Reform Strategy Fails to Provide Consumer Protection for new home builders
By: Anne PatenWednesday, July 22nd, 2015
The Consumer Protection Reform Strategy purported to offer new assurances that consumers would be treated fairly. As its name suggests, however, it was a ‘strategy’ contrived as an imitation of reform and never intended as a new consumer protection reality.
From its inception, the registration regime lacked any integrity. The qualifications for ‘registration’ under the Building Act 1993 were ignored by the governance bodies, with all ‘registered building practitioners’ simply grandfathered over to the new system. In a report released in 2000, the Victorian Auditor-General disclosed the reality: “The 20,600 existing building practitioners, registered under transitional arrangements between July 1994 and June 1997, have not been assessed for suitability in terms of qualifications, skills or experience.”
We now know that of those originally ‘grandfathered,’ 5,694 (or 26 per cent) of them are currently registered as building practitioners, as outlined in the 2015 Victorian Auditor-General’s Report titled Consumer Protection Framework for Building Construction.
If we consider ‘registered builders’, in 2006 as many as 30 per cent had no qualifications, and were awarded ‘registration’ under “flexibility provisions rather than by gaining prescribed qualifications” according to the Building Commission’s RIS: Building Regulations 2006.
Then in 2012, the Ombudsman’s Report revealed how thousands obtained their ‘registration’ as ‘builders’ – without sitting the tests; after failing the tests; after submitting false documents; or with the Registrar knowing applicants but assessing and approving their registration without oversight of the BPB as the accrediting authority. In one example, the Ombudsman found that between January and March 2012, of 18 applicants who failed the written tests, 16 were issued Domestic Builder Unlimited licences.
In relation to builders, the Ombudsman discovered that many applicants used proforma documents to create ‘mock up’ applications. These were fabricated applications, not real in any sense. Astonishingly, the BPB Registrar told the Ombudsman that this occurred in “many thousands of applications, particularly for domestic builders” and “this is the way it has been done for years and is well known to the BPB” according to Ombudsman’s Report 2012.
It was not only common practice to prepare fictitious applications, but it was long-established practice, and authorized by the BPB! The Registrar stated that he regularly met with organizations who coached applicants on “the preparation of applications and development of template type documents.” Even though providing false and misleading is clearly dishonest and an offence under the Building Act, the Ombudsman discovered that the BPB had never rejected an application on this basis. We even have a man who submitted a ‘mock up’ application, had no qualifications and pretended to have built buildings that turned out not to exist. He procured ‘registration’ and went into business charging fees to provide others with mock-up ‘builder’ applications!
The concept of registration as consumer protection was a marketing myth. Now exposed, it appears clear it was never planned to provide any assurance of competence, experience or good character. How could you expect someone presenting false documents to be ‘honest’ and ‘ethical’? It is disturbing to uncover that this appalling registration regime has survived for decades, devoid of any impartiality, lacking in authenticity, and open to abuse and conflict of interest.
Even more perturbing is that three years after the Ombudsman’s findings, nothing has changed. Whether grandfathered over, utilizing ‘flexibility provisions,’ failing the tests, paying for the licence, unable to speaking English or read plans, or the application improperly assessed, no building practitioners were deregistered. This was confirmed by VBA director David Wolf in 2014. As well, the ‘coaching courses’ persist. As corroborated by one RTO, applicants pay money for ‘external assistance’ and they receive a list of questions for the interview and the name of the interviewer!
- Enforcement of Compliance and Monitoring of Conduct
As is known by all in the industry and obvious from the evidence, enforcing compliance and monitoring building practitioner conduct are manufactured myths. There are no real audits when it comes to building. As the VBA’s Annual Report of 2013-2014 states, there were 99 building permit levy audits of surveyors but no audits of domestic builders, either limited or unlimited. By contrast, although there are 25,688 registered plumbers compared to 25,323 registered building practitioners, there were 16,447 plumbing audits!
Additionally, there are very few inquiries or prosecutions into building practitioners. In fact, under the VBA and BPB in 2013-2014, there were a minute 53 inquiries and 28 prosecutions. Generally it take years for an inquiry to be held, with allegations commonly minimized and ‘penalties’ as minuscule as to be pointless. Consequently, with zero enforcement, a negligible risk of ‘being caught’ and meaningless ‘penalties,’ misconduct has been condoned for building practitioners. In reality, the ‘regulator’ has supported the registered cowboys and afforded no deterrent to aberrant conduct, facilitating increased numbers of recalcitrant and serial offenders. The cowboys are protected and consumers are left helplessly unprotected.
- Dispute Resolution
The mythical ‘consumer protection’ scheme has avowed that there are few disputes and two forums for dispute resolution, one through Consumer Affairs and the other at VCAT. But both dispute resolution mechanisms are seriously flawed. Just like the registration element of the illusory ‘consumer protection strategy,’ there is a lack of independence, with conflict of interest and integrity major problems in the ‘dispute business.’
The BACV, for which Consumer Affairs is responsible, states that it resolves almost all disputes. Contrariwise, few disputes are conciliated and the real statistics on outcomes are not published. Those employed at BACV know the builders. Stories of BACV officials asking owners to pay money to which the builders are not entitled and visiting owners, builders at their side, and begging owners not to tell their story to the median are abundant. With VCAT, cases are deliberately drawn out for years, those involved as ‘experts’ are often not qualified, many work regularly for the building practitioners and their independence is questionable.
The reality is that building disputes are a natural consequence of having a lawless industry. Also, as governance of the industry has deteriorated over time, the number of disputes has inevitably increased, with the ‘building dispute industry’ growing enormously. Worse, there is a disincentive to reduce ‘disputes’ because the beneficiaries are making lucrative incomes from this substantial sub-industry. As the Auditor-General concluded in his recently released report, neither Consumer Affairs nor VCAT provides any means for consumers to obtain any satisfactory, timely or cost-effective outcomes.
- Builders Warranty Insurance
The insurance was promoted as ‘Warranty Insurance’ and cleverly marketed to consumers with its spurious nature obscured. Then for the first time in 2010, insurance statistics on this ‘Last Resort’ scheme were released. What had been concealed for years was the very limited triggers to access this so-called ‘insurance’ which allowed less than one per cent of owners to make a claim! It’s incredible, but true. Over the intervening years, this consumer con has been in the spotlight; numerous articles have detailed how consumers are compelled to pay for ‘warranty insurance’ that actually provides no ‘warranty’ and no ‘insurance’ for the overwhelming majority. Nonetheless, this swindle has been sustained now for 15 years, with Government officials prepared to deceive owners, most owners having no idea of the hoax until they need to claim. It is then that owners learn the reality that they have been deviously duped.
By: Anne PatenWednesday, July 22nd, 2015
Discussions 13 Comment
13 responses to “Reform Strategy Fails to Provide Consumer Protection”
- beverley-jane says:
How can these so called regulators and registration bodies possibly justify their existence or claim to be providing control and consumer protection?
Exactly what purpose are these multiple Ombudsman and Auditor General’s enquiries and reports if nothing is enforced and changed?
A waste of consumer money that appears to achieve nothing more than employment at the trusting consumer’s expense!
Is this not misleading and deceptive conduct on all levels?
- Bob says:
They make it illegal to provide services without being registered with them and them only.
The regulation should be coming down from a federal body, but instead they allow local dunderheads who are deep in the pockets of either the unions or incumbent “big players” to provide “regulation” and “registration”.
It’s not just Victoria, all states are equally as useless in monitoring this activity, just useless in different ways. It’s high time the federal government stepped in and created a unified body to register and police activity in the wild we- ah… construction industry.
- Mark Whitby says:
Very informative Anne,
So when is the government going to do something about this fiasco?
And if the BPB has its hands tied, why don’t the builder organizations get up in arms about it, and take control of who is going to be a member of their organinzations before they are tarnished?
- Diarmuid Hannigan says:
The building industry is now the biggest industry in Australia. It is the industry that builds our homes and builds Australia for the future. Our governments have been elected by us to work in the nations interests by building the best future for Australian citizens. Our governments are responsible to us the citizens of this nation to ensure that the regulatory processes that are in place to build the better future are not corrupted by vested interests. Currently this is not the case.
- Sharon says:
The politicians have known about all these problems for years, as several reports from the Auditor General and Ombudsman Victoria have highlighted these problems repeatedly. When will any action be taken by our problems to address these complete and utter failure of the consumer protection framework? With some many ‘registered’ cowboys working in the building industry and the Victorian Building Authority failing to regulate the industry, employing a builder is like playing Russian roulette, with most of the chambers containing a bullet. With the cowboy surveyors, you don’t even need to undertake building work yourself to have your house destroyed. One only need to look at the Glen Waverley building site which undermined the foundations of the surrounding properties and placed them at risk of collapse.
- Mary says:
Well written! As a consumer that is being put through a nightmare at the moment, I’d for one would like an explanation from our government bodies as to how, in this day and age, this is allowed to continue! As for the insurance.. a builder has to declare bankruptcy or die before you have any hope of claiming anything from it and we are forced to pay for this? What a joke… consumer protection? Perhaps someone could explain exactly where this protection starts? Time for our government bodies to wake up and take notice before more lives are ruined by these doggy builders who think they can play God with peoples livelihood.
- Andrew Heaton says:
One thing which amazes me is how the mess associated with the system have been going on for so long, have been so well known for so long, and yet remain unaddressed.
The fact that the system here in Victoria is overly complicated, non-transparent and lacking in effective enforcement for so long and here we are in 2015 having yet another report saying that nothing has improved is an indictment not only to the botched reform process of 2013 but also reform efforts prior to that.
What we need is a simpler system which is more transparent and has clearer forms of dispute resolution including a rapid dispute resolution process with clear and effective enforcement. That would work better not only for consumers but also for genuine builders who genuinely try to do the right thing.
Right now, consumers and genuine builders are not being served by a system that is clearly letting everyone down.
- Branko says:
I totally agree with Andrew. One glaring omission in new home insurance system is “Insurance write off” There are many homes that have been irreparably damaged by slab heave that cannot be returned to original construction tolerances and suffer from chronic foundation instability. Where homes cannot be returned to tolerances and stabilised and it’s because of builder’s negligence those homes should be declared and certified as “insurance write off” and owners compensated full amount by HOW insurer.
Recent VCAT decisions in Hooper and Softley could in essence be viewed as Write Off however owners should not have to go through expensive legal process to get justice.
- Mel says:
I have been waiting years for disciplinary action from the BPB. During this time I have been given very little or conflicting information on my file, and have faced huge delays for something which in reality should have been done and dusted in a few months. How many more home owners lives has my builder ruined while this has been going on? Not only do the BPB hand out registrations to builders who do not have the knowledge required to build a house, they then refuse to discipline said builder when the inevitable happens.
- Lesley Crouch says:
Fancy going to a doctor or a dentist without appropriate qualifications and training. You wouldn’t do it. Yet the building industry which we all rely on, is not properly regulated. There are new buildings going up all over the place. How many are going to show serious problems over the coming years? We should have a regulatory system that we can put our trust in. At the moment it is safer to buy an old house that you know has been around for a good many years. Unfortunately so many of them are being demolished to make way for new places. That’s fine if the new places have been built with proper regard to building codes and the builder has the necessary skills that have been audited correctly and not just rubber stamped
- Roy says:
We were lucky enough to contract a builder to add an extension to our home that couldnt read plans or cut a piece of timber to size. But boy did he know how to work the system, and so he should. This was his third time being called into the Building Practitioners Board. First time $2000 fine and $500 costs. Second time $1000 fine, $883 costs and 12 month suspension. Third being our turn, same complaints as the first two combined, and I quote the letter from the Building practitioners Board, “Given that the allegations faced at the hearing address the same regulation breaches” and “the Board believes it would not be in the interests of natural justice to again to bring the practitioner to enquiry in relation to the same issues”. So off to VCAT we went, needless to say the builder knew that system too, and we lost our savings regardless of the BPB a 72 page Building Commission defect report along with other reports. Eight years after commencing we we got an occupancy certificate.
Dodgy builders, dodgy building authority, dodgy tribunal, ???? governments.
- beverley-jane says:
Why is the consumer expected to just accept this ongoing devastation and somehow recover financially and emotionally? Justice???!!!
The whole diabolic system is designed to exhaust you financially and emotionally with those who have no option but to try and achieve the mythical JUSTICE facing what seems to be a pretty standard 8 years of hell. The parasitic system then delivers the final blow by dismissing the very real and shocking damage with the ‘natural justice’ garbage tagline. Unless one has been through this hell, it would be written of as hysterical exaggeration.
- Sonya says:
Shame on the Australian government and all who are in power to protect the Australian consumers but have failed to do so.
A home is the single largest investment most Australians will make and yet building, buying or renovating is likely to become the biggest financial nightmare a consumer can ever experience.
Builders warranty insurance is a joke – it stealing from consumers to fund the building industry and the crooks who participate in it.
Building Warranty Insurance is a junk product and despite the countless inquiries and reports that have been done over many years there has been no change. Ombudsman reports, VAGO reports, Senate inquiries and the like – they all identify the same thing – a system that is BROKEN where consumers have no real protection. Its failures have been highlighted over and over again, but our government refuses to respond with actual reform and genuine protection – how can this be? why does it continue?
Consumers are knowlingly and continuously put in harms way, it is evil and corrupt. How many more consumers lives must be ruined before someone stands up and fights for justice and genuine reform. Consumers need protection and they need it now!