QBCC Dispute Resolution Explained

Thursday November 30th, 2017

The Queensland Building and Construction Commission (“QBCC”) is the regulator of the building and construction industry in Queensland. The QBCC has a raft of different functions, but two of those are providing remedies to consumers for defective building work (“Dispute Resolution Function”) and the administration of the Statutory Insurance Scheme (“SIS”).

These functions are interrelated, but different. For a body corporate for a community titles scheme (“BC”), there is one very important difference between the two functions. Assistance under the SIS is not available in respect of:
1.Building work performed to commercial or industrial premises; or
2.Building work performed to premises that are more than 3 storeys (excluding storeys which main use is car parking, 50% or more).

In contrast, the Dispute Resolution Function is available to all consumers who are concerned about the quality of building work completed by a builder, so long as the QBCC’s powers are invoked under the Queensland Building and Construction Commission Act 1991 (Qld) (“QBCC Act”). Therefore, even if a BC is not entitled to assistance under the SIS, it can still access the Dispute Resolution Function. Where a BC is experiencing difficulties having defective building work rectified by a builder, the Dispute Resolution Function can be a useful tool for resolving the dispute cost effectively.

Dispute Resolution Function

Where a consumer is concerned about building work completed by a building contractor, the consumer can make a complaint to the QBCC. While the QBCC has a broad discretion to investigate complaints, the QBCC is generally required to comply with its rectification of building work policy (which can be located here: http://www.qbcc.qld.gov.au/sites/default/files/Rectification%20Of%20Building%20Work%20Policy.pdf), but can also depart from the policy if extenuating circumstances exist.

In brief, the policy provides:

3. The defective building work complained of by the consumer, must be considered “building work” for the purposes of the QBCC Act which defines “building work” to mean:

building work means—

(a)the erection or construction of a building; or

(b)the renovation, alteration, extension, improvement or repair of a building; or

(c)the provision of lighting, heating, ventilation, airconditioning, water supply, sewerage or drainage in connection with a building; or

(e) any site work (including the construction of retaining structures) related to work of a kind referred to above; or

(f) the preparation of plans or specifications for the performance of building work; or

(fa )contract administration carried out by a person in relation to the construction of a building designed by the person; or

(g) fire protection work; or

(h) carrying out site testing and classification in preparation for the erection or construction of a building on the site; or

(i) carrying out a completed building inspection; or

(j) the inspection or investigation of a building, and the provision of advice or a report, for the following—

(i) termite management systems for the building;

(ii) termite infestation in the building;

but does not include work of a kind excluded by regulation from the ambit of this definition.

The work excluded by regulation is contained in schedule 1AA of the Queensland Building and Construction Commission Regulation 2003 (Qld) (“QBCC Regulation”), which provides an exhaustive list of work which is not considered to be “building work” for the purposes of the QBCC
•Therefore, if the work in issue is contained within schedule 1AA, the QBCC will be unable to assist because it has no power to do so under the QBCC Act.

4. Defective building work means:

Defective building work means building work that is faulty or unsatisfactory, and includes, for example, work that:
1. does not comply with the Building Act 1975, Building Code of Australia or an applicable Australian Standard
2. involves the use of a manufactured product, and that product has been used, constructed or installed in a way that does not comply with the product manufacturer’s instructions.

5. Defective building work is split into two subcategories, namely structural defective building work and non-structural defective building work which are defined as follows:

Structural defective building work means defective building work (other than residential construction work causing subsidence) that is faulty or unsatisfactory because it does one or more of the following:
•adversely affects the structural performance of a building;
•adversely affects the health or safety of persons residing in or occupying a building;
•adversely affects the functional use of a building;
•allows water penetration into a building.

Non-structural defective building work means defective building work (other than structural defective building work or residential construction work causing subsidence) that is faulty or unsatisfactory because:
• it does not meet a reasonable standard of construction or finish expected of a competent holder of a contractor’s licence of the relevant class; or
• it has caused a settling in period defect in a new building.

6. A consumer concerned by the quality of building work should complain to the QBCC promptly, namely:
◦For structural defective building work, within 6 years and 6 months of the building work being completed by the builder and within 12 months of the defect becoming apparent; and
◦For non-structural defective building work, within 12 months of the building work being completed by the builder and within 12 months of the defect becoming apparent.


The QBCC generally has the discretion to investigate complaints that are made outside of these timeframes in extenuating circumstances. However, if the building work to which the defect relates was completed more than 6 years and 6 months prior to the complaint being made, the QBCC has no power to assist the consumer unless it obtains the approval of the Queensland Civil and Administrative Tribunal (“Tribunal”).

7. When a consumer makes a complaint, the QBCC will ask if it have attempted to resolve the issue with the builder directly. As soon as a consumer becomes aware of any issues, it should make the builder aware of it (preferably in writing) and give the builder the opportunity to rectify the defect. That said, if the builder is delaying rectifying the issue and the timeframe for making a complaint is running out, it is best to make the complaint so the consumer cannot be criticised for any delay in doing so. The QBCC can elect to investigate the complaint despite a consumer’s delay in making the complaint (so long as 6 years and 6 months have not elapsed since the building work was completed) where there is evidence that the reason for the consumer’s delay is because the builder told the consumer it would rectify the issues and then failed to do so.

Once the complaint is made, the QBCC will schedule a time to inspect the issues in the presence of both the consumer and the builder. At that time, the QBCC will decide whether to issue a direction to rectify the defect to the builder. A direction to rectify amounts to a formal demand to the builder for it to rectify the

defects identified by the QBCC. If the QBCC decides to direct the builder to rectify the issues, the builder will usually be given a period of 28 days to comply (although this period can be extended). If the consumer or the builder is unsatisfied with the QBCC’s decision, both parties can apply to the Tribunal to administratively review the QBCC’s decision.

If the builder fails to comply with a direction to rectify, the QBCC will ordinarily then consider whether the consumer is entitled to have the defects rectified pursuant to the SIS.

SIS

The SIS provides relief to consumers in respect of defective building work. It also provides protection in respect of incomplete building work and other issues. The SIS’s application to incomplete building work and other issues is outside the scope of this article.

A consumer’s claim for indemnity under the SIS will arise in one of two ways, namely:
1.Where a complaint has been made to the QBCC pursuant to its Dispute Resolution Function and a direction to rectify was issued to the builder but not complied with; or
2.Where a consumer identifies defective building work, but since the completion of the build, the builder has become insolvent, ceased trading or otherwise has ceased to exist (for example, if the builder is an individual, because of death).

In contrast to QBCC’s Dispute Resolution Function, the QBCC does not have any discretion to allow indemnity under the SIS unless the consumer is entitled to assistance. In determining whether the consumer is entitled to assistance, the QBCC will have regard to the terms of cover which apply to the SIS. The terms of cover are similar to the terms which apply to any other policy of insurance and are contained in schedule 2C of the QBCC Regulation which can be found here: (https://www.legislation.qld.gov.au/view/whole/html/inforce/current/sl-2003-0173).

The terms of cover which apply to the SIS are different to the requirements for complaints about defective building work. In brief, the terms of cover provide:
1.To be entitled to assistance, the issues experienced by the consumer fall within the definition of “primary insurable work” which is defined as follows:

Primary insurable work is any of the following building work if carried out by a licensed contractor and the insurable value of the work is more than the regulated amount—

(a) the erection or construction of a residence or related roofed building;

(b) building work within the building envelope of a residence or related roofed building;

(c) building work for anything attached or connected to a residence or related roofed building that requires building or plumbing approval;

(d) the erection, construction or installation of a swimming pool within the meaning of the Building Act 1975, schedule 2;

(e) other building work prescribed by regulation.

(2) However, the following is not primary insurable work, but may be associated insurable work—

(a) fencing;

(b) landscaping;

(c) electrical work under the Electrical Safety Act 2002;

(d) installation, renovation, repair or replacement of any of the following—

(i) air conditioning;

(ii) driveways or paths;

(iii) units for heating water regardless of the source of energy for heating, and including units for heating swimming pools;

(iv) refrigeration;

(v) roller shades and shutter screens;

(vi) security doors and grills;

(vii) solar power units and associated electrical components;

(viii) water tanks that are not part of a primary water supply for a residence or related roofed building;

(e) other work prescribed by regulation.

Because the definition of “primary insurable work” differs from “building work”, there will be some instances where an item of defective building work will be eligible for the QBCC’s assistance pursuant to the Dispute Resolution Function, but will not be covered by the SIS.

2. A claim must be made about the defective “primary insurable work” within certain timeframes. If the consumer fails to comply with the timeframes, the consumer is not entitled to assistance under the SIS. Generally speaking, complaints made to the QBCC pursuant to the Dispute Resolution Function are considered sufficient for a “claim”. However, it is prudent to confirm in writing with the QBCC that any complaint that is made pursuant to the Dispute Resolution Function will be considered a claim pursuant to the SIS should the complaint be unable to be resolved with the builder. Claims for assistance under the SIS must be made as follows:
◦For structural defective building work, within 6 years and 6 months of the insurance cover commencing, or if the building work isn’t completed within 6 months of when the insurance cover commences then an additional 6 months is added so that a claim must be made within 7 years of insurance cover commencing, and within 3 months of the consumer becoming aware (or should reasonably have become aware) of the defect; and
◦For non-structural defective building work, within 7 months of day the building work is completed or substantially completed.


3. Assistance will not be given to a consumer where the consumer has unreasonably refused to allow the builder the opportunity to rectify the issues.

4. Similarly with the Dispute Resolution Function, the QBCC will usually require consumers to have notified the builder of the substance of the claim and have made attempts to resolve the issue with the builder directly before a claim will be allowed under the SIS. As soon as a consumer becomes aware of any issues, it should make the builder aware of it (preferably in writing) and give the builder the opportunity to rectify the defect. However, if the builder is delaying rectifying the issue and the timeframe for making a claim is running out, it is advisable for the consumer to make the claim so the consumer’s rights under the SIS are not lost by reason of any delay. This is especially important in respect of claims under the SIS because the QBCC does not have the discretion to waive strict compliance with the timeframes stipulated under the terms of cover.

Once the claim is made, if it has not already done so, the QBCC will schedule a time to inspect the issues to determine whether the issues are in fact defective building work which is covered by the SIS. If the issues are covered by the SIS, the QBCC will then prepare a scope of work which outlines the work necessary to rectify the defective building work covered by the SIS. The QBCC will then arrange for various builders to provide quotations upon the scope of works and select a builder to perform the rectification work.

While the QBCC essentially project manages the completion of the rectification work, it will however require the consumer to enter into a building contract with the rectifying builder. The QBCC will still oversee the rectification work and make payments to the rectifying builder on behalf of the consumer as is appropriate up to the maximum assistance available to the consumer under the SIS. The maximum assistance available does vary depending on the consumer’s circumstances (for example, whether additional cover was purchased by the consumer when the insurance was taken out and whether any other limitations of liability contained in the terms of cover apply to the consumer’s situation), but is usually $200,000 per living unit. In respect of BCs, a living unit will usually be one lot within the BC.

Where there is defective building work within the common property of a BC which is covered by the SIS, a claim can be made by the BC under the SIS. The maximum amount of assistance available for defective building work to common property will depend upon the number of living units within the BC. Its important

to note that there is no additional assistance for defective building work to common property provided under the SIS and any assistance provided to a BC for defective building work to common property will be deducted from the lot owners’ entitlement under the SIS. Equally, if one lot owner individually made a claim which exhausts its entitlement, there would be no funds available for that lot owner under the SIS to “contribute” towards rectifying defective building work within the common property. For this reason, it is prudent to request that lot owners notify the BC prior to making an individual claim under the SIS so a co-ordinated approach can be taken.

Similar to decisions made pursuant to the Dispute Resolution Function, if the consumer or the builder is unsatisfied with the QBCC’s decision about a party’s entitlement under the SIS, both parties can apply to the Tribunal to administratively review the QBCC’s decision.

Conclusion

While the functions discussed above can be very useful, they can also be complex and difficult to navigate. Of most importance is ensuring that the QBCC’s timeframes (whether they be in respect of the Dispute Resolution Function or the SIS) are complied with. If a BC is unsure its rights or how best to navigate these issues, it is important to obtain legal advice at an early stage so the full benefits of the QBCC’s functions can be realised by the BC.

This article has been contributed by Nerida Whelan from Clarke Kann Lawyers.