Amendments to domestic building work in Queensland

Transcription

1 14 July 2015 CDI Lawyers Update Construction & Infrastructure Amendments to domestic building work in Queensland On 1 July 2015, an important change came into effect on the regulation of domestic building work in Queensland, namely, the repeal of the Domestic Building Contracts Act 2000 (Qld) (DBCA), with domestic building work now to be under the purview of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCCA). With this move comes a number of amendments to the regulation of domestic building work in Queensland, including a new distinction between a level 1 regulated contract and a level 2 regulated contract. To assist contractors and other parties understand and be across these changes, we have prepared a guide to these amendments, and what this means for you. 1 The key amendments The changes to domestic building work regulation are part of a rolling series of amendments brought in by the Queensland Building and Construction Commission and Other Legislation Amendment Act 2014 (Qld) (the Amendment Act). This current tranche of amendments, as in force on 1 July 2015, brings in the following key changes to domestic building contracts: the repeal of the Domestic Building Contracts Act 2000 (Qld) (DBCA); an amendment to the definition of domestic building work ; the introduction of level 1 regulated contracts and level 2 regulated contracts ; a requirement for the building contractor to provide the owner with a commencement notice ; the replacement of the former information statement with the new consumer building guide ; a modification to the maximum amount for deposits; a modification to cooling-off rights; a modifications to how variations are managed; a modification to the statutory warranties; a new regime regulating how extensions of time may be claimed; and certain exclusions from regulation. We have provided a brief synopsis of each of these key amendments below. Repeal of the Domestic Building Contracts Act 2000 (Qld) As noted above, by operation of the Amendment Act, as of 1 July 2015, the DBCA is repealed and domestic building work is now regulated under Schedule 1B of the QBCCA. Definition of domestic building work Formerly, the DBCA defined domestic building work to cover: the erection or construction of a detached dwelling; the renovation, alteration, extension, improvement or repair of a home; and 1 References in footnotes to the Queensland Building and Construction Commission Act 1991 (Qld) are references to this Act as in force on 1 July 2015.

2 removal or resisting work for a detached dwelling. Under the QBCCA, domestic building work is now expanded to include the installation of a kit home at a building site. 2 Relevantly, kit home is to include, but not be limited to, a detached dwelling, garage or carport. 3 Level 1 and Level 2 regulated contracts The DBCA applied to regulated contracts, defined as being domestic building contracts above $3,300. The Amendment Act divides regulated contracts into level 1 regulated contracts and level 2 regulated contracts, depending on the contract price. Under this new scheme, a level 1 regulated contract is a domestic building contract above $3,300, but below an amount set by regulation (the level 2 amount ). A level 2 regulated contract is a domestic building contract equal to or above this threshold. What this threshold will be has not yet been defined. However, using the current DBCA as a guide, the level 2 amount may be set at $20, Different requirements of form will now apply depending on whether a domestic building contract is a level 1 or level 2 regulated contract. 5 Both level 1 and level 2 contracts must be in a written form, dated and signed by or on behalf of the parties, 6 and contain: 7 the names of all of the parties; the building contractor s licence number; a description of the work; any plans or specifications for the work; the contract price or method of calculation, including the building contractor s reasonable estimate; the date for practical completion or how it is to be determined; and a conspicuous notice of the building owner s rights of withdrawal. In addition, a level 2 regulated contract, must: 8 if the contract price is fixed, contain a statement of the contract price on a prominent position of the first page of the contract schedule; if the contract price is not fixed, contain a warning to that effect and a brief explanation of the effect of the provision allowing such change, both of which must be in a prominent position on the first page of the contract schedule; 9 and not state the name of any person as a building contractor, or any person that may reasonably be mistaken to be the building contractor, unless that person is the building contractor under the contract. Commencement Notice A new requirement introduced by the Amendment Act is an obligation on the building contractor under a level 2 regulated contract to give a signed copy of a commencement notice to the owner within 10 business days of commencing work on site, stating the date of commencement and the date for practical completion Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 4(1). 3 Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, clause 60, section 4(10). 4 See Domestic Building Contracts Act 2000 (Qld), section 64 (deposits). 5 Additional requirements may also be fixed by regulation: Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, sections 13(4), 14(9). 6 Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, sections 13(2), 14(2). 7 Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, sections 13(3), 14(3). 8 Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 14(4)-(8). 9 Cf Domestic Building Contracts Act 2000 (Qld), section Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 16(2).

3 Consumer building guide A further requirement also applying only to level 2 regulated contracts is for the building contractor to provide the owner with a copy of the consumer building guide. 11 This guide is published by the Queensland Building and Construction Commission. 12 A copy of the consumer building guide may be found here. Unlike the former information statement which could have been provided up to 5 business days after the contract is entered into, the consumer building guide must be given to the building owner before he or she signs the contract. 13 A failure to provide this guide is an offence will have implications for the cooling-off period under the contract. Cooling-off periods As under the DBCA, a cooling-off period of five business days applies from receipt of the signed contract. 14 However, the former cooling-off period of five business days from receipt of the former information statement, now runs from receipt of the consumer building guide (for a level 2 regulated contract). 15 As above, the consumer building guide must be provided before execution of a level 2 regulated contract so, where this is done, the cooling-off period will be five business days. Similarly with the DBCA, if five business days have passed from the date of the contract, and the building owner has not received a copy of the signed contract and, for level 2 regulated contracts, the consumer building guide, the owner may withdraw from the contract. 16 The right of a building owner to withdraw within 7 days of becoming aware that no cooling-off warning was given in the contract, is no longer be present under the QBCCA. 17 Deposits As a result of the Amendment Act, deposits are now regulated depending on whether a contract is a level 1 regulated contract, which may have a deposit of up to 10% of the contract price, or a level 2 regulated contract, which may have a deposit of up to 5% of the contract price. 18 This broadly reflects the position under the DBCA which tied the maximum amount for deposits to whether a contract was above or below a set amount of $20, However, an exception to the above applies if the value of the off-site work under a regulated contract is more than 50% of the contract price, in which case, the contract may have a maximum deposit of 20% of the contract price. 20 Variations Formerly, there was a requirement under the DBCA that all variations are signed by the building contractor, who must also take all reasonable steps to ensure that the document is signed by the owner. 21 Such requirement for signatures are not part of the new regime. However, as under the DBCA, a building contractor must not carry out work the subject of the variation before the owner agrees to the variation in writing Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 18(1), (2). 12 Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 46(1). 13 Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 18(2). 14 Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 35(1); cf Domestic Building Contracts Act 2000 (Qld), section 72(2). 15 Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 35(2). 16 Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 35(3); cf Domestic Building Contracts Act 2000 (Qld), section 72(3). 17 See Domestic Building Contracts Act 2000 (Qld), sections 74, Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 33(1). 19 Domestic Building Contracts Act 2000 (Qld), section Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 33(1)(c). 21 Domestic Building Contracts Act 2000 (Qld), section Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 40(5); cf Domestic Building Contracts Act 2000 (Qld), section 79(3), (4).

4 Warranties As with the DBCA, the new Schedule 1B contains a number of statutory warranties for domestic building work, which are in substantially the same form. The Amendment Act has, however, has made some changes to proceedings for breach of one of the statutory warranties. In a proceeding for a breach of a statutory warranty, the former time to bring proceedings from 6 years and 6 months has been reduced to 6 years, but with the proviso that, if the defect becomes apparent within the last 6 months of the warranty period, proceedings may be started within a further 6 months from the end of the warranty period. 23 In addition and significantly the warranty period for defects which are non-structural has been reduced to only one year. 24 Other changes to proceedings for breach of warranties include an express provision that a person may enforce the same warranty for separate deficiencies 25 and a defence that the building contractor was not reasonably given access to rectify the deficiencies. 26 Extensions of Time The Amendment Act introduces a new regime on how extensions of time under a regulated contract may be claimed. A building contractor will only be able to claim an extension of time (EOT) if: the cause of the delay was not reasonably foreseeable (and beyond the reasonable control of the contractor), or was caused by the owner, or caused by a valid variation; the claim is made to the owner in writing within 10 business days of the contractor becoming aware of the cause and extent of the delay (or from when the contractor reasonably so ought to have become aware); and the owner approves the claim in writing. 27 A building contractor will now be required to give a signed copy of any approved claim for an EOT within 5 business days of approval to the building owner. 28 It is an offence under the QBCCA for a contractor to seek to rely on an EOT that does not comply with the above requirements. 29 Exclusions In several respects, there is now a lessening of regulation in areas that were formerly regulated. In addition to the key amendments above, there are also a number of areas which Schedule 1B does not seek to regulate, or where other rights or powers are removed, as compared with the position under the DBCA. These areas include: the regulation of rights of control of, or access to, building sites; 30 the regulation of display homes; 31 the right of a building owner to terminate a regulated contract if the contract price rises by 15% or more due to a cost escalation clause or if the subject is not completed in the period 1.5 times greater than the defined period under the contract; Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 29(2). See also Schedule 1B, section 29(4) for the meaning of when a defect becomes apparent, 24 Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 29(3). 25 Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 29(5). 26 Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 29(6)(b). 27 Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 42(1). 28 Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 42(3). 29 Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 42(2). 30 Domestic Building Contracts Act 2000 (Qld), sections 86, 87; cf Queensland Building and Construction Commission Act 1991 (Qld), section Domestic Building Contracts Act 2000 (Qld), sections 88, Domestic Building Contracts Act 2000 (Qld), section 90.

5 the regulation of a building contractor s rights to recover for a variation to the scope of work where the building contractor has not complied with the formal requirement for variations; 33 the requirement for a variation document which adjusts the contract price to be initialled by the building owner; 34 the removal of the formal obligation on the building contractor to provide contract related documents as soon as practicable on completion of the work; 35 the removal of the strict prohibitions regarding entering into cost plus contracts under the DBCA; 36 the regulation of completion payments; 37 the regulation regarding the payment of associated third party amounts; 38 the regulation regarding a building contractor contravening requirements relating to payment; 39 the regulation of cost escalation clauses; 40 the former distinction under the DBCA between calculable and incalculable delays; 41 and the former distinction between progress payments for designated stages contracts and other contracts. 42 Other Miscellaneous amendments In addition to the key amendments summarised above, there are a number of other changes introduced by the Amendment Act, including: extending the obligation to carry out the work with reasonable diligence to all regulated contracts where applicable; 43 removing an obligation on the building contractor to obtain foundation data if the building contractor is not lawfully entitled to enter the site before the date of the contract and the contract guarantees that there will be no increase in the contract price because of that data; 44 lesser regulation of both prime cost items and provisional sums in favour of a warranty by the building contractor that prime costs items and provisional sums have been calculated with reasonable care and skill; 45 and an additional requirement that progress payments claimed by a building contractor be proportionate to the value of the work that relates to the claim Domestic Building Contracts Act 2000 (Qld), section Domestic Building Contracts Act 2000 (Qld), section 81(5); cf Queensland Building and Construction Commission 1991 (Qld), section 41(2), (3). 35 See Domestic Building Contracts Act 2000 (Qld) section 39; cf Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section See Domestic Building Contracts Act 2000 (Qld), section See Domestic Building Contracts Act 2000 (Qld), section See Domestic Building Contracts Act 2000 (Qld), sections 10, See Domestic Building Contracts Act 2000 (Qld), Part 5, Division See Domestic Building Contracts Act 2000 (Qld), sections 11, See Domestic Building Contracts Act 2000 (Qld) sections 33, See Domestic Building Contracts Act 2000 (Qld), sections 65, Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 25; cf Domestic Building Contracts Act 2000 (Qld), section Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 31(3). 45 Compare Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 26 and Domestic Building Contracts Act 2000 (Qld) sections Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 34.

6 What this means for you Despite the repeal of the DBCA on 1 July 2015, the DBCA as in force before its repeal will continue to apply to contracts entered into before the repeal. 47 Building Contractors For domestic building contracts to be entered into after 1 July 2015, we recommend that building contractors review their contracts to ensure they will be in line with the amendments. In particular, we recommend that building contractors review the EOT mechanism under their contracts, given the removal of the former calculable and incalculable delays distinction, and the introduction of the new EOT regime outlined above. In addition, building contractors should also ensure that their contracts will comply with the formal requirements for level 1 and level 2 regulated contracts. For level 2 regulated contracts, this includes the requirement that, if the contract price is subject to change, that the warning and explanation be in a prominent position on the first page of the contract schedule. 48 For level 1 regulated contracts, the Amendment Act means that contracts of this value are subject to less requirement of form, including: no requirement to state of each of the statutory warranties that apply; 49 no requirement to provide a price change warning; 50 and no requirement to provide a copy of the consumer building guide (or the former contract information statement). As detailed above, in a number of respects, with the Amendment Act comes a lessening of regulation over domestic building work, as compared with the DBCA, and should come welcomed by building contractors. Building Owners For building owners entering into domestic building contracts to which the Amendment Act will apply, owners should be particularly aware of the reduction of the warranty period to one year for a breach of a non-structural warranty and ensure that proceedings are commenced in time. Further Information A copy of the Amendment Act may be found here. A copy of the explanatory memorandum may be found here. 47 Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1, section Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1B, section 14(6). 49 Cf Domestic Building Contracts Act 2000 (Qld), section 27(2)(c). 50 Cf Domestic Building Contracts Act 2000 (Qld), section 57.