Australia: Proposed changes to domestic building contracts in Queensland

Last Updated: 2 September 2014
Article by Andrew McCormack

NEED TO KNOW

The Queensland Government has recently released the Queensland Building and Construction Commission and Other Legislation Amendment Bill 2014 (the Bill) which will repeal the Domestic Building Contracts Act 2000 (Qld) (DBC Act).

Domestic building contracts are construction contracts governing "domestic building work", which includes: 1

  • the erection and construction of detached dwellings;
  • renovation, alteration, extension, improvement or repair of a home; and
  • removal or resiting work for a detached dwelling.

Domestic building contracts do not include:

  1. contracts between building contractors and subcontractors or;
  2. contracts for the construction of 2 or more detached dwellings.2

This position will not change under the proposed new legislation.

BACKGROUND

The Bill will consolidate the statutory regulation of domestic building contracts by inserting a new Schedule 1B (Domestic building contracts) into the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act), the principal piece of legislation governing building contracts in Queensland. 3

The Government's stated intent is to enhance protection for consumers while also reducing excessive red tape associated with domestic building contracts.

Click here to access a full copy of the Bill and Explanatory Notes.

THE DRAFT BILL

The Bill introduces two levels of domestic building contracts based on the value of the work being performed. Contracts will be considered either a 'level 1 regulated contract' or a 'level 2 regulated contract'.

Level 1 regulated contracts are contracts below a certain value and level 2 regulated contracts are contracts with a value above that threshold value. The draft regulation containing the prescribed value threshold has not yet been published.

In practical terms, the two tier system will see level 1 contracts subject to less regulation than level 2 contracts.

Different legislative requirements will apply for level 1 and level 2 regulated contracts. The key differences between the two types of contracts are:

  • provisions which must be included in the relevant domestic building contract;
  • the statutory cooling off period ;
  • deposits; and
  • the documents a building contractor must provide to a building owner.

A list of the key changes under the draft Bill are summarised in Diagram 1.

Diagram 1

DBC ACT

DRAFT BILL

Domestic building work

Domestic building work is defined to include:

  1. the erection or construction of a detached dwelling ;
  2. renovation, alteration, extension, improvement or repair of a home; and
  3. removal or resiting work for a detached dwelling.
The Bill expands the definition of domestic building work to include the installation of kit homes.
Provisions of the contract A regulated contract must be in written form, include any plans and specifications for the subject work and contain other specified matters such as the location of the works, the contract price and the building contractor's licence number.

The Bill imposes different content requirements for level 1 and level 2 regulated contracts.

Level 1 regulated contracts

Level 1 regulated contracts must contain inclusions substantially similar to those required under the DBC Act.

Level 2 regulated contracts

Level 2 regulated contracts must contain:

  • a provision stating the start date for the subject work;
  • plans and specifications (including those required for carrying out work in compliance with development approvals or similar authorisations);
  • a statement of each of the statutory warranties that apply to subject work; and
  • a warning placed next to the contract price if the contract price (or its method of calculation) can be varied under the contract.
Consumer building guide

The QBCC is required to approve a contract information statement for the benefit of building owners containing information about:

  • the rights and duties of building owners and building contractors; and
  • dispute resolution procedures.

The Bill now makes provision for the QBCC to publish a consumer building guide.

The guide will contain information about:

  • warnings about cost plus contracts;
  • information about the cooling off period;
  • deposit and progress payment requirements;
  • statutory warranties; and
  • dispute resolution procedures.
Cooling Off Period

A building owner may withdraw from a domestic building contract within 5 business days after the receipt day for the contract.

The receipt day is defined as the day on which the owner receives a copy of the signed contract and a copy of the appropriate contract information statement.

The Bill retains the 5 business day cooling off period under the DBC Act.

If a building owner under a level 2 regulated contract does not receive a copy of the consumer building guide before receiving a copy of the contract, the owner may withdraw within 5 business days after receiving the guide.

Deposits

A building contractor cannot receive a deposit which is:

  • more than 10% of the contract price if the contract value is below $20,000; or
  • more than 5% of the contract price if the contract value is above $20,000.

For level 1 regulated contracts, the deposit can be no more than 10% of the contract price.

For level 2 regulated contracts, the deposit can be no more than 5% of the contract price.

For level 1 or level 2 regulated contracts under which the value of off-site work is more than 50% of the contract price, a deposit of no more than 20% of the contract price can be claimed.

Documents to be provided by a building contractor

A building contractor is required to give a building owner a signed copy of the contract within 5 business days of entering the contract.

Contract Information Statement
A contractor is also required to give the owner a copy of an appropriate contract information statement.

The requirement for a signed copy of the contract to be given to a building owner within 5 business days is retained in the Bill for all contracts.

Level 2 regulated contracts

The Bill requires a contractor to give a building owner a commencement notice which notes:

  • the date works commenced on the building site; and
  • the date for practical completion of the works within 10 business days of starting the work.

The contractor must give the building owner a copy of the consumer building guide before the contract is signed.

NEXT STEPS

The Bill has been referred to the Transport, Housing and Local Government Committee for review and is due to be tabled in parliament on 8 October 2014.

Subject to further amendments to the draft Bill, the legislation is likely to come into force in late 2014/early 2015.

Footnotes

1 Section 8 of the Domestic Building Contracts Act 2000 (Qld).
2 Section 7(2) of the Domestic Building Contracts Act 2000 (Qld).
3 The Bill forms part of the Government's response to the recommendations of the Transport, Housing and Local Government Committee's Report No. 14, Inquiry into the Operation and Performance of the Queensland Building Services Authority 2012.

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