 million; and
- the building contract is not a subcontract for another building contract.
Under the current regime, the head contractor must open three trust accounts:
- a general trust account;
- a retention trust account; and
- a disputed funds trust account,
into which it must make payment in accordance with its subcontracts and the Act before retaining its own margin.
Penalties apply for failure to open and operate these trust accounts in accordance with the BIF Act. Head contractors also have notice obligations, including to the principal regarding the opening, amendment and closure of trust accounts and to its subcontractors regarding the applicability of the PBA regime before entry into a subcontract to which the Act applies.
Amendments to the BIF Act will streamline the PBA framework from 1 March 2021. These amendments will require only one trust account for each eligible contract, a single retention trust account for cash retentions held across eligible projects and no ‘disputed trust account’.
The new framework will give the QBCC a greater role in monitoring compliance. Currently, a principal has oversight over all payments made to and from a PBA. The new framework will remove the principal’s viewing rights in response to industry feedback that this type of oversight is inappropriate for private sector principals. Instead, the oversight functions and powers of the QBCC will be increased, including the ability to audit trust accounts.
The new framework will be phased in gradually to all eligible building contracts valued at $1 million or more. From 1 March 2021 the new framework will apply to State Government eligible building contracts valued between $1 million and $10 million (which already use PBAs).
The new framework will be further rolled out as follows:
- 1 July 2021: State Government and Hospital and Health Services eligible building contracts valued at $1 million or more;
- 1 January 2022: private sector, local government, statutory authorities’ and government owned corporations’ eligible building contracts valued at $10 million or more;
- 1 July 2022: private sector, local government, statutory authorities’ and government owned corporations’ eligible building contracts valued at $3 million or more; and
- 1 January 2023: all eligible building contracts valued at $1 million or more.
Notice requirement for calling on security
Section 67 J of the QBCC Act creates a statutory obligation for a contracting party under a building contract to which the QBCC Act applies, to notify within 28 days of becoming aware (or the point at which it ought reasonably to have become aware), of its right to obtain the amount owed before it is able to have recourse to security held under a relevant contract.
- This provision does not apply where:
- work has been taken out of the hands of the party that provided the security or retention amount;
- the contract has been terminated; or
- the security or retention amount is to be used to make a payment into court to satisfy a notice of claim of charge under the BIF Act (see last paragraph).