Building and renovating

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1 Building and renovating Last updated: 20 November 2017 Summary This factsheet contains information about: the laws in Victoria on building and renovating the Victorian Building Authority owner-builders registered builders and architects building surveyors obtaining a permit to build important contract terms for building work This information relates to laws in Victoria, Australia. can be a complex task involving various professionals. This factsheet looks at laws you should be aware of if you are building or renovating in Victoria. Here we cover the consumer protection provisions in the Domestic Building Contracts Act. Legislation House building and renovations are called domestic building work in Victoria. This work is covered by: the Building Act 1993 (Vic) the Building Regulations 2006 (Vic) the National Construction Code the Australian Consumer Law and Fair Trading Act 2012 (Vic) the Domestic Building Contracts Act 1995 (Vic). Victorian Building Authority The Victorian Building Authority (VBA) administers the Building Act. It oversees building legislation, regulates building practices, provides services to industry and consumers, registers Victorian building practitioners and monitors their conduct, accredits building products and construction methods, and advises government on building policy. Page 1 of 10

2 The VBA has replaced the former Building Commission and the Building Practitioners Board, and it also regulates architects. Tip: The VBA s website is very useful if you are thinking about building and renovation work. It provides technical advice and practical hints for your project as well as factsheets on many topics. Building standards All new homes, home renovations, extensions, alterations and additions must comply with the Six Star Standard in the National Construction Code. The standard covers thermal (energy) performance. Six Star Standard for energy efficiency Before a building permit can be issued, an Accredited Assessor must perform an Energy Rating Assessment on the design. The assessor can recommend changes that will help the project reach six stars. Six Star compliance is about good design at the planning stage. It makes homes more comfortable and saves money on energy bills. Minor work that doesn t need a building permit is not affected by the standard. The efficiency rating applies to: the home's building envelope (roof, walls, floor and windows) installation of a solar hot water system or a rainwater tank for toilet flushing lighting (but not plug-in appliances). Design features that save energy include: living areas facing north (avoid east- and west-facing walls and windows) treated windows, particularly if they face west wide eaves and window awnings for shading weather stripping good room layout and windows placed to capture breezes insulation under roofs and in walls energy-efficient lighting roof ventilation with roof and eave vents. Bushfire Standard Victoria has adopted a national building standard in bushfire-prone areas (Australian Standard AS Construction of buildings). The standard sets out protection for new homes built or renovated in bushfire-prone areas. It takes a technical approach that allows assessment of the level of heat and flame a building is likely to face in a fire. The standard has six risk levels, called Bushfire Attack Levels (BALs). Every new home built or renovated in a bushfire-prone area must have a BAL assessment as part of the application for a Page 2 of 10

3 building permit. The BAL assessment is to work out the best construction methods and materials for that site to improve a new building s ability to avoid damage in a bushfire. The standard applies to all new constructions, renovations or repairs to a home or outbuilding in Victoria in bushfire-prone areas. It does not require owners to retrofit protection to existing homes. Owner-builders If you are an owner-builder, you must get a certificate of consent from the VBA before getting a building permit for work valued over $16,000. You must have knowledge about the duties and responsibilities of an owner-builder, and you will have to do an online assessment and get 100% before you can apply for your certificate of consent. You must live in, or intend to live in, the finished dwelling. You may only get one building permit for a single dwelling or associated work in any five-year period. Owner-builders cannot build for profit (rent or sale), and must own the land on which the building work is done. The VBA keeps an owner-builder public register. If you apply for a certificate of consent after 1 September 2016, information will be published on the register and remain open for public access for 10 years. The VBA has a factsheet about the register. The VBA may carry out inspections of any owner-builder site. Registered building practitioners A Registered Building Practitioner must hold an appropriate qualification, be of good character and prove to the VBA that they are covered by the necessary insurance. Building practitioners, including building surveyors, are registered for five years at a time and must re-register at the end of each five-year period. A Building Surveyor must be appointed for the works. This role is discussed below. Architects Architects do not provide building supervision services. The services they offer include design development, preparing drawings, obtaining planning permits (if necessary) and building permits, arranging contracts, selecting contractors, administering building contracts and inspecting the works. Tip: If you (or your registered building practitioner) are doing building work on your property you need planning or building permits. Nearly all building work requires a building permit under the Building Act. That includes any work to do with construction, alteration, demolition or removal of a building. Some, but not all, building work also requires a planning permit. Page 3 of 10

4 Building surveyors Surveyors check building plans and designs to make sure they comply with the building regulations. They ensure that each building practitioner engaged in the building work is registered and covered by insurance, and does everything required by the authorities and by the planning permits. Pre-commencement role If you are building, you must appoint a building surveyor ( surveyor ). Surveyors are responsible for checking building plans and designs to make sure they comply with the building regulations. They ensure that each building practitioner engaged in the building work is registered and covered by insurance, and does everything required by the authorities and by the planning permits. Your building surveyor may be either a private practitioner or the employee of a local council. You can search the VBA online register or go to the Australian Institute of Building Surveyors website. Once you have appointed a surveyor, they can only be removed by application to the VBA. Role during construction Surveyors: carry out compulsory inspections of the work to ensure it is being done properly, as described in the approved drawings and under the relevant regulations are not supervisors of the building works (generally, they only go to the site four or five times) are required to act independently. You should consult them if you have any questions about the state of the works. Role at the completion of building works The surveyor will carry out a final inspection before issuing an occupancy permit or a certificate of final inspection. These permits or certificates are only issued when the building is suitable for occupation. They have nothing to do with the quality of the building work. They do not guarantee that the work complies with the building legislation and regulations, and they can t be used as proof that the work has been done properly. Decision to engage an architect Architects do not provide building supervision services. They design developments, prepare drawings, obtain planning permits (if necessary) and building permits, arrange contracts, select contractors, administer building contracts and inspect the works. Architects are not required to be registered under the Building Act as they are governed by Page 4 of 10

5 the Architects Act 1991 (Vic). Tip: It is useful to consult an architect about any quote you get for building works. They can help you decide if the quote is adequate and realistic, and covers the work you want done. Obtaining planning or building permits If a building permit is needed, it doesn t make any difference whether you have a registered builder doing the work or you are doing it yourself as the owner. Not all building works require a planning permit, but nearly all works require a building permit. A building permit: is issued by a building surveyor covers the structural and technical integrity of the work to be done and the legislation and regulations it has to comply with is needed for all building work connected with the construction, alteration, demolition or removal of a building is needed at the beginning of a project, before any building work is carried out. This fact sheet does not cover planning permits, which are separate from building requirements. Contract terms for major domestic building work Building contracts are difficult to get right and can cost a lot if you get it wrong. Make sure you obtain legal advice before signing any contract. To protect consumers, the Domestic Building Contracts Act 1995 (Vic) (DBCA) requires a builder to thoroughly investigate the site before preparing footings or foundation design. Important contract details Section 31 of DBCA says what must be included in a building contract. The contract must: be in writing and signed give a detailed description of the work include plans and specifications include the names and addresses of the parties include the registration number of the builder give a start date or show how the date is to be worked out give the date when the work will finish or the number of days needed to finish the work once it is started state a contract price. If the start date is not known, the contract has to say the builder will do everything reasonably possible to make sure the work will start as soon as possible. Page 5 of 10

6 Cooling-off period A consumer may withdraw from a building contract within five days. That means no more than five clear business days after you receive a copy of the signed contract. How do I cool off? Contracts must contain a written notice advising consumers of the cooling-off period. If you wish to cool off, simply complete the notice and give it to the builder. If you withdraw from the contract If you have paid a deposit, the builder may keep $100 plus any other out-of-pocket expenses. The builder must refund all other money. Variations to contract price If the builder claims a variation is needed: the builder must give a written notice of the variation, state why the variation is necessary and state the time it will take to complete the works the builder must also provide a cost of the variation and state the effect it will have on the contract price. The circumstances in which a builder can request additional money for variations are very limited. Builders cannot get extra payments unless they can show that the variation is necessary and that it could not have been reasonably foreseen at the time the contract was agreed. (This is set out in section 37 of the DBCA.) Tip: If a building surveyor requires a variation, the builder can carry it out without the consumer's signed consent. For any other variations the builder must get signed consent. If you are a consumer and you want to vary the contract: you must give the builder written notice. In minor cases (less than 2% of the contract sum) the builder may carry out the variations. If the change is more than 2% of the total, the builder must give you a notice, stating: whether the variation will need a change to the building permit whether it will cause delays and an estimate of the delays an estimate of the cost of the change and how it will affect the contract price. Your builder cannot go ahead with a variation unless you accept the builder's notice by signing it and returning it to the builder. Tip: If you request a variation and the builder approves it, expect payment to be claimed at the next progress payment. Page 6 of 10

7 Delays and extensions of time Generally, major domestic building contracts allow the builder to claim for extensions to the finish date when delays occur. Extensions are normally permitted if the delay is beyond the builder s control (e.g. bad weather, some industrial disputes, delays by consumers, variations to the plans requested by the consumer). A builder must make allowances in the contract for bad weather, public holidays, weekends, rostered days off and any other delays. This is set out in section 32 of the DBCA. Most building contracts provide for a fixed amount of damages if there are delays. This is the amount the parties estimate as the daily or weekly costs to the consumer of any delays to the completion of work. Normally these damages are deducted from the final payment made to the builder. Progress payments The building contract will usually state that payments to the builder will be in stages, as the work is done. In a contract to build all stages of a home, section 40 of DBCA says a builder cannot claim more than: Deposit 5% Base stage 10% Frame stage 35% Fixing stage 25%. As the consumer, you should make progress payments on time. Late payment can cost penalty interest, and it is a breach of the contract. Tip: If you are the consumer in a building contract, don t make any payments until the builder completes the stage as defined in the contract and approved by the building surveyor. The builder is then entitled to the payment. Home warranty insurance This is only required if the contract price is more than $16,000. The insurance typically covers: defective building work (including breach of implied warranties) non-completion of work loss of deposit or progress payment alternative accommodation breaches by the builder of the Australian Consumer Law. The insurance has some limitations: It must be impossible for you to get the builder to fix the problem. Cover is only available if the builder is dead, insolvent, has disappeared or has failed to comply with an order of Page 7 of 10

8 the Victorian Civil and Administrative Tribunal (VCAT) or a court. Cover for completion costs is capped at 20% of the contract price. The minimum sum insured is $300,000, but legal costs and expenses are included in the total. So there is real danger that it won t be enough to finish the work. The consumer must make a claim within 180 days of first becoming aware of the problems with the builder. If this is not known, then it can be the date they might reasonably be expected to have become aware. The insurer must decide within 90 days if they will pay the claim. Other insurance As a consumer, you should make sure your builder is covered by contract works and public liability insurance. The insurance normally covers: damage to the work (e.g. by fire) neighbours or others being injured. Completion It is important for consumers to be clear about when the builder has actually finished the job. In some contracts, the finish date is described as practical completion. That is the stage when works have been substantially completed except for minor defects. In almost all domestic contracts, completion is when the building surveyor issues an occupancy permit or a certificate of final inspection. Most contracts provide that the works are complete when the consumer takes up occupation of the home. Payment A builder must not demand final payment until: the work has been completed in accordance with the plans and specifications, and the consumer receives an occupancy permit, or a certificate of final completion is issued by the building surveyor (section 42 of DBCA). As a consumer you should keep a careful record of all claims, documents and correspondence that have anything to do with the building project. Defects liability period Most contracts provide a period during which the consumer can require the builder to return and repair defects. This is usually 13 weeks from the completion of the work. Tip: As soon as you occupy your new home, you should list all defects and give the list to the builder as soon as possible. Make sure it is within the defects liability period provisions in your contract. Page 8 of 10

9 Ending a contract As a consumer you may terminate a major domestic building contract if: the contract price rises by 15% or more, or the contract has not been completed within 1.5 times the period it was to have been completed, and the increased time and cost was not reasonably foreseeable by the builder at the time the contract was agreed (section 41 of DBCA). If a contract is ended for the above reasons under section 41 of the DBCA, the builder is entitled to a reasonable price for the work carried out. Most contracts have a separate termination clause and a default notice (10 or 14 days). Disputes If you have a dispute with a builder over building or renovating in Victoria, read the factsheet called Building and Renovating Disputes. It includes tips for avoiding disputes, and information on how to go about resolving them. Contacts and further information Australian Institute of Building Surveyors Web: Building Advice and Conciliation Victoria (BACV) Web: vba.vic.gov.au/disputes-and-resolutions Consumer Affairs Victoria (CAV) Advice on disputes arising from domestic building and renovations. Walk in centre: Victorian Consumer & Business Centre 113 Exhibition Street Melbourne Vic 3000 Web: Tel: Victorian Building Authority Web: Owner-builders: Victorian Civil and Administrative Tribunal (VCAT) 55 King Street Melbourne Vic 3000 Web: Page 9 of 10

10 Building and Property List Tel: Acknowledgments Victoria Law Foundation acknowledges the assistance of Daniel Oldham, Solicitor. Produced by Victoria Law Foundation Page 10 of 10