Reform of the Home Building Act 1989 - Australian Institute of ...

Australian Institute of 

Architects 

Reform of the Home 

Building Act 1989 

Submission to Fair 

Trading 

23 August 2012

SUBMISSION BY 

Australian Institute of Architects – NSW Chapter 

ABN 72 000 023 012 

Tusculum, 3 Manning Street 

POTTS POINT NSW 2011 

Telephone: 02 9246 4055 

Facsimile: 02 9246 4030 

email: nsw@architecture.com.au 

PURPOSE 

 

 

 

This submission is made by the NSW Chapter of the Australian Institute of 

Architects (the Institute) to Fair Trading in response to the Reform of the 

Home Building Act 1989 Issues Paper. 

At the time of the submission the office bearers of the NSW Chapter are: 

Matthew Pullinger (President), Brian Zulaikha (Immediate Past-President), 

Joe Agius, Nigel Bell, Shaun Carter, Emili Fox, Adam Haddow, David 

Holm, Esteban Insausti, Chris Jenkins, Alex Kibble, Stuart Landrigan, 

Louise Nettleton, Peter Sarlos, David Springett. 

The Office Manager of the NSW Chapter is Roslyn Irons. This paper was 

prepared by Murray Brown, Policy & Professional Development Manager, 

Richard Barton, General Counsel and the NSW Chapter’s Practice 

Committee (chaired by Agi Sterling) for Chapter Council. 

INFORMATION 

Who is making this submission? 

The Australian Institute of Architects (the Institute) is an independent 

voluntary subscription-based member organization with approximately 

10,153 members who are bound by a Code of Conduct and Disciplinary 

Procedures. 

 

 

The Institute, incorporated in 1929, is one of the 96 member associations 

of the International Union of Architects (UIA) and is represented on the 

International Practice Commission. 

The Institute’s New South Wales Chapter has 2,959 members, of which 

1,700 are registrable architect members – representing 56% of all 

registered architects in NSW. 

Australian Institute of Architects (NSW) 

Reform of the Home Building Act 1989 

23 August 2012 

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Where does the Institute rank as a professional association? 

At 10,153 members, the RAIA represents the largest group of nonengineer 

design professionals in Australia. 

 

Other related organisations by membership size include: The Design 

Institute of Australia (DIA) - 1,500 members; the Building Designers 

Association of Australia (BDAA) - 2,200 members; the Australian Institute 

of Landscape Architects (AILA) 1,000 members; and the Australian 

Academy of Design (AAD) - 150 members. 




ii

Australian Institute 

of Architects 

Reform of the 

Home Building 

Act 1989 




1

REFORM OF THE HOME BUILDING ACT 1989 

RESPONSE TO ISSUES PAPER 

Question Topic 

Response 

Key issue 1: Home 

building contracts 

1 Compliance with the 

Building Code of 

Australia 

2 Increase the 

monetary threshold 

of the small jobs 

contract to $20,000 

3 Question 3: 

Progress payments / 

deposits 

Compliance with the minimum BCA standards to the extent that they apply through the application of 

any law, is fundamental. In addition, however, the required clause ought to state that, where the 

contract documents require a standard higher than BCA, the work must comply with the specification. 

At the least, NSW Fair Trading inspectors must be mandated in their assessment to take account of 

the standard of construction expressed in the contract documents, and not to rely on base level 

tolerances etc provided by regulation. 

The Institute agrees that this is appropriate. 

The Institute recognizes that the majority of builder/home owner projects do not provide for an 

independent contract administrator, such as a quantity surveyor or an architect, to determine the 

appropriate amount of a payment made before the building work is complete. An independent contract 

administrator, such as the architect in a suitable contract, has the role of determining the appropriate 

level of completion when money is claimed by the builder and to issue a “progress certificate” that 

triggers corresponding payment obligations on the home owner. This mechanism facilitates home 

owners only paying for what has been completed at the date of a claim for payment. This mechanism 

can, if desired, accommodate deposits paid before work commences. 




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The Institute agrees that payment at recognised milestones of completion for home owners not using a 

contract providing for independent administration of progress claims, is an appropriate way to protect 

them from overpayment, especially where a deposit is payable. However, this mechanism means that 

builders are foregoing the prompt payment which may have occurred at a monthly interval before 

completion stage is reached. Inevitably, this has an impact on the cost which is passed back to the 

home owner in the contract price. Conversely, in situations such as renovation work, staged payments 

can mean that owners are paying too much compared to the work completed by the builder, because 

the description of the stage is inappropriate for the scope of work to be performed. 

An administered contract avoids the need for this cost impact, but we appreciate that not all home 

owners are in a position to engage a contract administrator such as an architect. We therefore 

propose that, if the milestone payment system is adopted, it is not mandatory, or, is only mandated 

with an exception to apply for independently administered contracts such as those where an architect 

is engaged. This is the system adopted in other jurisdictions such as Victoria and Queensland. 

4 Termination clauses The Institute supports the mandatory inclusion of termination clauses in contracts. To provide fairness 

and balance, it is appropriate for the clause to allow for assessment by an independent assessor of 

moneys outstanding for work done, offset against the independent assessor’s determination of the 

reasonable cost of correction of defective work that would otherwise have been rectified under the 

contract, and which ought to be moneys owing. 

5 Cost-plus contracts The Institute agrees that this form of contract is ripe for difficulties because of the risk of cost blow-out 

involved. However, we accept that there are some housing projects where costs are unknown. 

Renovation, conservation or refurbishment of an existing building are the usual situations because of 

the difficulty of specifying the full scope of work at commencement. 

A cost plus contract is one way of dealing with this – although not the only one, as provisional or prime 

cost sum(s) in a fixed price contract may be sufficient to deal with the unknown factor(s). In the 

example given in the Issues Paper, the need for excavation in traditional practice would have been 

dealt with in this way, by a substantial prime or provisional cost sum. 




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Key Issue 2: 

Statutory 

warranties 

6 Definition of 

‘completion’ and 

subsequent 

purchasers. 

We also acknowledge that some home owners prefer the apparent flexibility of commencement before 

the plans and specifications are complete, along with the notion that the end cost will be lower if the 

builder is not required to load up the contract price for unknowns. We recommend that If cost plus 

contracts are to be permitted they ought to be: 

a limited to higher value wholly new homes, probably at a figure more like $750,000, or higher. 

(the limit set in Victoria at $500,000 is now many years old),and/or, 

b only be permitted in renovation, conservation or refurbishment of a home if there is a 

demonstrable aspect of the project that creates uncertainty about the scope of work to be 

costed. 

We agree that under the new definition of completion, under most contracts without independent 

contract administration, completion and practical completion are simultaneous and final payment is 

then due. In such cases, commencement of the statutory warranty period when the project can be 

used for its intended purpose and is free of major defects provides a workable basis for the original 

owner. 

However, we acknowledge the issue for the subsequent owner in that the date of completion under the 

building contract may not be readily obtainable. If the date of completion for the original owner were to 

be practical completion but a different more identifiable date for subsequent owners were adopted, the 

statutory warranty period is likely to be effectively extended, to the disadvantage of the building 

contractor. 

It is our understanding that in ordinary circumstances, the Occupation Certificate is issued reasonably 

soon after the building contract works are practically complete. The issue of the Occupation 

Certificate, which is a traceable document for subsequent owners to locate, could serve as the 

mutually acceptable trigger point for the statutory warranties without substantial disadvantage to 

contractors. 




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8 Maintenance 

schedule 

9 Owner’s 

maintenance 

obligations 

10 Definition of 

‘structural defects’ 

This requirement should apply to all strata scheme buildings. Buildings simply are not maintenancefree. 

Yes, for the same reasons as above 

We appreciate the distinction between structural and detail/aesthetic defects, but all defects arising 

from breach of the statutory warranties should be rectified. We support the proposal of the Minister for 

Fair Trading’s Home Building Advisory Council for a 2 category system similar to the Queensland 

model. 

11 Statutory warranties The Institute considers that in the ordinary course of home building, the statutory warranties are 

adequate, given that the usual warranties are applicable whether or not stated in the contract. 

12 Defences to 

statutory warranties 

Key Issue 3: 

Dispute Resolution 

13 Compel 

homeowners to 

allow licensees back 

on site to rectify 

defects 

14 Complaint 

Inspection Advices 

15 Non-compliance 

with rectification 

orders 

We are not in a position to comment on the suitability of the defences available to builders, except to 

note that it is appropriate that it continue to be a defence that the owner has insisted on a particular 

material or solution against the builder’s advice. 

Institute members are not commonly exposed to the situation where rectification orders are required, 

because architect-administered contracts almost invariably involve a defects liability period post 

practical completion, in which defective or incomplete work is to be fixed/completed before the contract 

is at an end and the final contract payment is due. However, where rectification orders are required, it 

seems only logical, and fair to contractors, that home owners ought to be compelled to allow access, 

as long as there is not a personal or property safety issue. 

Once an agreement to be reflected in the Complaint Inspection Advice is reached, or a Rectification 

Order is made instead, it seems logical that there be a requirement to both comply and to comply 

within time limits. 

We support the proposal to compel compliance with a Rectification Order, or Complaint Inspection 

Advice, as a means of achieving the outcome of rectification. 




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16 Disputes over 

$500,000 

17,18 Alternative dispute 

resolution processes 




We agree that Fair Trading should promote its services as alternatives, but note that once the amount 

in dispute becomes substantial, it is only to be expected that the parties will have legal advisers, and 

that alternative dispute resolution will have been in contemplation, under advice. 

The Institute supports alternative dispute resolution systems and their promotion within the courts. 

The Land & Environment Court is a model in this regard. It requires intending litigants to go down an 

alternative dispute resolution track that often resolves disputes before litigation. 

Key Issue 4: Owner 

Builders 

19-26 The Institute generally agrees with the views of the Home Building Advisory Panel in relation to these 

questions. 

Key Issue 5: 

Disciplinary 

Provisions 

Questions 27-30 

We agree that effective regulation is essential and support the proposals to strengthen enforcement to 

achieve this. 

Key Issue 6: Home 

warranty Insurance 

31 Comparative models The Institute has no issues with the current model in NSW being inadequate compared to other 

jurisdictions. 

32 Extended cover for 

new rectification 

work 

For the same reasons as the cover was initially required, new rectification work of significant value 

performed near the end of the period should be under extended cover. 

33 Searchable public 

register 

A searchable public register would appear to assist as it would avoid both fraud and loss of certificate 

issues. 

34 Cover cap levels No comment 

35 Renaming of 

scheme 

We agree it should be renamed as it causes confusion because it is not consistent with the ordinary 

understanding of insurance. 

36 Exemptions from 

home warranty 

This exemption needs to dovetail with SEPP65 provisions for multi-residential buildings so that the use 

of the SEPP is the trigger for the exemption. This would avoid different definitions around exemptions 

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insurance 

37 Clarification of 

definition of ‘storey’ 

for the purposes of 

determining the high 

rise exemption 

for multi-storey residential developments in the industry and at the same time distinguish the issue of 

new work from refurbishment. In the Institute’s view, refurbishment involving renovation and 

maintenance which happens to be in a 3 or more storey building, but is in possession of the owner, 

ought to have the same safety net protection as renovation or refurbishment ‘at ground level’. 

In our view, use of the SEPP criteria would trigger the exemption. The definition in the SEPP is: 

‘residential flat building means a building that comprises or includes: 

(a) 3 or more storeys (not including levels below ground level provided for car parking or storage, or 

both, that protrude less than 1.2 metres above ground level), and 

(b) 4 or more self-contained dwellings (whether or not the building includes uses for other purposes, 

such as shops)’ 

38 Definition of storey No comment 

39 Repeal of s.92B No comment 

40 Eligibility criteria Eligibility should generally be determined by the insurer according to risk. However, risk management 

should not cross into detriment to others operating in the industry, as has been the case with private 

insurers in the past. Specifically, private insurers were deterring some contractors from tendering for, 

or working on, architect designed/administered projects under what the Institute believes is a 

misconception. 

41 Definition of ‘Cannot be found in Australia’ is a more logical statutory definition. 

“disappeared” 

42 Top up insurance No comment 




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