By: Sarah Metcalfe, Andrew Brennan and Nick Lux

At a glance

The release of the Victorian Building Authority’s (VBA) independently commissioned report ‘Victorian Building Authority – The Case for Transformation’¹ in October 2024 (VBA Report) provided the background to important reforms to the Victorian building regulatory regime recently announced by the Victorian Minister for Planning² and the VBA.

These important regulatory reforms are being announced at a time when the Victorian Government has set a target of building 800,000 new homes between 2024 and 2034 and 2.24 million homes by 2051.³

Whilst there is likely to be an abundance of multi-level apartment construction (class 2) work over the next 10 years in Victoria in line with the 800,000 ‘Housing Statement’ target, there is also going to be increased scrutiny on the builders and professionals involved under the new regulatory regime and as a bi-product of that, a greater exposure to claims for wrongdoing.

In this article we break down:

• some of the key reforms which have been announced
• the scope and scale of the fast tracked planning approvals by the Planning Minister to meet the stated new home targets, and
• the impact the new regulatory framework will have on:
  • builders
  • relevant building surveyors, and
  • design professionals including architects and engineers.

Proposed changes to the Victorian building regulatory framework

Important changes to the regime which have recently been made or announced include:

1. the creation of the new Building & Plumbing Commission (BPC) who will have the power to direct the rectification of defective work following the issuing of the Occupancy Permit (presently such directions can only be issued prior to the issuing of an OP) and stop apartments with serious defects from being sold
2. The requirement for developers to provide a ‘developer bond’ to cover the cost of fixing defects in buildings over 3 stories
3. An ‘inspection blitz’ by the VBA/BPC with a focus on Class 2 buildings.⁴
4. A revised approach to the issuing of Directions to Fix (DTF) and Building Orders by relevant Building Surveyors⁵, and
5. The release by the VBA of a new Practice Guide for design documentation for Class 2 residential buildings (Class 2 Guide).

The Victorian Government’s ambitious Housing Statement

The Victorian Government is implementing policies and planning approvals to try and meet its Housing Statement target of building 800,000 new homes over the next decade and 2.24 million homes by 2051. The policies and approvals so far include:

• pilot projects of 10 ‘Activity Centres’ designed to deliver 60,000 new homes in areas with existing transport, services and jobs with an announcement for a total of 50 ‘Train and Tram Zone’ Activity Centres’ recently announced⁶
• the fast tracked approval by the Minister for Planning of 11 and 12 storey residential buildings in Coburg⁷
• approval of planning for 700 new homes in the Docklands, to be built in 3 new high rise buildings, on top of the approval earlier in 2024 of plans for 900 rental apartments in Docklands, and
• investment in public and community housing including building 769 homes within next 5 years with Commonwealth Government funding, investing $1 billion in the Affordable Housing Investment Partnership program providing low interest loans and government guarantees to finance social and affordable housing.

What will be the impact of the reforms on builders, design professionals and building surveyors?

The VBA Report together with the two reports⁸ released by Cladding Safety Victoria this year (CSV Reports) highlight some of the failings of the current building regulatory regime. In the process of delivering the cladding rectification program to some 330 apartment buildings, the CSV observed ‘significant and widespread’ non-cladding defects across these buildings particularly in balconies.⁹ The CSV has expressed the view that design and permit decisions by designers and building surveyors were an ‘early and causative factor’ leading to the installation of combustible cladding on apartment buildings. In relation to the widespread balcony defects observed, the CSV attributes the source of those defects ‘primarily …to the builder’¹⁰. Where a lack of detail in construction drawings and specifications have contributed to the defects, CSV suggests design professionals and building surveyors face exposure to civil claims.¹¹

The reforms are looking to tackle these types of issues and are expected to have a significant impact on builders, professional designers and relevant building surveyors.

Builders

Some of the criticisms directed at builders in the VBA Report include carrying out non-compliant work, failing to call the RBS to cause inspections at mandatory notification stages, demanding progress payments for works that have not been carried out and for works carried out under a Direction to Fix and failing to obtain requisite domestic building insurance.

The CSV in its non-cladding building defects report identified systemic issues with waterproofing and moisture/water damage in class 2 buildings of two to 10 stories.¹² The State Building Surveyor at a recent presentation¹³ indicated that a new category of domestic builders is to be introduced for buildings between two and five stories. Builders seeking registration in this new category will be required to meet additional criteria.

The new BPC will have the power to order builders or developers to return to a building to rectify defects after an Occupancy Permit has been issued. The VBA Report also recommends (#8) the introduction of statutory mechanisms to hold directors of insolvent building or development companies liable for defective work. These reforms would make builders more accountable for their actions and give Owners a wider range of options when faced with defective works/insolvent builders/developers.

The regulatory reforms will result in more mandatory inspections by RBS’ and more VBA ‘blitz’ inspections on Class 2 Buildings. Builders should expect to face more scrutiny and be more accountable for their actions, both by RBS’ in the fulfilment of their obligations and by the new BPC through their greater focus on inspections and disciplinary action, particularly for repeat offenders.

Relevant Building Surveyors

The Building Act 1993 was amended in 2016 to prohibit a builder from appointing a private building surveyor in relation to domestic building work.¹⁴ Pursuant to s33 of the Building Act 1993, a builder is required to ensure that the relevant building surveyor is notified ‘without delay’ at the completion of each mandatory stage of work (s33(1)) and the builder must ensure that any person who is carrying out the building work stops carrying out that work or any part of it on completion of a mandatory notification stage if directed to do so by the relevant building surveyor (s33(2)). Section 33(3) provides that a relevant building surveyor ‘must notify the Authority…of any failure of a person to comply with subsection (1) or (2)’.

Approximately 100,000 building permits are issued in Victoria each year.¹⁵ In the period July 2023 – June 2024 only 109 referrals were made to the VBA by building surveyors under s33(3). It is apparent from the VBA Report and some of the reforms that have been announced that concerns remain about the independence of RBS’ and the potential conflict of interest between their regulatory role under the Building Act 1993 (the Act) and their relationship with builders who are/can be a primary referrer of work to private building surveyors.

The new Class 2 Guide has been prepared to address inadequacies in design documentation, which can lead to project variations, increased construction costs and non-compliant building works.¹⁶ The Practice Guide sets out the type of information required from designers to ensure that an RBS has sufficient information to show that the proposed building work will comply with the Act and Regulations.¹⁷ The Practice Guide addresses the information required for each aspect of the design including architectural, fire safety and structural engineering. The onus will be on the RBS to detect non-compliances with the Practice Guide and reject building permit applications with inadequate information. It is foreseeable that where an RBS fails to identify any ‘missing details/information’ and a project ultimately contains defects which can be linked to the missing details/information, an RBS may find themselves the subject of a civil claim.

In addition to the increased scrutiny which will be required of relevant building surveyors when reviewing applications for building permits, it has also been proposed that they carry out additional mandatory inspections including a waterproofing inspection and a pre-lining inspection.¹⁸ The need for greater scrutiny of waterproofing in apartments was highlighted in the CSV report into non-cladding building defects. The report identified that of the 359 funded by the CSV which have combustible cladding, 50% have non-cladding defects and of these 80% were identified to have water/moisture related structural damage and of these, 33% were missing or had insufficient waterproofing.¹⁹

Whether the Government goes one step further and passes legislation amending the Building Regulations 2018 (Vic) to require RBS’ to carry out ‘as many inspections as are reasonably required to ensure building work is compliant’ in line with the VBA Report recommendation #4, is yet to be seen. Such expansive inspection obligations would be a significant change to the current requirements for mandatory inspections (which on a standard build is 4 inspections) and would alter the role of the RBS significantly such that they would be taking on a ‘supervisory role’ which currently falls within the contractual responsibilities of the builder.²⁰

Any changes to the inspection requirements are likely to increase the responsibilities of RBS’ and provide further avenues for their conduct to be scrutinised. It is not uncommon in domestic building disputes to see claims made against RBS’ based on their alleged failure to identify and issue directions/orders for defects which are not required to be inspected under the current mandatory inspection requirements. The perception of RBS’s as having a supervisor role on building sites persists amongst consumers. An increase to the number of inspections or a significant expansion in way in which inspections are to be carried out (as proposed in the VBA Report) will add to this perception and their exposure to claims.

Design Professionals

The VBA Report identified non-compliant architectural designs, where the relevant practitioners involved had not been referred to the Architects Registration Board of Victoria (for disciplinary action). The Report recommends that where the VBA identifies non-compliances by design professionals, the relevant practitioner should be referred to the ARBV (or appropriate body) and that the VBA should have a policy regarding the referral of such matters to the appropriate body for disciplinary action.

Following the NSW reforms, the VBA Report also recommends that the Act be amended to require design practitioners to declare their designs are compliant at the time they submit them to the RBS for review. Prescribed categories of engineers already provide certificates of compliance for carrying out certain functions under the Act.²¹ Designers including architects and draftspersons are not required to do so. However, typically, architects under consultancy agreements are contracted to produce designs which comply with all legislative requirements, which encompasses compliance with the BCA. The provision of a certificate of compliance for their designs may be viewed as written confirmation that they have complied with their contractual obligations.

The more significant reform to impact designers is the introduction of the new Class 2 Guide. The Guide prescribes in some detail the information that designers should consider and include in their designs. It is in essence a ‘best practice’ guide for the design of class 2 buildings. Scopes of services within consultancy agreements often dictate the level of detail that is to be provided by designers in their design documentation. The fee is negotiated on the basis of the agreed scope of work. Designers will need to ensure that their proposed contractual scope of work includes provision for the requirements of the Class 2 Guide. Where this does not occur and a designer does not address any part of the Guide in their design because it is not being paid to do so, the failure(s) of the designer to comply with the Guide may be relied upon to support a civil claim against the designer.

Even though described as a Guide, compliance with the Class 2 Guide is not considered to be optional. In the event the VBA finds the designers are not complying with the Class 2 Guide, the VBA Report recommends that compliance with it be made mandatory.²²

Our experienced construction team in Victoria are here to provide tailored advice and help you navigate the reforms to the Victorian building regulatory regime.

If you have any questions or would like advice, please contact the authors of the article.