Report: Inquiry into the operations of the Home Building Service
Reverend the Hon. Dr Gordon Moyes: At the outset of my contribution to this take-note debate on the report on the inquiry by General Purpose Standing Committee No. 2 into the Home Building Service I place on record my appreciation to the committee secretariat for the excellent task it performed and to other committee members who made it an enjoyable inquiry to be associated with. In particular I appreciated the fine chairmanship of the Hon. Robyn Parker, and I thank her for that. Few things upset Australian families as much as ineffective and inadequate protection by governments against any who would damage or destroy their homes. The iconic Australian film The Castle is a classic example of the concern of such families. Unfortunately, there are always shonky builders and others who damage or limit the family home.
The New South Wales home building industry generates in excess of $19 billion per year and employs approximately 250,000 people. In 2005-06 the industry built 32,000 new homes and undertook 21,500 major renovations and 1.66 million minor building works. Regulatory systems are put in place by the Government to protect citizens from shonky builders. The home building industry is regulated in order to protect consumers, and consumer protection should always be seen as its first and most important goal. However, as the report states, the committee was concerned by evidence put forward by inquiry participants about the poor consumer protections offered under the current scheme.
Particular concerns included the last resort nature of the scheme and its tendency to escalate disputes. In addition, payouts are sometimes seen to be totally inadequate, while the costs associated with exhausting other avenues before claiming on insurance can be exorbitant for the normal family. The fact that both consumer and industry representatives highlighted these deficits attested to the weight of the existing problem. For these reasons the committee considers that the New South Wales Government should adopt the recent recommendation of the home warranty insurance scheme board to introduce an additional trigger to enable consumers to claim insurance without having to pursue a builder’s bankruptcy or insolvency.
In New South Wales the Home Building Act 1989 requires builders and tradespeople to be licensed for the work they do. Only builders who are properly trained and who have relevant experience may be licensed. As this is true, it is remarkable how many builders manage to slip through the net. The Home Building Service sets and maintains standards of competence for builders and tradespeople, and issues licenses and certificates to builders and their companies that meet the requirements of the Act. It is responsible for assessing licence applications and in so doing undertakes various checks. It also maintains a public register of information on builders, tradespeople and specialist workers that building consumers may check before entering into contracts.
On the basis of the evidence before this inquiry, as well as independent investigations by oversight bodies, it is clear that there are ongoing problems with the licence assessment system and the public register that undermine their credibility. The experience of home building consumers has been the key focus of this inquiry, and it is clear from their experience that the Home Building Service of the Office of Fair Trading has not always succeeded in protecting consumers, whether in relation to licensing of builders, complaint handling or disciplinary matters. In addition, the home warranty insurance scheme is limited in its ability to compensate consumers when things go wrong.
Nevertheless, we remain concerned by the stories of inquiry participants and alarmed by the impact that costly and prolonged disputes have had on individuals and families. The committee may need to consider further claims about certain inaction following complaints going back over many years. On this basis the committee considers that early dispute resolution processes must be improved in a number of ways. Further effort should be devoted to both community and Office of Fair Trading staff education, and the industry competencies of building inspectors should be improved to ensure that they are better able to investigate and resolve disputes. In addition, builders should be able to initiate early dispute resolution through the Home Building Service, rather than only through the Consumer, Trader and Tenancy Tribunal, as is currently the case.
The home-building regulatory system must also work to the benefit of builders. It must deal with them fairly and support them as professionals. Building industry representatives also revealed a number of ways in which the licensing, dispute resolution, disciplinary and insurance systems need to be improved. Ultimately, an effective regulatory system is one which prevents poor home building work from occurring in the first place, which deals with complaints swiftly and fairly, and which, when appropriate, penalises those who have acted improperly. It should compensate parties fairly when things go wrong. Finally, it should ensure that all parties are properly informed about the way the system works, and about their rights and responsibilities.
The establishment of the Home Building Service in 2003 was a step forward in the regulation of the home building industry and consumer protection. However, evidence gathered during the inquiry attests to a need for further work to deliver better outcomes for both consumers and builders. Legislative and policy changes are essential, as are improvements in the way the Home Building Service seeks to deliver on its performance standards. The report indicates in which directions the changes must be made. Additional resources also are necessary to ensure that the Home Building Service is more effective in its licensing, complaints handling and disciplinary roles.
The Home Building Service also has an important role to play in ensuring builders’ compliance with the Act and in disciplining them when they are in breach. The committee believes that the level of effort in enforcing builders’ compliance with the Act has improved since the establishment of the Home Building Service. Compliance procedures have been strengthened and penalties have increased, but far too much non-compliance is still slipping through the cracks. However, the fact that the Home Building Service determines whether it will investigate an alleged breach, and that some alleged breaches are not investigated, will trouble many people who read the committee’s report.
Moreover, the committee is concerned by evidence from both consumer and industry representatives that the Home Building Service could be more active and consistent in disciplining builders. This concern was strengthened by evidence arising from the Moss review, and information from the Office of Fair Trading, that only 70 per cent of investigations in 2005-06 were completed by the due date. While the committee recognises that some delays are beyond the control of the Home Building Service, we consider that the service should take bigger steps to meet its performance standards in relation to the discipline of builders.
The committee considers that the penalty system should be reviewed with a view to further improvement in policing and encouraging compliance with the Act. The New South Wales Government also should examine the potential to enable not only contractors to be prosecuted for breaches of the Act but also individual builders, and perhaps the directors of various firms that tend to declare bankruptcy, only to be resurrected under another name.
Underpinning all of the committee’s 21 recommendations is the sense that consumers need to be better informed and supported as they navigate the home building system. Under the scheme, the primary responsibility for ensuring that work is properly and adequately performed lies with the builder. The scheme provides last-resort cover for homeowners when the builder has not honoured its responsibility. Claims may only be made where dispute resolution cannot take place because of the death, disappearance or insolvency of the builder.
The relationship between the owner, the builder and government agencies will always be a complex one. Government agencies tend always to be behind the poorest practices by builders and that in turn concerns all owner-builders. We believe the recommendations of this report are long overdue. We urge government agencies to ensure they implement our recommendations. I look forward to the Government’s response to the committee’s 21 recommendations.
