Developers would need to prove they can afford to fix defects under proposed law


July 23, 2019 16:37:42

An Australia-first licencing scheme that would crack down on developers avoiding debts and defect bills by requiring increased transparency is being considered by the ACT Government.

Key points:

  • A licencing scheme backed by the ACT Labor conference would bring in a range of transparency measures
  • The construction union says developers are less regulated than the rest of the industry
  • The scheme would bring in measures to curb phoenixing by developers

A resolution passed by the ACT Labor conference over the weekend called for the introduction of a developer licencing scheme, which would ascribe a number of conditions to developers working in Canberra.

It would require developers to demonstrate they have the financial and operating capacity to fully complete proposed projects, including being able to address any defects that arise after construction is complete.

They would be required to disclose how developments are funded, making it more difficult for companies to go into liquidation in order to avoid debts, only to re-emerge as a new company — a practice commonly known as phoenixing.

The resolution also called for developers to be made to set up trust accounts to ensure contractors and subcontractors are still paid if a developer goes into liquidation.

The motion was brought by the CFMEU, whose ACT branch secretary, Jason O’Mara, said developers had thus far avoided the scrutiny placed on other parts of the industry.

“There’s a bit of a gap, builders are highly regulated and so are subcontractors, but developers now are taking a much more proactive role in the projects and we believe they should not miss out on being regulated,” he said.

“You take all the benefit of a project going well, but if you make choices with builders and subcontractors … if things aren’t going well you should be held accountable.”

Building quality is a hot-button issue around the country, with building ministers from all states and territories last week resolving to reform the industry with a consistent national approach.

The concerns were fuelled by high-profile incidents of poor building quality at the Opal and Mascot towers projects in Sydney.

Warning intervention could blow out costs and wait times

Earlier this year owners of the Elara Complex in Canberra’s north lost a $19 million Federal Court compensation case against the complex’s developer, after the court found they had filed their claim outside of the deadline.

The owners had been chasing compensation for repairs after the company behind the development went into administration when issues began to arise.

Steve Mann from the Urban Development Institute of Australia, a peak body for developers, said while he welcomed laws that strengthened the industry, there needed to be a balance to keep development efficient.

“We’re very happy to see that governments are focusing on this issue, we just don’t want overreactions that in fact make the end products less affordable and longer time periods to deliver,” he said.

“There’s already a lot of pressure when it comes to housing and cost of living for mums and dads. We don’t want to add to it unnecessarily.

“We just don’t want to see a sort of second layer of certification come into the process which will cause time and cost delays.”

‘Someone’s got to be responsible’

The proposal by ACT Labor would also require licensed developers to nominate a person to take responsibility for its conduct.

The motion further proposed a requirement that developers not impose unrealistic deadlines that could result in unsafe work practices or cut corners.

Mr O’Mara said that requiring developers to nominate a named representative would improve transparency.

“It just means that people can’t hide behind the corporate veil, someone’s got to be responsible,” Mr O’Mara said.

While the motion was passed by the ACT Labor conference, it is not binding on Government policy.

However ACT Building Quality Minister Gordon Ramsay said the Government was closely examining the proposal.

“The Government is currently in the early stages of examining options for a proposed developer licencing scheme in the ACT,” he said in a statement.

“We will continue our crackdown on dodgy operators in the construction sector with increased levels of enforcement and compliance activity on building sites around the Territory.

“Industry has been clearly put on notice that the Government will not tolerate building work that was not of a high standard — and neither will the community.”










First posted

July 23, 2019 16:12:01

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