Report 12

Regulation of Builders and Building Surveyors

Introduction and Overview

Introduction

This report provides an assessment of how well the Building Commission (the Commission) regulates Western Australia’s (WA) residential building industry. Our focus was on the regulation of WA’s 15,000 registered builders and building surveyors (surveyors) and how compliance with building legislation and codes is monitored and enforced.

The audit did not assess the effectiveness of reforms in building industry regulation introduced in 2011 but we did review the status of their implementation.

Overview

The building industry carried out more than $14 billion in work in 2014-15[1], making it a major contributor to WA’s economy. The value of the residential component was about $8.3 billion[2]. The safety and amenity of all buildings – industrial, commercial and residential – has a direct impact on the entire WA community.

The WA Government through the Home Building Contracts Act 1991 has nearly $1 billion of exposure[3] to the industry due to its role as reinsurer of home indemnity insurers. The Act requires a builder to obtain home indemnity insurance (HII) in the name of the owner before accepting payment or commencing work. In 2010, private insurers started withdrawing from HII in WA, prompting the WA government to step in as a reinsurer of HII to ensure WA owners continued to have protection from financial loss.

The State now reinsures 100% of each new HII policy. In the 2015-16 budget, the State estimated its liability for outstanding HII claims to be about $24.5 million. Effective regulation of the industry assists in managing this exposure.

WA’s building industry has been regulated since the 1930s, mainly by various regulatory boards for different building occupations. However, this began to change in 2009 when the Commission was set up as a division of the Department of Commerce (Commerce), to achieve a more integrated approach. Two years later the approach was formalised in 4 new building laws (see Appendix 1).

Under the new laws, the Commission became the principal regulator of builders and surveyors. It also became responsible for implementing various reforms.

Builders and surveyors involved with home building works valued at $20,000 or more must be licensed as either a contractor or a practitioner or both. Contractors can contract to build homes but only practitioners can build them. Licences need renewing every 3 years.

The Commission issues a practitioner licence after assessing if an applicant meets the qualifications, experience and character criteria. Applicants for a contractor licence must meet financial capacity criteria, nominate a supervisor and show financial and management capacity. Surveyor practitioners must meet the same criteria as builders but surveyor contractors need only meet the financial capacity criterion.

Interstate persons holding equivalent licences can also apply for a WA licence. The Commonwealth Mutual Recognition Act 1992 entitles an applicant registered in any other state or territory to register for an equivalent licence in WA.

The Building Act 2011 requires builders to comply with applicable standards. The main standard is the Building Code of Australia (the Code).

The Commission can issue warnings, penalties or suspend builders and surveyors for statutory breaches or disciplinary matters. It can also refer complex or contentious matters to the State Administrative Tribunal (SAT).

The Commission also receives and deals with complaints about the work of builders and surveyors. It rejects complaints that lack substance and investigates the rest. A valid complaint results in the Commission either ordering the work be remedied or the payment of costs or it refers the matter to SAT for a decision.

Similar processes apply when unregistered builders provide poor services or carry out work valued in excess of $20,000.

The Commission also has powers to check compliance with building laws and relevant codes through proactive audits. These include occupation-based audits that look at how well individual builders and surveyors comply with administrative and technical requirements. These audits are done on a regular basis. The Commission also undertakes general audits. These are one-off audits to check quality or compliance of a specific aspect of construction across a broad selection of builders or surveyors. All audits involve site inspections by Commission inspectors who use pre-determined criteria to assess compliance.

When the Commission finds faulty work performed without a building permit or by an unregistered builder, it can issue a notice requiring rectification. Otherwise, it refers any faulty work to the local government (LG) that approved the building plans and issued the building permit. LGs can also inspect buildings, investigate complaints, and issue orders if a registered builder does not carry out works as per the building plans.

[1] Derived from Australian Bureau of Statistics data, Catalogue 8752, Table 17.

[2] Derived from Australian Bureau of Statistics data, Catalogue 8752, Table 26.

[3] Department of Commerce: Funding the Second Phase of Building and Plumbing Regulation Reform – January 2015, page 1.

 
Page last updated: June 22, 2016

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