[+] Developers in Crosshairs in Defect Liability Shake Up

Developers in the Australian capital could be liable for building defects as early as next year if the ACT Legislative Assembly follows through with developer regulation legislation. It would be the first state or territory in the country to hold developers legally accountable for defects, which have historically been the responsibility of the builders. The government is finalising its review of developer licensing and regulation, a recommendation from its 2020 Inquiry into Building Quality. An ACT government spokesperson confirmed the legislation on developer licensing and regulation is due to be introduced to the Legislative Assembly before the end of the year. “Canberrans should be confident that when they engage with a developer, the developer will be competent, transparent and act ethically,” the spokesperson says. “The ACT government’s examination of the role of developers in the building and construction industry aims to implement measures to improve accountability, protect consumers and sub‐contractors, and provide consumers with greater information about developments and the developers behind them.” Uncomfortable truth The government’s proposed regulatory changes are a reflection of the increasing involvement of developers in decision making during the construction phase of a development. The proposed legislation is targeting four key areas—accountability and transparency, ethical behaviour and work practices, project capacity and capability, and building quality and safety. The Urban Developer understands a licensing scheme is being proposed, which would aim to bring developers into the regulatory chain of accountability for building works. ▲ The ACT is a hive of development, its fourth largest economic driver. It is unclear whether this will be a positive or negative licensing scheme as the government was considering both options this year. “Negative licensing schemes operate to address quality and safety matters after the fact, they are not proactive regulation,” a legislation discussion paper says. “Negative licensing schemes, unlike positive licensing schemes, do not have an initial ‘screening process’ for determining whether one is suitable to carry out a specific occupation or occupational activity.” Industry and community consultation this year indicated strong support for accountability and transparency, while the licensing scheme was not well supported within the industry. The building and construction industry is the ACT’s fourth largest industry, contributing about $3.64 billion to the economy and creating almost 7 per cent of jobs in the territory. Interstate ecosystem Queensland is the only jurisdiction to have enacted a licensing scheme for developers but this legislation was repealed in 2014 through the introduction of additional licensing exemptions. A Developer Review Panel was set up by the Queensland Minister for Energy, Renewables and Hydrogen/Minister for Public Works and Procurement. Its final report was tabled in parliament this year with five key recommendations, one of which was to establish a developer registration framework. In NSW, the Building Commission oversees development and is empowered to issue developers with sanctions, prohibition orders, stop-work orders and building rectification orders. It has also adopted a developer rating system to help inform off-the-plan purchasers. ▲ NSW Building Commissioner David Chandler has been instrumental in addressing building defects in the state. If the ACT pursues an extension of warranties to developers, similar to the NSW scheme, developers could be liable for the compensation of residential building defects. Similar to the NSW Design and Building Practitioners Act there would a statutory duty of care on builders who carry out the building work, those who supervise, co-ordinate, project manage or have substantive control over the program of work. ACT property developers may need to seek advice on their building contracts to clearly define the extent of their role in construction, which Moulis Legal lawyer Ben Game said could also become legally hazardous for a developer’s directors or other officeholders to hold positions of influence on the builder. ACT pitches ‘best regulation in the country’ Speaking at an Australian Apartment Advocacy event, Weir Legal and Consulting director Bronwyn Weir said the Australian Capital Territory was due to create the most comprehensive developer regulation in the country, while NSW’s Building Commission had been influential in this space. “ACT, small as it is, is on the verge of creating the best developer regulation in the country,” Weir said. ▲ Weir Legal and Consulting’s Bronwyn Weir says the ACT’s proposed developer regulation will be Australia’s best. IMAGE: Australian Apartment Advocacy “[We need] increased oversight, more inspections and greater levels of registration of practitioners and accountability. “New South Wales is the only state where developers are responsible for the statutory warranties of apartments. “But now in the rest of the country, it’s starting to happen.” And it’s something that apartment owners are crying out for, according to Australian Apartment Advocacy chief executive Samantha Reece. “We do research every two years and the 2023 research actually found that 82 per cent of the 2000 apartment owners who responded want to hold the developer more accountable if the building goes bust and there are defects,” Reece says. While change is afoot in the ACT, Weir said there is “lots of opportunities for improving the national regulation landscape”. You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Developers in Crosshairs in Defect Liability Shake Up

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