Role of property developers under review and significant industry reforms foreshadowed
On 2 November 2022, the Developer Review Panel (Panel) convened by the Queensland Parliament released its long-awaited discussion paper in respect of the role of property developers operating in the Queensland building and construction industry (Discussion Paper) which can be found here.
The Discussion Paper raises 38 potential ‘options’ (or potential reforms) for consideration by the industry, on which feedback is sought from the general public by 16 December 2022. If the majority of the proposed options are eventually adopted, their implementation will result in a significant change to the regulation of the construction and property development industry in Queensland. In this article, we consider the suite of potential options that have been raised for discussion.
Background and reasons for the review
In November 2021, the Queensland Government announced its review into the role of developers within the building and construction industry. The review originated from a public hearing that was held in Brisbane on 3 and 4 March 2020 convened by the Transport and Public Works Committee of the Queensland Parliament. At the hearing, the Committee received submissions to the effect that developers play a vital role in ensuring the flow of funds down the contractual chain, and that accordingly a licensing regime should apply to developers to ensure that they are captured within the security of payment lifecycle.
On 15 July 2020, Queensland Parliament legislated for a review to be conducted into the role of developers in the building and construction industry. The Developer Review Panel was established on 16 November 2021 and comprises members with property and construction industry experience including Alison Quinn, Gina Patrick and John Payne, whose biographies are included at Appendix 2 of the Discussion Paper.
What are the options raised in the Discussion Paper?
The Panel has set out 38 options for consideration in the Discussion Paper for which the general public has been invited to provide feedback by 16 December 2022. The Discussion Paper states that the options do not represent government policy or the Panel’s views. The full list of 38 options can be found at Appendix 1 of the Discussion Paper. We have set out some of the key items which we anticipate will be of interest to the sector:
Licensing. A licensing regime for property developers, with similar entry requirements to the Queensland Building and Construction Commission (QBCC) licensing framework.
Code of conduct. An industry code of conduct which could be monitored or enforced by the government, an independent body, or the building practitioner industry.
Developer ranking system. The introduction of a developer ranking system, which would rank developers based on a prescribed list of principles or behaviours, potentially similar to the iCIRT ranking system recently introduced in NSW.
Disclosure arrangements. Disclosure from a principal to a head contractor before entering a contract for development activity, including such matters as land ownership and other assets, finance arrangements and compliance with health and safety and other legislation.
Expansion of project trust accounts. Extending the project trust requirements to developers and requiring developers to quarantine funds for specific projects.
Tendering standards. The introduction of minimum standard requirements for tendering, to be developed and maintained by industry or government, and to provide additional probity, transparency and accountability to tendering across the sector. The Panel has also raised an option for consideration as to promoting alternatives to hard tendering (which is tendering only on design and other limited information). A further option raised is a cooling-off period to be introduced once a tender has been submitted. It is raised that a cooling-off period would enable the parties to further consider the tender submissions and provide parties an opportunity to withdraw from tenders that are unsustainable.
Standard contracts. The Panel has raised an option to be considered whereby the General Conditions of Contract are reviewed in a Queensland context to ensure they are contemporary and fit for purpose. The Panel has also identified an option that would require parties to clearly identify what changes have been made to standard contracts, to help parties better identify the proposed changes and their impacts.
Powers to suspend construction work. Streamlining of powers for head contractors to suspend construction work, including if there has been non-payment of progress claims by a developer.
Expanding ‘fairness in contracting’ laws. Extending mandatory and prohibited contract terms legislation to developers, including prescribed requirements, restrictions and penalties.
Superintendents. The introduction of mechanisms to ensure superintendents act in a fair and reasonable manner, including precluding superintendents from acting as an agent of the principal.
Expansion of security of payment (adjudication) to domestic contracts. Extending the adjudication of payment disputes process to contracts for domestic building work with consumers. Currently, domestic building work is excluded from adjudications under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act).
Extend the non-conforming building products chain of responsibility to developers. Presently, the chain of responsibility under the non-conforming building products legislation in Queensland captures persons who design, manufacture, import, supply or install a building product. An option would be to also include developers in the chain of responsibility. The Panel has also raised an option for consideration including whistleblower type protections for the reporting of non-conforming building work, and introducing obligations for building certifiers to report non-conforming building work to the QBCC.
Mandatory inspections. The number of mandatory inspections during construction could be increased to enhance the oversight surrounding the construction of class 2 – 9 buildings. Another option that is raised is for the QBCC to conduct ‘certificate of occupancy’ audits based on a similar process in NSW to assess building work before a certificate of occupancy is granted.
Additional insurance. The introduction of insurance for consumers (such as decennial liability insurance, which is being implemented in NSW) to limit the exposure of owners in residential apartment buildings that have experienced defects following completion of the building.
Property protections. Ensuring head contractors and subcontractors maintain access to their equipment and building materials, such as immediately following the financial collapse of a project. This has been a significant concern for the sector.
Body corporate reforms. Some of the options raised by the Panel include ensuring documentation provided at handover of the building is adequate and fit for purpose; limiting developers from being able to vote on a body corporate decision relating to defects for a certain period after the establishment of a body corporate; requiring developers to disclose budget protections to a body corporate for a minimum period; and addressing potential conflicts of interest involving developers regarding the composition of a body corporate and provision of building management services.
Dispute resolution services. The Panel has raised options relating to dispute resolution services, including reviewing current dispute resolution processes (including opportunities to clarify valid payment claims and adjudication applications), and investigating alternative services such as dispute resolution processes to address issues on an interim basis while a contract is on foot and limited to disputed monies under a certain value of work.
The general public now has the opportunity to provide comment on the Discussion Paper and can do so by 16 December 2022. Following this consultation period, the Panel will provide its final report to the Queensland Government for its consideration. Information sessions are also being convened and details regarding them can be found on the website of the Department of Energy and Public Works here.
Our Construction and Infrastructure team will be providing a submission in response to the Discussion Paper. If you would like to share any views, or if you have any questions about the Discussion Paper, please feel free to get in touch with a member of our team.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.