Introduction

Litigation should always be a last resort when dealing with domestic building defects. Disputes between homeowners and builders can be resolved through negotiation and defects can be rectified without the need for costly and time-consuming legal action.

Knowing your options can help you navigate the process effectively and ensure you take the necessary steps to protect your property and investment.

The following must not be construed as legal advice, as each case is different. Marchesin & Co. Lawyers is happy to hear about your grievances – feel free to give a call on 03 9111 5677 to speak with a lawyer.

First Steps

Make a “reasonable attempt” to resolve the dispute with the other party such as a Letter to the builder formally requesting the defective works be rectified. This letter preferably be sent via email or registered mail – communication via SMS is fraught with danger, as text messages can be inadvertently deleted or edited.

Gather all documentation including:

  • The domestic building contract
  • Occupancy permits or certificates of final inspection
  • Correspondence with the builder (emails, letters, and records of discussions)
  • Invoices and payment records
  • Photos and reports of the defects
  • Any expert assessments or building reports

Domestic Building Dispute Resolution Victoria (DBDRV)

Before any legal proceedings can commence in Victorian Administrative and Civil Tribunal (VCAT), Domestic Building Dispute Resolution Victoria (DBDRV) must be engaged to assess the situation. DBDRV is a free service that mediates domestic building disputes.

Engaging DBDRV can often prevent the need for costly legal action and ensure defects are addressed efficiently. Parties can also apply to VCAT to seek a review of DBDRV decisions.

Types of Disputes

DBDRV can only help resolve disputes arising from defective or incomplete building work, delays, issues with payment and arising from a domestic building contract.

Criteria for DBDRV

Your dispute must be about domestic (residential) building work, such as construction, renovation, alteration, extensions, demolitions, improvement or home repairs, accompanied by a domestic building contract.

The DBDRV does not mediate disputes for single trade work such as tiling or plasterwork, unless the cost of those works is more than $16, 000. A domestic building contract is required for any works over $16, 000, as well as Domestic Building Warranty Insurance regardless of the type of trade work. The DBDRV will mediate claims related to single-trade work if they meet this threshold.

Note: there is a 10-year limitation period on domestic building contracts – to inquire about your 10-year limitation period give us a call on 03 9111 5677.

Your dispute must not be, nor have been, the subject of a VCAT proceeding or any other court.

If your dispute is eligible to be heard by the DBDRV then you must apply to resolve your dispute before applying to VCAT, s 45F (5) of the Domestic Building Contracts Act 1995 (Vic) states:

“Certificate of conciliation required to bring proceeding in VCAT to resolve domestic building work dispute

(1) A party to a domestic building work dispute must not make an application to VCAT in relation to the dispute unless the chief dispute resolution officer has issued a certificate of conciliation to the party certifying that the dispute—

(a) was not suitable for conciliation; or

(b) was not resolved by conciliation.

(2) An application to VCAT to commence proceedings in relation to a domestic building work dispute must be accompanied by a copy of the certificate of conciliation.”

Exceptions

You can bypass DBDRV and go directly to VCAT if you’re seeking an injunction to prevent a party from taking actions that cause you harm.

If your dispute was heard by Building Advice and Conciliation Victoria (BACV) which closed in April 2017, contact Consumer Affairs Victoria (CAV) to obtain a letter from CAV to VCAT, using this letter apply directly to VCAT.

Who Can Apply?

Building owners, builders, sub-contractors, architects, engineers, surveyors, and draftspersons involved in domestic building work disputes are eligible to apply directly to DBDRV without legal representation.

DBDRV Process

Step 1: Submitting an Application

The process can be completed online via the DBDRV website. The application must include a record of prior attempts to resolve the dispute directly with the other party, such as the letter mentioned in ‘first steps’ and all other correspondence such as email replies, photos, quotations, occupancy permits or certificate of final inspection, the domestic building contract, any variations to the contract, invoices, etc.

Step 2: Jurisdiction Review

Once submitted, a dispute resolution officer reviews the case to determine if it falls within DBDRV’s jurisdiction. If accepted, the dispute progresses to the next stage.

Step 3: Initial Assessment

A Dispute Resolution Officer will assess if your dispute is suitable for conciliation based on criteria in section 45C(3) of the Domestic Building Contracts Act 1995 (the Act), including prior resolution attempts and the likelihood of success. They will contact both parties for more information.

If not accepted, both parties will be notified, given options, and issued a certificate of conciliation (dispute not suitable) required for a direct VCAT application.

If accepted, both parties will be notified, and a notice of decision outlining the applicant’s reasons for the dispute will be provided.

Step 4: Preparing for Conciliation

A Dispute Resolution Officer (DRO) will work with both parties to assess the dispute and determine the best approach. Attendance at conciliation is mandatory for all parties, and the process is facilitated by an experienced conciliator.

Before conciliation, participants may need to provide relevant documents, such as building contracts, architectural and engineering plans, permits, inspection records, variation and extension requests, and key correspondence. These documents help ensure a well-informed and efficient resolution process.

Step 5: Building Assessment

In certain disputes the DBDRV will appoint an assessor to examine the disputed building work, to determine whether the work is defective or incomplete. They have the ability to specify the cause of a defect and a timeframe for any work required or complete the building work.

The DRO determines which issues will be assessed based on the information provided by both parties. Not all issues raised may be included, and additional items cannot be added on the day. Both parties will be informed in advance about the specific issues under assessment.

Assessments take place with all relevant parties present, as notified beforehand. Respectful conduct is expected, and recordings are not permitted. The assessor does not provide opinions on whether the disputed work is defective or incomplete. After the assessment, an assessment report is issued, and parties have five business days to submit responses if needed.

There is no fee for an assessment unless a party requests one after a dispute has been rejected or was not resolved through conciliation.

Step 6: Conciliation Conference (Mediation)

A conciliation conference provides a confidential and structured environment for parties to discuss their dispute, facilitated by a conciliator (mediator). The conciliator helps guide the conversation, encourages communication, and assists in exploring possible resolutions.

Conferences are held in person, but may also take place via teleconference, video link, or with an assessor present. All decision-makers must attend, and parties can request to bring a support person or legal representative, subject to approval.

Note: the conciliation must follow the conciliation rules outlined in section 46B of the Act.

If a party refuses to participate, an assessor may be appointed, a dispute resolution order may be issued, or a certificate may be provided stating non-participation.

Section 46C(1) of the Act states as following to statements made during conciliation:

“(1) Evidence of anything said or done by the parties or the conciliation officer during conciliation under this Division is not admissible in any proceeding before VCAT under Part 5 or in any other legal proceeding unless all the parties to the dispute agree in writing to the giving of the evidence.”

Outcomes

If the matter is resolved the agreed terms are documented including the actions that the parties must take to finalise the matter with a timeframe that the obligations must be carried out within.

Section 46E of the Act a Certificate of Conciliation can be issued when the matter remains unresolved at the conciliation conference, and the parties may proceed to have the matter determined by VCAT.

The conciliation can result in an adjournment to give parties more time to obtain further information, a Dispute Resolution Order (DRO) will be issued.

Dispute Resolution Orders (DRO)

If the parties partially resolve the matter or fail to reach an agreement, the Chief Dispute Resolution Officer (CDRO) may issue a binding DRO against one or both parties.

A DRO will be issued by the CDRO once the following circumstances of the dispute are considered:

  • Any building assessment conducted by DBDRV
  • The extend of non-compliance with a record of agreement
  • Any change in the nature of the dispute or the circumstances of the parties
  • Whether it is fair and reasonable to issue the order.

DRO against a Building Owner

The order may require the building owner to pay the builder, if the builder has completed work but hasn’t been paid, the order can force the owner to pay them for the work done under s49B of the Act. The owner may be ordered to deposit money into a trust fund, if there are issues with defective or incomplete work, the owner may be ordered to put money into the DBDRV Trust Fund, s 51A of the Act. This ensures that the money is available to fix or complete the work before it is released to the builder. An order can also be issued to prevent the owner from doing anything that would stop the builder from fulfilling their contractual or warranty obligations.

The builder can notify the DBDRV if a building owner fails to comply with a DRO, this is either verified independently or the owner may confirm that they have not complied with the order. Once confirmed, both parties will receive a notice of breach of the DRO. The builder is then entitled to end the contract and apply to VCAT for payment for work already completed under the contract, an order for damages due to loss of work caused by the un-timely end of the contract and any other appropriate orders.

A building owner who has been issued with a DRO may ask VCAT to review the DRO, once the review is lodged with VCAT by the building owner the DRO is suspended, and the builder must wait until VCAT makes its decision. The building owner can also seek a VCAT review if a breach notice of the DRO is issued.

DRO against a Builder

A dispute resolution order issued against a builder can require them to rectify defective building work, complete the construction in accordance with the contract, and repair any damage caused during the building process, s 49B of the Act.

Additionally, the order may direct the builder to compensate the owner financially for the cost of rectifying or completing the work, pay for claims or entitlements under the contract, such as delay damages, or cover the reasonable cost of hiring another builder if the defects are severe enough that the original builder should not be allowed back on-site. If the work in question should have been carried out by a registered builder, the order may also require the builder to arrange for a qualified professional to complete the job.

Note: that a DRO can also find that the building work in dispute is not defective or incomplete.

If a builder fails to comply with a DRO the building owner can notify the DBDRV, the DBDRV may appoint a assessor to check the status of the building work and report whether the order has been breached. If the DRO has been breached a breach notice will be issued, the building owner is then entitled to end the contract and apply for VCAT.

The CDRO must give the Victorian Building Authority (VBA) a copy of the breach notice, the VBA then has 28 days to commence disciplinary action against the builder by issuing a ‘show cause’ notice. Which proposes suspension of the builder’s registration for up to three years.

The builder may challenge the DRO by asking VCAT to review the decision of the DRO on that basis that:

  • The description of the defective or incomplete building work is not accurate
  • The due date for carrying out the specified building work is not reasonable
  • Any requirement in the order to take, or refrain from taking, specific action is unreasonable or unnecessary

If a review is lodged with VCAT by the builder, the DRO is suspended, and the owner must wait until VCAT makes a decision.

Failure to Comply

Section 46G of the Act states that

“Notice of failure to comply with conciliated agreement (1) A party to a domestic building work dispute may give written notice to the chief dispute resolution officer if an action recorded in a record of agreement for the dispute has not been taken within the time specified in the record of agreement. (2) The notice must state the extent of any partial compliance with the required action.”

Wait, there’s more!

Our next post, Part 2, will discuss the VCAT process and limitation periods for claims against builders for defective building works.

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