Are you a Subcontractor or Builder?

There are pitfalls that tradies working in the domestic building industry may fall into when dealing with the Domestic Building Contracts Act 1995 (Vic) (“Act”). They may sometimes get themselves strung up without knowing that they have when involved in doing renovation jobs and building gigs.

What does the law say?

Well, the Act says many things. However, we think that this part of the Act is important because it talks about major domestic building contracts and building works.

For example, Section 29(1) of the Act says [1]:

• A person must not enter into a major domestic building contract to carry out domestic building work for another person unless:
• the person is a registered building practitioner; and
• the person’s registration authorises the person to carry out the work.

Penalty: 500 penalty units, in the case of a natural person; 2500 penalty units, in the case of a body corporate.

How much is a penalty unit? As of FY 2019, a penalty unit is $165.22 [2]. This doesn’t sound very much but can get expensive, very fast. This fine can go up to $82,610 and, if you run a company, then it can go up to $413,050 [3]. While the law sounds simple, and almost common sense to know what domestic building works and what major domestic building contracts are, it is very important to know the consequences if they are not complied with.

The mysterious case of Owusu

The case of Owusu-Afriyie v Panoramic Structures and Pools Pty Ltd (Building and Property) [2016] VCAT 485 (“Owusu”) shows that understanding the law about domestic buildings might be more difficult than what we might first think. In Owusu, this case involved a concreter working for an owner-builder. The hearing itself went for a lengthy five days [4]. Here, the concreter was held by the Tribunal to be a “builder”, even though the concreter was just doing concreting work and the owner was the owner-builder.

What should I look out for?

If you are in the construction trade, always make sure to know what kind of agreement you are getting yourself into. Double check if you are following the laws properly when signing up construction works for more than $10,000 [5].

Owusu provided two questions to ask in these kinds of situations.

First:

• is there a contractual intermediary [6];

Second:

• did you enter into a contract with a builder and was your engagement part of the works under a domestic building contract [7]?

If you answered no to both questions, this may class you as engaging in a major domestic building contract if you are dealing directly with an owner.

What should I do now?

As a tradie:

• If you are engaging in any kind of works more than $10,000, think carefully who is your customer? Is it the builder or the owner?
• Speak to the VBA and discuss your situation.
• If you are still unsure about what to do next, then you should consider getting legal professional help to ensure that you are complying with your legal obligation in the construction industry.

How can DSA Law help?

If you have a construction law issue and believe you could benefit expert legal assistance, please Contact Us or one of our Commercial Lawyers at DSA Law on (03) 8595 9580.

[1] Domestic Building Contracts Act 1995 (Vic) s 29(1)

[2] Victorian Government Gazette, No. G 14 (4 April 2019)

[3] Domestic Building Contracts Act 1995 (Vic) s 29(1)

[4] Owusu-Afriyie v Panoramic Structures and Pools Pty Ltd (Building and Property) [2016] VCAT 485 at 16

[5] Domestic Building Contracts Regulation 2017 (Vic), reg 6; see also Consumer Affairs Victoria, building contracts (2 January 2020)

[6] [2016] VCAT 485 at 71

[7] [2016] VCAT 485 at 72