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Explanatory note
This explanatory note relates to this Bill as introduced into Parliament.*
Amended in committee--see table at end of volume.
Clause 2 provides that the proposed Act will commence on a day or days to
be proclaimed.
Clause 3 is a formal provision that gives effect to Schedules 1-5, which
amend the Building Services Corporation Act 1989.
Clause 4 is a formal provision that gives effect to Schedule 6, which amends
the Consumer Claims Tribunals Act 1987.
Clause 5 is a formal provision that gives effect to Schedule 7, which
contains amendments to the Contracts Review Act 1980 and other Acts.
Schedule 1
Amendments to BSC Act relating to work
and contracts
Schedule 1 [ 1 ] inserts definitions of business day, contract price,
owner-builder and statutory warranty. These definitions are used in new
provisions relating to contracts, warranties and insurance.
Schedule 1 [2] specifies the circumstances in which the proposed
amendments apply to developers.
Schedule 1 [3] inserts new sections establishing requirements for contracts
for residential building work or specialist work.
Proposed section 6 applies the requirements to that work but excludes them
in certain emergency situations.
Proposed section 7 requires the contracts to be written, to contain the parties'
names and licence details, the plans and specifications, the contract price (if
known) and applicable statutory warranties and to comply with any
requirements of the regulations.
Proposed section 7A makes it an offence to contract to do such work unless
the contract requirements in proposed section 7 are complied with (maximum
penalty 20 penalty units).
Proposed section 7B requires the licence holder to give the other party a
signed copy of the contract not more than 5 clear business days after entering
into the contract (maximum penalty 20 penalty units).
Proposed section 7C makes void clauses in contracts or other agreements that
require mandatory arbitration of disputes.
Proposed section 7D specifies the circumstances in which a licence holder or
other person has a caveatable interest in the land by virtue of the contract.
Explanatory note page 2
Schedule
l [4] inserts proposed section 10 which provides that a contract
that does not have a sufficient description of the work or is not in writing is
not enforceable by a licence holder who is party to it. It also removes the
right of a licence holder who enters suck a contract, or a person who
contracts to do work under a contract that contravenes other contractual
requirements, to claim damages or to take action in respect of a breach of
contract. The person will still be liable for breaches of the contract.
Schedule 1 [5] inserts new sections establishing requirements for contracts
for supplying kit homes.
Proposed section 16C applies the requirements to that supply.
Proposed section 16D requires the contracts to be written, to contain the
parties' names and licence details, the plans and specifications and the
contract price (if known) and to comply with any requirements of the
regulations.
Proposed section 16DA makes it an offence to contract to supply a kit home
unless the contract requirements in proposed section 16D are complied with
(maximum penalty 20 penalty units).
Proposed section 16DB requires the licence holder to give the other party a
signed copy of the contract not more than 5 clear business days after entering
into the contract (maximum penalty 20 penalty units).
Proposed section 16DC makes void clauses in contracts that require
mandatory arbitration of disputes.
Proposed section 16DD specifies the circumstances in which a licence holder
or other person has a caveatable interest in the land by virtue of the contract.
Schedule 1 [6] inserts proposed section 16G which provides that a contract
that does not have a sufficient description of the kit home to be supplied or is
not in writing is not enforceable by a licence holder who is party to it. It also
removes the right of a licence holder who enters such a contract, or a person
who contracts to supply a kit home under a contract that contravenes other
contractual requirements, to claim damages or to take action in respect of a
breach of contract. The person will still be liable for breaches of the contract.
Schedule 1 [7] inserts proposed Part 2C. (Statutory warranties).
Proposed section 18A applies the Part to residential building work done or to
be done under a contract made on or after the commencement of the section.
Explanatory note page 3
Proposed section 18B sets out the warranties by a licence holder, or a person
required to hold a licence, in a contract to do residential building work. The
warranties are:
*
that the work will be performed in a proper and workmanlike manner
and in accordance with the plans and specifications in the contract
*
that the materials supplied by the builder will be good and suitable for
the purpose, and new unless otherwise stated in the contract
*
that the work will comply with the law
*
that the work will be done with due diligence and within time
*
that the work will result in a dwelling that is reasonably fit for
occupation as a dwelling
*
that the work and materials will be reasonably fit for the specified
purpose or result if the purpose is made known.
Proposed section 18C extends the statutory warranties to immediate
successors in title to owner-builders, developers and licence holders when
they sell land on which residential building work has been done.
Proposed section 18D extends the statutory warranties to successors in title
unless a predecessor in title has enforced the warranty in the same respect.
Proposed section 18E permits proceedings for a breach of statutory warranty
to be commenced for up to 7 years after completion of the work or, if the
work is not completed, the completion date or the date of the contract (if
there is no completion date).
Proposed section 18F provides a defence to a breach of statutory warranty if
the defendant shows that the relevant deficiencies arose from the instructions
of the person for whom the work was done after contrary written advice by
the defendant or person who did the work.
Proposed section 18G prohibits contracting out of statutory warranties.
Schedule 2
Amendments to BSC Act relating to
licensing
Schedule 2 [ 1 ] omits the financial grounds on which the BSC could
previously reject an application for a licence or renewal of a licence.
Schedule 2 [2] omits provisions that automatically cancelled a licence on
financial grounds.
Schedule 2 [3] omits references to warnings about financial matters from the
examples of the kinds of warnings that may be given by the BSC about
licence holders.
Explanatory note page 4
Schedule 2 [4] makes an amendment consequential on the amendment made
by Schedule 2 [1].
Schedule 2 [5] makes an amendment consequential on the amendment made
by Schedule 2 [6].
Schedule 2 [6] removes the power to require
financial information from
applicants for licences.
Schedule 3
Amendments to BSC Act relating to disputes
Schedule 3 [1] makes an amendment consequential on the repeal of
provisions relating to rectification orders.
Schedule 3 [2] amends definitions contained in Part 4 as a consequence of
the amendment made by Schedule 3 [10].
Schedule 3 [3] makes an amendment consequential on the repeal of
provisions relating to rectification orders.
Schedule 3 [4][6] revise the definition of improper conduct (for which
action can be taken against a licence holder's licence) to include breaches of
statutory warranties and make other consequential amendments as a result of
the repeal of the provisions relating to rectification orders and other
amendments.
Schedule 3 [7] revises the definition of improper conduct (for which action
can be taken against a supervisor's licence) to include breaches of statutory
warranties.
Schedule 3 [8] revises the grounds on which complaints can be made against
licence holders. The new grounds include grounds related to breaches of
statutory warranties but do not include matters related to the financial
circumstances of licence holders.
Schedule 3 [9] makes an amendment consequential on the amendment made
by Schedule 3 [10].
Schedule 3 [10] inserts new provisions relating to complaints. As a
consequence of the introduction of new private insurance arrangements, there
will no longer be rectification orders as to work. The Director-General of the
Department of Fair Trading (the Director-General) will be able to advise the
parties and to take action to bring them to a settlement. However, the function
lost will, by virtue of the transitional provisions inserted by Schedule 5,
continue in relation to existing work and contracts.
Explanatory note page 5
Proposed section 58 enables the Director-General to determine whether to
take action about a complaint and to advise the parties and attempt to bring
them to a settlement.
Proposed section 59 protects an insurer who makes a complaint from liability
for loss caused by the complaint.
Schedule 3 [11] makes an amendment consequential on the amendment made
by Schedule 3 [ 10].
Schedule 3 [12] makes an amendment consequential on the amendment
made by Schedule 3 [ 15].
Schedule 3 [13] inserts definitions of authority, building claim and building
disputes tribunal.
Schedule 3 [14] removes the right to appeal to the Commercial Tribunal
against a decision on an insurance claim in the existing scheme (the
transitional provisions will continue the right for those currently insured
under that scheme).
Schedule 3 [15] inserts proposed sections 89A89D which confer
jurisdiction on the Commercial Tribunal relating to certain building claims.
Proposed section 89A confers on. the Tribunal jurisdiction over building
claims outside the monetary jurisdiction of building disputes tribunals under
the Consumer Claims Tribunals Act 1987. These will include disputes
relating to insurance claims under private insurance required under the
proposed Part 6.
Proposed section 89B gives the Tribunal power to take any action that a
building disputes tribunal may take in deciding a building claim.
Proposed section 89C sets out a procedure for deciding which court is to
decide an issue in a building claim where proceedings are taken in the
Tribunal and another court.
Proposed section 89D confers on the Tribunal jurisdiction under the
Contracts Review Act 1980 to make orders about unjust contracts for certain
residential building work or specialist work or about provisions in such
contracts. Under that Act the Tribunal may re-open contracts and take other
action in relation to contracts.
Schedule 4
Amendments to BSC Act relating to
insurance
Schedule 4 [1] provides that a licence is automatically cancelled if the holder
is convicted more than once in any period of 12 months of an offence under
proposed Part 6. A licence will also be automatically cancelled if the holder
fails to maintain insurance as required under the BSC Act.
Explanatory note page 6
Schedule 4 [2] makes it clear that the failure of a licence holder to obtain
insurance in relation to residential building work or the supply of a kit home
is a sufficient ground for suspension of the licence by the District Court.
Schedule 4 [3] inserts proposed Part 6.
Proposed section 90 contains definitions for the purposes of the proposed
Part.
Proposed section 91 applies the proposed Part to residential building work
done or to be done and kit homes supplied or to be supplied under contracts
made on or after the commencement of the proposed section.
Proposed section 92 makes it an offence for a person to contract to do
residential building work unless a contract of insurance is in force (maximum
penalty 100 penalty units). It is also an offence to contract to do such work
without attaching a certificate of insurance to the contract (maximurn penalty
100 penalty units). The offences will not apply if the contract price, or the
value of the labour. and materials, is not more than $5,000.
Proposed section 93 makes it an offence for a person to contract to supply, or
supply, a kit home unless a contract of insurance is in force (maximum
penalty 100 penalty units). It is also an offence to contract to supply a kit
home without attaching a certificate of insurance to the contract (maximum
penalty 100 penalty units). The offences will not apply if the contract price,
or the value of the labour and building components, is not more than $5,000.
Proposed section 94 removes the right of a person who enters into a contract
without complying with proposed section 92 or 93 to enforce the contract or
to recover money in respect of work done under the contract under any other
right of action (including a quantum meruit action).
Proposed section 95 makes it an offence for an owner-builder to contract to
sell land on which the owner-builder is to do or has done owner-builder work
unless a contract of insurance is in force (maximum penalty 100 penalty
units). It is also an offence to contract to sell the land without attaching a
certificate of insurance to the contract (maximum penalty 100 penalty units).
The offences will not apply if the sale occurs more than 7 years after the
work is completed or the value of the work is not more than $5,000. The
contract for the sale will be voidable at the purchaser's option if the
owner-builder does not obtain the insurance.
Explanatory note page 7
Proposed section 96 makes it an offence for a person who does residential
building work otherwise than under a contract or a developer to do residential
building work unless a contract of insurance is in force (maximum penalty
100 penalty units). It is also an offence to sell the land without attaching a
certificate of insurance to the contract (maximum penalty 100 penalty units).
The offences will not apply if the sale occurs more than 7 years after the
work is completed or the value of the work is not more than $5,000 or to
owner-builders and other persons who do their own work.
Proposed section 97 enables the Director-General to exempt a person from
the insurance requirements of proposed section 95 or 96 in exceptional
circumstances or circumstances of hardship.
Proposed section 98 makes it clear that an employee of an owner-builder, a
developer, a licence holder or other person required to be insured is not
required to obtain insurance.
Proposed section 99 sets out the matters an insurance contract for residential
building work by a licence holder must insure. They include the risk of loss
from non-completion of the work because of the insolvency, death or absence
of the contractor and the risk of loss arising from breach of statutory
warranty.
Proposed section 100 sets out the matters an insurance contract for the supply
of a kit home must insure. They include the risk of loss from non-supply
because the supplier dies or is insolvent or cannot be found and the risk of
loss from the use of unsuitable materials and components or faulty design of
the kit home.
Proposed section 101 sets out the matters an insurance contract for residential
building work by an owner-builder, a developer or a person who does work
otherwise than under a contract must insure. This will be the risk of loss
arising from breach of statutory warranty.
Proposed section 102 sets out the general requirements for insurance
contracts. The contract must be of a kind approved by the Minister, be
provided by an insurer approved by the Minister, provide cover of not less
than $200,000 and must comply with the requirements of the regulations. An
excess of $500 is permitted.
Proposed section 103 enables regulations to be made establishing
requirements for professional indemnity insurance and other similar forms of
insurance. Matters about which regulations may be made include the
provision of automatic run-off cover and the duration of cover.
Proposed section 103A enables the Minister to approve a kind of insurance or
an insurer subject to conditions and to revoke or vary an approval.
Explanatory note page 8
Proposed section 103B requires an insurance contract to provide cover for
non-completion for not less than 12 months after work ceases or a kit home is
supplied. Cover for other risks must be provided for not less than 7 years
after completion.
Proposed section 103C enables the Governor to make regulations about
insurance requirements.
Proposed section 103D makes a provision of an agreement that purports to
restrict or remove the rights of a person under the proposed Part void.
Proposed section 103E exempts the New South Wales Land and Housing
Corporation from the proposed Part.
Schedule 4
[4] makes a consequential amendment.
Schedule 5
Other amendments to BSC Act
Schedule 5 [2] renames the Act the Home Building Act 1989.
Schedule 5 [l], [3][21], [24][42] and [44] amend the Act as a result of the
abolition of the Building Services corporation. The functions of the
Corporation and its General Manager are to be exercised by the
Director-General.
Schedule 5 [22] inserts proposed sections 105113.
Proposed section 105 defines assets and liabilities.
Proposed section 106 confers functions on the Director-General related to the
objectives of the Act. These were formerly exercised by the Building
Services Corporation.
Proposed section 107 constitutes the Fair Trading Administration
Corporation (the Administration Corporation).
Proposed section 108 provides that the Administration Corporation's affairs
are to be managed and controlled by the Minister.
Proposed section 109 sets out the Administration Corporation's functions,
including the carrying on of business related to assets held by it.
Proposed section 110 transfers the assets, rights and liabilities of the Building
Services Corporation to the Administration Corporation.
Proposed section 111 provides for the keeping and use of the Administration
Corporation's seal.
Proposed section 112 establishes the Home Building Trust Account.
Explanatory note page 9
Proposed section 1 13 establishes the Fair Trading Administration
Corporation General Account.
Schedule 5 [23] establishes the Home Building Education and Research
Fund.
Schedule 5 [43] enables savings and transitional regulations to be made as a
result of the proposed Act.
Schedule 5 [45] inserts proposed Part 4 of Schedule 4. The proposed Part
contains savings and transitional provisions consequent on the enactment of
the proposed Act. These provisions include:
the continued application of the current contracts provisions to existing
contracts, and
the continued application of financial provisions relating to licences in
the case of current licence applications, and
the continued application to previous conduct, subsequent conduct
relating to existing work and contracts, and existing disputes of current
provisions related to disputes settling, complaints, disciplinary action,
jurisdiction of building disputes tribunals and the Commercial Tribunal
and appeals, and
the continued operation of statutory insurance schemes, but only in
relation to work currently insured, or currently required to be insured
under those schemes, and
matters resulting from the dissolution of the Building Services
Corporation, the transfer of its assets and the subsequent renaming of
the Act.
Schedule 6
Amendment of Consumer Claims Tribunals
Act 1987
Schedule 6 [l] and [2] make amendments consequential on the amendment
made by Schedule 6 [3].
Schedule 6 [3] provides that the time limit for jurisdiction in a building claim
related to a contract of insurance is 10 years or less after completion of the
residential building work.
Schedule 6 [4]-[6] and [13] make amendments consequential on the
dissolution of the Building Services Corporation.
Explanatory note page 10
Schedule 6 [7] makes an amendment consequential on the repeal of
provisions relating to rectification orders.
Schedule 6 [ 8 ] inserts definitions of residential building work and specialist
work for the purposes of Part 3A.
Schedule 6 [9] makes it clear that a claim or appeal against a decision under
a contract of insurance required to be entered into under the Building Services
Corporation Act I989 (to be renamed the Home Building Act 1989) may be
dealt with by a building disputes tribunal.
Schedule 6 [10] makes an amendment consequential on the repeal of
provisions relating to rectification orders.
Schedule 6 [11] and [12] remove provisions as to the referral of building
claims to the BSC for dispute resolution.
Schedule 6 [14] confers jurisdiction on building disputes tribunals to require
payment of money for application towards payment for building work the
subject of a claim.
Schedule 6 [15] confers additional powers on building disputes tribunals in
claims relating to building insurance.
Schedule 6 [16] confers jurisdiction under the Contracts Review Act 1980 on
building disputes tribunals in relation to contracts for residential building
work or specialist work. A tribunal may adjust contractual provisions and
rights under this jurisdiction.
Schedule 6 [17] enables regulations to be made about procedure when the
jurisdiction conferred by Schedule 6 [16] is exercised.
Schedule 7
Amendment of other Acts
Contracts Review Act 1980 No 16
The Schedule amends the definition of Court to include the Commercial
Tribunal and building disputes tribunals under the Consumer Claims
Tribunals Act 1987 when those bodies are exercising their jurisdiction under
the Home Building Act 1989.
Local Government Act 1993 No 30
The Schedule removes the requirement for proof of insurance under the
Building Services Corporation Act 1989 before a council can release
approved plans and specifications for building work and replaces it with a
requirement for proof of the insurance required under proposed Part 6 of that
Act (as renamed).
Explanatory note page 11
Strata Titles Act 1973 No 68
The Schedule makes an amendment consequential on the repeal of provisions
relating to rectification orders.
Strata Titles (Leasehold) Act 1986 No 219
The Schedule makes an amendment consequential on the repeal of provisions
relating to rectification orders.
In addition, the following Acts are amended to replace or remove references
to the Building Services Corporation and to replace-references to the Building
Services Corporation Act 1989:
Dangerous Goods Act I975 No 68
First State Superannuation Act I992 No 100
Gas Act I986 No 213
Home Purchase Assistance Authority Act I993 No 15
Hunter Water Board (Corporatisation) Act I991 No 53
Land Tax Management Act 1956 No 26
Liquefied Petrolum Gas Act 1961 No 3
Public Authorities Superannuation Act 1985 No 41
Public Finance and Audit Act 1983 No 152
Search Warrants Act 1985 No 37
State Authorities Non-contributory Superannuation Act I987 No 212
State Authorities Superannuation Act
No 211
Superannuation Act 1916 No 28
Water Board (Corporatisation) Act 1994 No 88
Water Supply Authorities Act I987 No I40
Explanatory note page 12