The builders’ disciplinary regime starts to bite

Geoff Hardy                 A couple of newsworthy events at the turn of this century precipitated a wave of reform in the building industry.

The first was the insolvency of a major construction company, Hartner Construction, which had a similar impact to the recent Mainzeal collapse.

The second was the realisation that the leaky building phenomenon was a full blown crisis. In 2002 a study of the shortcomings of New Zealand’s building industry was carried out by the Overview Group on the Weathertightness of Buildings, which produced what is known as the Hunn Report (named after the Group’s Chairman).

The Hunn Report made 25 separate recommendations, most of which have been faithfully adopted by successive Governments over the ensuing 12 years. Perhaps the most significant one has been the introduction of occupational licensing for builders, which was enshrined in the new Building Act of 2004.

Until that time, anyone could get a dog, a ute, and a set of tools, and call himself or herself a builder. That in itself did not cause the leaky building crisis (the Hunn Report concluded that it was one of those systemic failures with multiple causes) but it did lead to the same lax quality standards that you would expect to see if anyone could get a robe, a shingle and a laptop, and call himself or herself a lawyer.

Builder licensing had a long gestation period, and did not become fully operational until 1 March 2012. Their system differs from the lawyers’ regulatory regime in several important respects.

First, to become a licensed builder it is not yet necessary to have any specific qualifications conferred by an educational institution. Since many competent builders have no such qualifications, the Government instead introduced a quality assurance assessment that was based more on experience on the job.

Secondly, a tradesman can become licensed in any of seven different skill sets (design, site supervision, carpentry, brick and blocklaying, roofing, external plastering, and foundation laying) and three different tiers of complexity (simple single dwellings, more complex single dwellings/low rise commercial buildings, and high rise commercial buildings), so unlike lawyers they are limited to their proven areas of specialisation.

Thirdly, licensing is voluntary. Builders only have to be licensed if they choose to do residential building work that is critical to the structural integrity, weathertightness or fire safety of houses or small-medium apartment buildings. And as long as there is at least one licensed builder carrying out or supervising that work, they can engage any number of unlicensed tradesmen to assist them. So a builder would only choose to be licensed if he or she wants the kudos that comes with the title, or he or she wants to do residential building that is more complex than mere handyman work, and not be supervised by someone else.

In all other respects, the builders’ licensing regime is similar to the lawyers’ licensing regime. They need to renew their practising certificate every year, pay an annual levy, undertake a minimum level of continuing education, and submit to a disciplinary process. Lawyers are largely disciplined by their peers, subject to some oversight by a lay observer, and ultimately by the Courts. Licensed builders are disciplined by a statutory board known as the Building Practitioners Board (BPB) that gets administrative support from the Government.

The BPB is currently made up of two lawyers, an accountant, a mediator, a building surveyor, a building consultant, an architect, and a builder, who are drawn from all over the country. The BPB can either receive complaints from members of the public, or investigate licensed builders on its own initiative.

Complaints are extremely easy to initiate. They are done online using a simple form that guides you through the process, and they cost nothing to file. Not surprisingly, it is becoming commonplace for homeowners whose relationship with their builder comes to an end in acrimonious circumstances to file a complaint with the BPB irrespective of any other dispute resolution process that may be initiated.

These complaints may be motivated by a genuine desire to protect the general public from a sloppy builder or force the builder to acknowledge his deficiencies, but more often than not they are a natural attempt to exert some leverage in the context of a dispute, or to exact some retribution.

The complaints are first investigated by the Registrar of Licensed Building Practitioners who filters out those which are non-compliant. The Registrar sends qualifying complaints to the BPB with a recommendation to proceed or not proceed, and the BPB makes its own decision.

If the BPB decides to proceed – and present indications are that it will hear all complaints where an arguable case is established – then a semi-formal, quasi-judicial and hugely costly tribunal-like process is commenced that is governed by standard principles of natural justice and procedural fairness.

The BPB’s powers are limited to imposing a number of sanctions that range from suspending or cancelling the builder’s licence, restricting the kind of work the builder can do, fining the builder up to $10,000, ordering the builder to undertake training, formally reprimanding the builder, to ordering the builder to pay the costs of the complaint inquiry. There is no power to direct that a payment be made to the complainants.

The BPB can only discipline a licensed builder on one or more of the grounds specified in section 317 of the Building Act 2004. Any disciplinary action the BPB takes will be recorded against that builder’s name on the public register for licensed building practitioners for three years.

There are some jurisdictional limits on the BPB’s powers which are not readily apparent, and some procedural changes in the pipeline that will see the BPB moving from an inquisitorial system to a more adversarial system in the near future. These and other related topics will be examined in greater detail in an ADLS seminar in Auckland entitled “Construction Law Series: Current Issues” on 17 June 2014. The seminar will also cover the new consumer protection proposals, the proposed changes to the Construction Contracts Act, proposals to provide security for retention payments, the new NZS construction contracts, and the recent High Court decision in The Minister of Education v Carter Holt Harvey Ltd.

Geoff is the proprietor and senior lawyer at Madison Hardy, and a former partner at Simpson Grierson. He was an ADLS Councillor from 2006-11 and Vice-President from 2009-10, and has been the Convenor of ADLS’s CPD Committee since 2010.

To register for the “Construction Law Series: Current Issues” seminar, visit www.adls.org.nz/cpd

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