Kim O’KEEFFE (Shepparton) (17:57): I rise to speak and make a contribution on the bill before the house today, the Building Legislation Amendment (Domestic Building Insurance New Offences) Bill 2023. There have been great contributions across the chamber. What is apparent is the absolute need to progress this bill. However, we need to get it right. Whilst this is a step in the right direction, it does not do enough. The bill is for an act to amend the Domestic Building Contracts Act 1995 to insert new offences for a builder to demand or receive money under a major domestic building contract if the builder has not ensured that the domestic building work to be carried out under the contract is covered by insurance and to make other miscellaneous consequential amendments. In addition, the bill is an act to amend the Building Act 1993 to amend the purposes of that particular act to include regulating builders and enforcing offences under the Domestic Building Contracts Act 1995 in relation to demanding or receiving money under a major domestic building contract if the builder has not ensured that the domestic building work to be carried out under the contract is covered by insurance. Also the bill will provide that the investigation enforcement powers may be exercised and proceedings may be commenced in relation to the contravention of certain offences against the Domestic Building Contracts Act 1995 and to provide that builders who are found guilty of contravening certain offences against the Domestic Building Contracts Act 1995 may become ineligible for registration for a period of time to and make other miscellaneous and consequential amendments.
The bill before the house inserts two new offences with tough penalties, ensuring that domestic builders will comply with the insurance requirements, and will provide strong powers for the Victorian Building Authority to enforce compliance for the insurance requirements so no more Victorians will have to fall victim of building groups collapsing or going into liquidation for failures. As such, the two new sets of offences within the bill will apply where a builder enters into a major domestic building contract and demands or receives money from or on behalf of the building owner to carry out work under the agreement without ensuring the builder holds domestic building insurance when it is required. In addition, the bill will ensure that significant penalties are introduced for any violations or abuse of the new offences.
It is very important to note that following the collapse of the Porter Davis Homes group in March last year, more than 500 home owners or prospective home owners were at risk of losing their entire deposit due to the failure of the group to obtain builders insurance on their behalf when it was required. This is just wrong and devastating for all those individuals who are caught up in the collapse of the Porter Davis Homes group. The bill before the house brings a set of penalties and protections so that Victorians cannot be punished like these events we have witnessed in the past.
However, we need to have a framework that ensures transparency and adequately protects those everyday Australians who are building a home. We need this bill proclaimed a priority so that no more Victorians can be victims of building groups collapsing and lose their own money from the failure of building groups to obtain builders insurance – but we need to get it right. Whilst this is a step in the right direction, as we have said, it does not go far enough.
Just last week my office was contacted by a constituent who had been caught up with a home builder collapsing and going into liquidation earlier this month. The home builder group Montego Homes has approximately over 80 homes in either the construction phase or contract phase and has left the constituent and their family with significant financial loss and no home. The constituent was told that most of the 80 creditors were uninsured. However, the builder had failed to provide insurance in place to the constituent and his family. The builder was still taking money from the customers up to and including the day of being put into administration, when the group itself had no funds left in equity to give back to the constituents or fellow creditors. As a result, the constituent has been deceived and left out of pocket by the builder, who knew that there was going to be a foreclosure. The anxiety and distress inflicted on those affected is simply wrong. No-one should be put in this position, where their dream of having a new home – something they have worked hard for – is now placed in limbo.
In addition, on 25 January it was reported that a total of 63 homeowners had been affected by the collapse of Montego Homes, who did not have insurance. At the recent creditors meeting the administrators revealed that their investigations had found that Montego Homes had taken out a $200,000 loan just before they went under. There was only $21,000 left in the group’s bank account when external administrators were appointed, and there appear to be minimal assets. As a result of external administrators coming in, they have already started selling company property like iPads and phones at auction.
Jessica, who is a 40-year-old woman, was hoping to help her mother and be close by her side as she headed into her later years by organising two homes built next to each other. Jessica committed a $30,000 deposit and is unsure if she has lost her deposit entirely. As you can imagine, this has caused enormous stress and uncertainty. In addition, she said Montego Homes tried to hit her up with a $45,000 increase in the cost of building, in a sign of the company being in financial trouble for a substantial period of time. However, the scope of the bill before the house does not protect Victorians enough. Whilst the damage and actions are caused by a small cohort within the Victorian building industry, the offences and penalties that are included in the bill do not stretch far enough. The government must commit to extending the support scheme until the issues that are plaguing domestic building insurance are resolved. Buying a home is tough, and new home buyers should not be fearful of a building company collapsing and losing the deposit that they have worked so hard for.
Following the bill being proclaimed as law, the operation of these new offence provisions as proposed in the bill before the house will be monitored to ensure that consumer protections are upheld and appropriately balanced with industry interests. It is important that we as a state have the protections in place for consumers so that we do not have to witness another event like Porter Davis Homes Group and more recently Montego Homes occurring again, but also that we consult with industry, involving and including them in the process so that we can get this right by introducing and putting in place measures protecting Victorian homebuyers, ensuring that they are covered by insurance prior to paying any money to a builder under a contract for domestic building work.
However, there are many areas of concern with the bill, as it does not do enough to protect Victorians from the damage caused by a small cohort in the industry itself, and it does not do it fast enough. As such, there is limited scope in the bill. The bill itself seeks to legislate only around insurance, and many industry stakeholders like Master Builders Victoria claim that the bill does not address the many concerns about the current state of the act. In part of its consultation with the opposition, MBV called for a thorough review of the act to better protect all parties and support the industry to deliver homes for Victorians, stating that the act needs to be improved and requires further clarity for industry around who is captured by the penalties. In addition, many businesses and consumers have noted that the act is out of date and no longer fit for purpose to suit current building practices, according to former Master Builder Victoria’s CEO. Under the bill, the Victorian Building Authority has explicit powers to enforce disciplinary action against builders who breach their responsibilities under the Building Act 1993 and the Domestic Building Contracts Act 1995. Of course the effectiveness of these new powers of the VBA are unknown, which does create some doubt and uncertainty on whether it will allow for the VBA to be the lead regulator in taking strong action against a builder for noncompliance with any of the new offences.
It is unclear generally how the government itself intends to ensure that industry and consumers are aware of changes to the act that apply to them. This, as a result, may pose many issues regarding implementation. We need more houses built, but consumers need confidence that their money will not be lost.
Lastly, in regard to the proposed changes to the definitions in the bill, specifically changes to the definition of ‘builder’ to exclude the explicit mention of managing or arranging directors, this may lead to confusion regarding builder obligations. Neither the bill nor the existing acts sufficiently define who is a competent builder or provide for any statutory performance monitoring, which would facilitate better performance. Further, no sufficient registry is maintained of builders with adverse findings against them in builders warranty insurance claims, nor is there one for individuals purporting to be builders who have breached the Building Act 1993 and the Domestic Building Contracts Act 1995 as well as acts including the Crimes Act 1958. However, in essence I now support the bill as far as the amendment that has been put forward from our opposition goes.