Domestic building works – what do I need to know?

It is extremely important that tradespersons and landowners understand whether building/construction works fall within the scope of “domestic building work”, as this will determine the legal and contractual requirements for the works, as well as the process that needs to be followed should a dispute arise.

There are no formal requirements in the Building Act 1993 (Vic) or the Domestic Building Contracts Act 1995 (Vic) (DBCA) for commercial building contracts. On the other hand, the DBCA imposes various mandatory requirements with respect to domestic building works, including the form and content of contracts for those works.

What is domestic building work?

Domestic building work is work related to the construction, renovation or improvement of a residential premises, or part of a commercial or industrial premises that is used as a permanent residential premises.  Domestic building work includes:

• the construction, renovation, improvement, repair or demolition of a home;
• work carried out in connection with the renovation or repair of a home, including landscaping, paving and the provision of utilities;
• site work related to the above work; and
• the preparation of plans or specifications for the carrying out of the above work.

However, domestic building work does not include any work in relation to:

• farm buildings (other than a home);
• buildings used only for business purposes;
• buildings used to accommodate animals; and
• transporting building between sites; and
• certain works that are exempt under regulation 7 of the Domestic Building Contracts Regulations 2017, which includes electrical works, painting and plastering.

What laws apply?

As noted above, the primary legislation dealing with domestic building work is the DBCA. The DBCA applies to all domestic building works, unless exempt (see above). Under the DBCA, there are a number of mandatory requirements concerning the form and content of domestic building contracts, which vary depending on the value of the contract.

What are the requirements under the DBCA?

The requirements under the DBCA are extensive, so we cannot provide a comprehensive list of its requirements in this article.  However, notably, under the DBCA:

1. all major domestic building works (greater than $10,000 in value) must be subject to a written contract; and

2. a builder must not enter into such a building contract for domestic building works unless they are registered as a building practitioner under the Building Act 1993 (Vic). In that regard, it is worth noting that the definition of a ‘builder’ is broad and includes any person who carries out domestic building work, or who manages or arranges the carrying out of domestic building work;

3. there are restrictions on the use of ‘cost plus’ contracts and clauses for domestic building works. In particular, ‘cost plus’ contracts generally cannot be used for domestic building works unless the contract price is more than $1 million; and

4. there are restrictions on the use of ‘cost escalation’ clauses for domestic building works. A ‘cost escalation’ clause means a clause that enables a builder to increase the contract price to reflect increased costs of labour or materials. A builder cannot use a ‘cost escalation’ clause unless the contract price is more than $500,000 (or any higher amount fixed by the regulations) or is in a form prescribed by the Director of Consumer Affairs.

If the requirements of the DBCA are not met (including those set out above), the ‘builder’ may not be able to enforce the contract (either all or part) against the landowner and/or the landowner may be able to avoid the contract.   For this reason, it is very important that tradespersons understand the requirements of the DBCA and seek tailored legal advice when preparing their agreements for domestic building works.

What are the options to resolve a domestic building dispute?

Disputes arising in the domestic building industry are unfortunately quite commonplace. If the works that are the subject of the dispute constitute domestic building works, there is a specific legal process that must be followed by the parties. The domestic building dispute process is designed to be simple, cost effective, and suitable for self-representation.

Prior to commencing legal proceedings, the parties should take all reasonable steps to attempt to resolve the dispute.  If the dispute remains unresolved and the aggrieved party still wishes to pursue the domestic building dispute, the following steps will need to be followed.

It is important to note at the outset that a claim in relation to a domestic building dispute must be commenced within 10 years of the certificate of occupancy or certificate of final inspection being issued (if one is issued).

A domestic building dispute commences under the DBCA with a referral to BPC. BPC aims to resolve disputes between the parties by a process called conciliation. Conciliation involves a BPC-appointed officer working directly with the parties to resolve the dispute. The conciliation process is informal, and applications can be commenced directly through the BPC website.

A domestic building dispute that cannot be resolved through conciliation is referred to the Victorian Civil and Administrative Tribunal (VCAT).  BPC may, in some circumstances, avoid the conciliation conference altogether and refer the matter directly to VCAT.  The VCAT process is also intended to be simple and cost effective.  Depending on the nature of the matter, it may be necessary for the dispute to be referred to a court for determination rather than VCAT.

Do I need a lawyer?

As noted above, it is very important that tradespersons seek tailored legal advice when preparing their agreements for domestic building works, to ensure that the agreements are enforceable.

Further, should a dispute arise regarding domestic building works, we recommend seeking assistance from a lawyer if you do not understand procedural requirements or the risks involved with the process.  An experienced lawyer can assist you with preparing your case, including procuring the best expert evidence, in a way which increases your prospects of a successful outcome.

If you require advice, contact the Litigation & Dispute Resolution team at Coulter Legal today.