THE QBCC COMPLAINTS PROCESS AND INSURANCE SCHEME FOR RESIDENTIAL APARTMENT COMPLEXES OF 3 STOREYS OR LESS

In our March 2017 edition of Activated (Activated – 14 March 2017) we spoke about the time limits that apply to making a complaint to the Queensland Building and Construction Commission (QBCC) in respect of defects in building work.

This month we talk in more detail about the complaints process through the QBCC and possible statutory insurance available to a body corporate for defects in common property for residential apartment complexes of 3 storeys or less.

Why 3 storeys or less (and when we say 3 storeys, we mean 3 storeys plus a carpark)?

Whilst:

  • The complaint process applies to defects in all building work, including common property in apartment complexes greater than 3 storeys;
  • The statutory insurance scheme only covers a residence. A residence is relevantly defined as a single detached dwelling, one or more attached dwellings that are separated by a common wall but less than three stories (for example a townhouse up to 3 stories high) and a residential unit/apartment (including common property) provided the building where the unit is located is not more than three stories.

High-rise buildings (over three stories) are not covered by the Scheme.

As we said in the March edition, there are different time limits that apply for making a complaint to the QBCC, depending on when the building contract between the developer and the builder was entered. However, generally speaking, if the Community Titles Scheme is more than 6 years 3 months old then it is unlikely there is any help available to a body corporate through the QBCC (unless there have been significant renovations within the last 6 years and the defects relate to those renovations).

The Complaint Process

Having established the existence of the defects (preferably by a detailed report), the following steps should occur:

  • Step 1 – The builder must be formally notified of the defects and be given opportunity to attend the site to rectify them. This is done by giving the builder written notice of the defects and stipulating a time for them to attend site and rectify them. The notice should:
    • clearly identify the builder by their correct name and licence number;
    • clearly identify the nature and location of each defect. This is where the detailed defects report will be of assistance. Note it is important that only defects in the common property should be included. Any defects that are within the boundaries of a Lot must be pursued by the Lot owners;
    • Stipulate a reasonable time to attend site and rectify the defects. The time limit should not be less than 14 days and may need to be more, depending upon the nature and extent of the defects. The building consultant engaged to provide the defects report may be able to assist in this respect, or otherwise we can advise you on what is a reasonable time. Care should be take here to ensure you are not exceeding the limitation periods discussed in the March 2017 edition of Activated;
    • State that in the event they fail to attend to the defects within the time frame stipulated, that a complaint will be made to the QBCC.
  • Step 2 – If the builder fails to rectify all the defects to a satisfactory standard or at all, a complaint should be lodged with the QBCC whereupon the QBCC will inspect and assess the defects and if they deem it appropriate, issue a direction to rectify to the builder;
  • Step 3 – The QBCC will arrange and undertake an inspection. The builder and (a nominated representative) of the body corporate will be invited to attend. The QBCC inspector will decide on whether a defect exists. If the QBCC inspector determines a defect exists they will (in most cases) issue a Direction to Rectify. If the builder fails to comply with the Direction to Rectify to a standard acceptable to the QBCC inspector, the builder is liable to receive a penalty from the QBCC which can include a fine and demerit points against their licence.
  • Step 4 – If the builder fails to comply with the Direction to Rectify by rectifying all the defects listed to the satisfaction of the QBCC (again providing it relates to a building of no more than 3 storeys (plus a carpark)) the body corporate will be entitled to make a claim on the Statutory Insurance Scheme.

The Statutory Insurance Scheme

Depending upon time limitations and other relevant factors, if the relevant building falls within the definition of a residence as mentioned above, to the extent the Scheme is of a residential nature, the Scheme will provide cover to:

  • each owner of a Lot in that building – in respect to the building work within their lot; as well as
  • the body corporate – in respect to the building work within the common property of that building,

for the cost of rectifying defective building work where the builder has failed to do so.

The Scheme is administered by the QBCC and they refer to it generally as the ‘Home Warranty Insurance’. The Scheme provides cover for the cost of rectifying certain types of defective work and subsidence (and completing incomplete work but that is not relevant to an established body corporate) up until the expiry of the policy.

There are conditions and understanding your rights can be a complex task – including considering factors such as:

  • the date of commencement of the policy,
  • the types of defects covered,
  • whether it is primary insurable work, associated insurable work or work that is not covered; and
  • procedures which must be undertaken before making a claim on the Scheme (including Steps 1 to 3 above).

Generally, the policy will be established around the time the original construction work is commenced.  A premium is paid by the builder or developer before or shortly after work is commenced and a certificate of insurance is issued.

The certificate of insurance will tell you when the policy was established and from that you can work out when coverage expires.

If a certificate was not provided to the body corporate with a copy of the building contract when the body corporate was established, you can search the QBCC records by lodging the appropriate form. You can also obtain a copy of the Insurance Policy Conditions which set out the terms and conditions of the policy.

The applicable version of the Insurance Policy Conditions will depend on when the building contract was signed for the original construction.

Coverage under the scheme will expire 6 years and 6 months after the date when the policy under the Scheme comes into effect. That means the time frame for making a claim on the Scheme can expire before the time limit for making a complaint referred to in Step 2 above.  It is also important to note that the claim is required to be lodged within 3 months of noticing the defect.  So care needs to be taken to ensure defects are identified and the required steps are taken in compliance with these timeframes.

If a claim under the Scheme is approved, the QBCC will appoint a consultant to prepare a scope of work and administer a tender process for the rectification of the defects. The successful tenderer will enter a contract with the body corporate and undertake the work which the QBCC will pay for up to the cap of the coverage (the cap is calculated by a formula in section 27 of Schedule 2C of the QBCC Regulation). If the body corporate is registered for GST, they will have to pay the builder the GST component of the contract price and claim that back as an input tax credit.

The process for pursuing rectification of defects and claims under the Scheme can be complex and whether or not you are entitled may not be readily apparent at first glance. It is always prudent to obtain advice as early as possible to establish the limitation dates that affect you and set out clearly for you the steps you need to take.

Active Law’s construction team are very experienced in all aspects of construction law including in pursuing the QBCC complaint process and claims under the statutory insurance scheme as well as all other aspects of law affecting the construction industry.

The information contained in this article is of a general commentary nature only. The information contained within this article might not be accurate at the date it is published/received and/or might not continue to be accurate in the future. You should seek proper legal advice in respect of your individual circumstances. Active Law will not be responsible for any loss or damage caused by reliance on any information contained within this article.