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CLAUSE NOTES
Residential Building Work Contracts and Dispute Resolution Bill 2015
Clause 1: Short title
Sets out the name of the proposed Act.
Clause 2: Commencement
The Act is to commence on proclamation, to enable administrative
processes to be developed for implementation of this Act and for
other related legislation that is part of the Government’s Building
Legislation Framework Review package.
Clause 3: Act binds the Crown
Requires the Crown to comply in the same way as everybody else in
the community.
Clause 4: Definitions
Interpretation of the terms used in the Act. Some of the key terms
include:
“building contractor” – the person performing the work
“owner” – a person who is the beneficiary of the work
“date of practical completion” – the date at which the building
work is completed to the agreed standard
“defects document” – a document list and minor omissions in
residential building work
“variation” – an agreed change to the original contract
“variation document” – a document setting out the agreed
change
Clause 5: Meaning of residential building
Defines types of residential buildings to which this Act applies, including
detached dwellings, conjoined dwellings and associated building work
such as sheds and carports.
Clause 6: Meaning of residential building work
Defines the types of residential building work to which this Act applies,
including fire systems, plumbing systems and gas supply systems.
Residential building work is taken to include any prefabrication of
components manufactured off site. So if the owner purchases a kit
home, they are still covered under this Act.
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The Act includes residential improvements including driveways, fences,
retaining walls and landscaping.
Clause 7: Meaning of provisional sum
The building contractor’s estimate of the cost of the work.
Clause 8: Certain contracts taken to be one contract
If several separate building contracts are made between the same
parties relating to the same work, that could have been entered into as
one contract, then they are to be treated as one contract. This is to
prevent the splitting up of contracts so that each will fall outside the
scope of this Act.
Clause 9: Application of Act
This Act applies only to work on Residential Buildings, and Residential
Building Work, costing the owner $20,000 or more. The cost of the
building work includes the cost of labour and materials used.
Demolition work, with no new building work, is excluded from the
application of this Act.
Clause 10: Exemptions from application of Act
The regulations made under the Act may provide that certain types of
building work are excluded from the application of the Act, or from
particular provisions of it.
Clause 11: Functions and powers of Director
Details the general functions of the Director, including giving advice,
investigations, facilitation of mediation, reviewing the operation of the
Act and reporting to the Minister.
Clause 12 Delegation
The Director may delegate his or her powers or functions under the
Act, except for the power of delegation.
Clause 13: Contracts must be in writing
Contracts between the owner and the building contractor for the
performance of residential building work must be in writing, or if verbal,
are put into writing within 5 business days after being made.
Clause 14: General contents of contracts
Provides the mandatory details that residential building contracts must
contain, including that they be in legible English, and provide the names
of the parties. They must include a contract price, or a method for
calculating the contract price, specify the date of practical completion,
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or a method for calculating it, and include a checklist and building
consumer guide.
The Director may specify other items which must be included.
Clause 15: Contracts must be signed
Contracts are to be signed by the building contractor and the owner.
Clause 16: Copy of contract for owner
The building contractor is to provide a signed copy of the contract to
the owner, with a copy of the Residential Building Consumer Guide,
within 5 business days of entering the contract.
Clause 17: Variations must be in writing
Variations are additions or omissions from the signed contract agreed
by the parties. They include changes to materials used or the scope of
work performed under a contract. Variations are commonly the cause
of cost overruns and building disputes.
All variations are to be put in writing before the varied work
commences on site, unless it is not reasonably practicable to do so.
Clause 18: General contents of variation document
Variations of building contracts now require the observance of certain
formal requirements, including that they be put into writing, recording
of the reasons for the variation, the effects on the completion date, the
revised costs of the contracted work, and subsequent revision of the
scheduled progress payments.
Clause 19: Variation document must be signed
After a variation is made, the building contractor is to take all
reasonable steps to ensure that the variation document is signed by the
owner.
Clause 20: Copy of variation document for owner
Within 5 working days of an agreement for making a variation, the
building contractor must give a copy of the variation document to the
owner.
Clause 21: Where variation requires consent by building surveyor or authorisation
to be obtained
A proposed variation to a residential building contract may materially
affect the work permitted by approved plans. In that situation the
variation is also to be approved by the relevant building surveyor (to
ensure that the varied work is compliant with the National
Construction Code) and the council permit authority (to ensure that
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the variation work conforms to planning or building permits that may
have already been granted for that work).
Clause 22: Implied warranties
Certain mandatory warranties are implied by law into every residential
building work contract to which this Act applies, and are given by the
building contractor to benefit the owner. Even if these warranties
were not specifically mentioned in a contract agreed between the
parties, they still apply as being “implied” by law as rights given by
Parliament.
Clause 23: Suitability of the materials used
Materials used must be suitable for their intended purpose; and new
unless otherwise agreed.
Clause 24: Compliance with legal requirements
The building contractor is to comply with all relevant laws codes and
standards, including the Building Act 2000, and the National
Construction Code.
Clause 25: Standard of work and the exercise of care and skill
The building contractor will use appropriate skill and care in the
performance of the contracted work.
Clause 26: Implied warranties
Certain statutory warranties may only apply to specific types of
contracts.
Clause 27: Adherence to the agreed plans and specifications
If plans and specifications form part of the contract they must be
complied with.
Clause 28: Suitability of the residential building for occupation
If the residential building work is on the habitable parts of a house or
unit, they must be suitable for occupation.
Clause 29: Carrying out work with reasonable diligence
The building contractor warrants that work will be completed on the
agreed or estimated time.
Clause 30: Calculation of the provisional sums and prime cost items
If a provisional sum or prime cost item is used, the calculation must be
reasonable. This cannot be used as a way to “under-estimate” a job
and later increase the cost.
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Clause 31: Succession to statutory warranties
When an owner (who was a party to a building work contract) sells
their residential building, the new owner (purchaser) can enforce any of
the statutory warranties, up until they expire 6 years after the practical
completion date. This right is given to a new owner, despite there not
being a building contract between the building contractor and the new
owner. This right extends to those who buy from owner builders, or
from “speculative” builders who buy and sell land or buildings.
Clause 32: Proceedings for breach of statutory warranty
An owner has a period of six years from the date of the practical
completion of the building work, to commence proceedings to enforce
those warranties. That may include adjudication under Part 10 of the
Act or starting court proceedings.
Clause 33: Right of owner to withdraw from contract in cooling-off period
The Act gives an owner a right to withdraw from a residential building
work contract. They have 5 business days after the receipt from the
building contractor of a signed copy of the contract with a copy of the
Residential Building Consumer Guide. That period is referred to as the
“cooling off” period.
Clause 34: Restrictions affecting right of withdrawal in cooling-off period
Despite the provision of a “cooling off” period, the owner may not
withdraw from their contract in certain circumstances:
a) The parties had entered a prior residential building work contract
and the terms for both contracts are substantially the same and
refer to the same building or land; or
b) The owner has obtained legal advice from a practicing legal
practitioner regarding that building work contract before signing
it.
Clause 35: Right of owner to withdraw from contract if cooling-off warning not
given
The owner has a right to withdraw from a contract if the contract they
signed did not have with it the Residential Building Consumer Guide,
informing them of their rights to withdraw during the “cooling off”
period.
Clause 36: Withdrawal procedure
Outlines the procedures that an owner is to follow to withdraw from a
contract, including giving a notice of withdrawal to the building
contractor.
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Clause 37: Rights and obligations of parties following withdrawal in cooling-off
period
Deals with the effect of withdrawals from a contract where there have
been sums pre-paid to the building contractor. Generally, an owner
withdrawing from the contract is not then liable to the builder in any
way and a pre-paid amount must be refunded. The building contractor
can retain an amount for covering their out of pocket expenses actually
incurred before the owner withdrew, plus the nominal sum of $100.
Clause 38: Rights of building contractor following withdrawal for failure to give
warning
If the building contractor did not notify the owner of there being a
“cooling off” period, and the owner thereby withdrew from the
contract, the builder is entitled to receive a reasonable amount for the
contracted building services up to the date of the owner’s withdrawal.
Clause 39: Building contractor must give owner copy of residential building
consumer guide
A building contractor must give to an owner a copy of the Residential
Building Consumer Guide before signing the contract or commencing
any residential building work.
Clause 40: Building contractor to give commencement notice
The building contractor is to notify the owner of the date work was
started, and the estimated date of completion.
Clause 41: Deposits
Sets out the permissible percentage of the contract price that can be
requested as a deposit.
Clause 42: Progress payments
Parties may negotiate progress payments, but the building contractor
may only demand a payment in proportion to the amount of work
actually performed at that time.
Clause 43: Building contractor to give notice of practical completion
The building contractor is to notify the owner and the building
surveyor (if one was engaged by the owner), of the date the work was
completed.
Clause 44: Correction of minor defects and omissions
Outlines a process for dealing with minor defects or omissions that the
owner claims on or after completion day.
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Clause 45: Interpretation of Part 9
Definitions of certain terms used in Part 9, Dispute Resolution.
Clause 46: Application of Part
This Part does not affect the rights of the parties to use other methods
to resolve residential building disputes, including adjudication in Part 10
of the Act.
Clause 47: Lodging of notice of dispute
Provides that either the owner, or the building contractor, may lodge a
notice of dispute with the Director of Building Control, in relation to a
residential building work contract. A notice of dispute is to specify the
grounds of the dispute. The person lodging that notice of dispute is to
serve a copy on the other party to the contract.
Clause 48: Acceptance of notice of dispute lodged with Director
The Director must accept or reject the notice of dispute within 10
business days. Grounds for rejection include that there were no
reasonable attempts to resolve the dispute, no substantive grounds for
the claim, the claim is frivolous or vexatious, or proceedings relating to
the matter in dispute have commenced under Part 10 of this Act, or
under another Act.
Clause 49: Director may require information to be provided
By service of a notice on a person the Director may seek additional
relevant information from the parties to the contract or other persons.
Clause 50: Establishment of mediation panel
If the Director accepts a dispute, he/ she then has two business days to
establish a Mediation Panel to consider the dispute. The Panel may
consist of one or more persons whom the director considers has
suitable qualifications or experience to assist in mediation of residential
building contract disputes. The Director facilitates this mediation
process but is not a party to it.
Clause 51: Director may join parties to a dispute
The Director may decide to join other parties to the mediation, where
he/ she believes that they ought to be a party to a dispute.
Clause 52: Panel to mediate dispute
The function of mediation is to encourage the parties to negotiate to
reach a settlement. This is a role for the independent Mediation Panel.
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Clause 53: Director may issue practice directions
The Director may prepare directions for the guidance of the Mediation
Panel in performing its functions, for example to take into account a
Guide to Standards and Tolerances as a reference resource.
Clause 54: Where parties reach settlement within relevant period
If the Director accepts the settlement, the settlement is binding and
may be enforced in a court of law.
Even if parties reach a settlement of their dispute, the Director might
refuse to approve it if it was not entered into in good faith, was not a
genuine attempt by parties to settle, or was the result of
unconscionable conduct by a party.
Clause 55: Where parties fail to settle dispute within relevant period
Parties to a dispute have a maximum of 20 business days after the
establishment of the Mediation Panel to reach a settlement. If they
cannot agree by that time, mediation will be terminated. Parties then
need to consider other options to resolve the matters in dispute.
Clause 56: Use of evidence obtained in the course of mediation
The purpose of mediation is to encourage parties to settle disputes and
the information disclosed to the Director or the Mediation Panel may
not be used in proceedings before a court, tribunal or other body,
including matters regarding practitioner conduct and licensing.
Clause 57: Interpretation of Part 10
Introduces definitions that apply to the adjudication of residential
building disputes.
A specific definition of owner is included here to extend the right to
apply for adjudication to any subsequent owner of the residential
building work.
Clause 58: When work taken to not be satisfactorily completed
Explains what is meant by “not satisfactorily completed”. This included
work that is incomplete, or has not been completed to the standard
required under the contract, or breaches of statutory warranties.
Clause 59: Application of Part
This Part does not affect the rights of the parties to use other methods
to resolve residential building disputes, including mediation in Part 9 of
the Act.
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Clause 60: Work-completion claims
An owner may serve a work-completion claim on the building
contractor, specifying the work to be completed, or rectified and the
date by which it should be completed.
Clause 61: Contents of work-completion claims
Work completion claims must be in writing, addressed to the
contractor and contain other specified information identifying the
nature of the claim and the date that the work is required to be
completed by.
Clause 62: Time limit for making work-completion claims
Work completion claims cannot be served more than 12 months after
any work under the contract was last performed, unless a longer
period is specified in the contract.
Clause 63: Application for adjudication of work-completion claim
If a contractor has not satisfactorily completed the work identified in a
work-completion claim, the owner may apply to the Director for an
adjudication application in relation to the claim. This must be made
within 20 business days of the completion date specified in the work-
completion claim.
The adjudication application must be in writing and contain the details
of the incomplete or unsatisfactory work that was referred to in the
work completion claim.
There is a fee for lodgement of this application.
A copy of the adjudication application must be served on the building
contractor.
Clause 64: Respondent may respond to application
The respondent may lodge a response, in writing, with the Director,
within 10 business days after being served, and also provide a copy to
the applicant.
Clause 65: Director to determine whether to accept or reject application
The Director must accept or reject the application within 10 days of it
being served on the respondent.
The Director may consult with both parties and take any other actions
he or she thinks fit to assist in making the decision.
The Director may reject the application if no work-completion claim
has been served, the time to complete a work-completion claim has
not expired, or the application is frivolous, vexatious or without
substance.
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The Director may also reject the application if there has been no
reasonable attempt to resolve the matter, or if it would be more
appropriately dealt with by mediation under Part 9 of this Act. The
Director must reject the application if proceedings for the same matter
in dispute have commenced before a court or under the Building and
Construction Industry Security of Payment Act 2009.
Clause 66: Withdrawal of application
An applicant may withdraw an application at any time before an
adjudication decision has been made by serving a notice on the
Director and the respondent.
Clause 67: Director may, on request of party, arrange for inspection of work
Once the Director has accepted an application, he or she may – at the
request of either party – arrange an inspection of the disputed work by
a suitably qualified person.
Clause 68: Conduct of inspection
Parties must provide reasonable access to the relevant building site and
will be jointly and severally liable for the inspection fees.
The inspector must provide a written report.
Clause 69: Time to be given to enable consideration of inspection report
Following an inspection, the applicant must notify the Director within
20 business days, or a longer time agreed with the Director, of their
intention whether to proceed with their adjudication application.
If the applicant does not contact the Director, the application will be
taken to have been withdrawn.
Clause 70: Establishment of pool of experts
The Director will consult with industry bodies and representatives to
establish a pool of experts who can adjudicate on matters in dispute
under this Act. This will be an external, independent group and will not
include those State Service employees or officers who work under the
supervision of the Director of Building Control.
Clause 71: Appointment of expert panel
The Director can appoint an expert panel from the pool of experts
available.
The panel will have an uneven number of members to prevent
deadlock on decisions.
Members will be chosen who have expertise relevant to the particular
dispute.
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Members must not have been part of a mediation process on the same
matter.
The Director must not direct or attempt to influence the expert panel
in the performance of its functions.
Clause 72: Conduct of adjudication proceedings
The expert panel is to make a decision as soon as practicable after
being appointed.
It may inform itself in any manner it considers appropriate. Proceedings
are intended to be informal and non-technical.
Clause 73: Expert panel may join parties to adjudication
An expert panel may join other parties to the adjudication proceedings,
with the approval of the Director.
Clause 74: Determination of adjudication application
After determining a claim, an expert panel may decide to issue a work-
completion order, or refuse to issue a work-completion order.
The determination will be in writing and will list the reasons for the
determination.
An expert panel may also award costs against a party where their claim
was unfounded, vexatious or frivolous.
Clause 75: Work-completion orders
To give effect to its adjudication determination, an expert panel may
issue a work-completion order for work to be completed, to rectify
defective work or order a party to pay a sum of money to enable the
work to be completed by another.
Clause 76: Other orders or declarations
An expert panel may issue a declaration that the work is complete, and
where appropriate may issue orders for the reimbursement of fees for
obtaining tests or the advice of expert consultants.
Clause 77: Orders relating to fees and expenses of expert panel
An expert panel is entitled to remuneration for its services and
expenses and it can make orders that bind both parties to the
adjudication
All fees are payable to the Director who will then arrange payment to
the panel.
The Director may consider hardship as the ground for waiving or
reducing the fees.
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Clause 78: Compliance with orders
A person who is served with an adjudication order must comply with it
by the date specified.
Failure of a contractor, practitioner or building practitioner to comply
with an adjudication order is improper conduct and the expert panel
may provide a report of that failure to the Administrator of
Occupational Licensing.
If a person fails to comply with an order to pay a sum of money, that
sum of money will become a debt due to the other party.
Clause 79: Avoidance of requirements of Act
Any agreements that try to avoid or circumvent the requirements of
this Act are void. This is to prevent one party attempting to induce the
other party to sign away their legal rights.
Clause 80: Director may approve residential building consumer guides
A Residential Building Consumer Guide is a document prepared by the
Director of Building Control to inform prospective consumers
(owners) of their rights and obligations before they sign a residential
building contract. In particular the Guide is to contain information on
the operation of this Act. It will be published as a brochure, available
to building contractors to give to clients, and also available on the
Justice Department’s website.
Building contractors are required by the Act to make this Guide
available to owners.
Clause 81: Guide to Standards and Tolerances
A guide, or guides, approved by the Director, will allow the parties or
panel members to determine whether a matter in dispute is actually a
building defect.
Clause 82: Remuneration of panel members
Panel members will be paid the remuneration as determined by the
Minister.
Clause 83: Members of panels disqualified if interested
Members of the panel must be independent. They are disqualified from
being on the panel if they have a personal interest in the matter, and
any decision made by that member will be void. No fees are payable to
a disqualified member.
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Clause 84: Liability of Director and members of panels
Standard form of personal liability immunity clause. The Director and
panel members do not incur personal liability for performance of
functions under this Act.
Clause 85: Fees payable to Fund
Fees received by the Director are paid into the Building Administration
Fund established under the Building Act 2000.
Clause 86: Regulation-making power
This clause provides that the Governor-in-Council may make any
regulations necessary for this Act.
Clause 87: Administration of this Act
Provides that until an Order under the Administrative Arrangements Act
1990 is made to the contrary, the administration of the Act is assigned
to the Treasurer. The Department responsible to that Minister in
relation to the administration of this Act is the Department of Justice.
Clause 88: Savings and transitional
Saves the rights of a residential home owner to enforce the statutory
warranties granted by the Housing Indemnity Act 1992 before its repeal
by this Act.
Clause 89: Principal Act
Amends the Judicial Review Act 2000.
Clause 90: Schedule 1 amended (Decisions to which Act does not apply)
Decisions made by the Director of Building Control under section 48
of this Act are not subject to the Judicial Review Act 2000.
This only affects mediation proceedings in Part 9 and it does not affect
an adjudication decision made by an expert panel under Part 10.
Clause 91: Legislation repealed
Repeals the legislation specified in Schedule 1 – the Housing Indemnity
Act 1992.
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