Creation Of DBDRV To Address Strata Building Defects

Body Corporate Managers of residential unit developments need to be aware of these changes as they apply to disputes between owners and building professionals such as builders and architects.

Presently an owner who is in dispute with their builder about defective work has two options:

They can seek free advice and conciliation from Building Advice and Conciliation Victoria (BACV); or
They can lodge an application in the Victorian Civil and Administrative Tribunal (VCAT).

However, in an effort to reduce the cost of access to justice for owners and builders alike, the Victorian Government has created Domestic Building Dispute Resolution Victoria (DBDRV) which will replace the BACV. It is expected to commence operation in July 2017.

“The creation of Domestic Building Dispute Resolution Victoria (DBDRV) means there will be significant changes in Victoria to the way domestic building disputes are to be resolved.”

What disputes will go to Domestic Building Dispute Resolution Victoria?

The DBDRV will deal with any dispute between a ‘building owner’ on the one hand and builders, subcontractors, architects, building surveyors and engineers on the other, in respect of domestic building contracts or the carrying out of domestic building work. This includes disputes about:

Alleged breaches by the builder of the implied statutory warranties regarding their workmanship;
Failure to complete the building work, or to complete the building work within the required time;
Failure by the builder to maintain the standard or quality of work specified in the building contract; and
Failure by the owner to pay for the building work.

A ‘building owner’ includes any person who is the owner of the building or land on which the domestic building work was carried out. Accordingly, this definition will encompass bodies corporate insofar as the dispute concerns common property.

Importantly, save for a couple of exceptions, any dispute which falls within DBDRV’s jurisdiction must be referred to DBDRV before an application can be made to VCAT. This differs from the conciliation service provided by BACV, which was optional. Accordingly, body corporate managers should familiarise themselves with the DBDRV procedures.

The Domestic Building Dispute Resolution Victoria process

In order to initiate the Domestic Building Dispute Resolution Victoria process, a party to the domestic building dispute must refer the matter to the chief dispute resolution officer (‘the Chief Officer’). The Chief Officer will determine whether it is suitable for conciliation. If the matter is to proceed to conciliation, the Chief Officer may appoint a building assessor, architect or other suitably qualified professional to inspect the building works, prepare a report and to assist during the conciliation process.

If the matter does not resolve at conciliation or is determined by the Chief Officer not to be suitable for conciliation, the parties may proceed to VCAT. Alternatively, the parties may continue with the DBDRV process.

If the parties continue with the DBDRV process, the Chief Officer, with the help of a building assessor or engineer as the case requires (that may have been appointed during conciliation), will proceed to issue a Dispute Resolution Order. A Dispute Resolution Order may:

Order a builder to rectify defective building work (and damage), or complete building workwithin a defined period of time;
Restrain owners from doing anything that might prevent the builder from satisfying an order torectify or complete building work;
Order an owner to pay money into trust; and/or
Order a builder to pay the reasonable cost of rectifying defective building work.

Interestingly, the DBDRV will only order a builder to pay for rectification to be carried out in circumstances where the building work ‘is so defective that it would not be appropriate to allow the builder to rectify or complete the work’. Should a party wish to appeal the DBDRV’s orders, they may apply to VCAT. However, if the DBDRV’s orders are affirmed, then VCAT may award costs against the appealing party.

If the DBDRV’s orders are not complied with, the aggrieved party may terminate the building contract and apply to VCAT for an order for payment of damages by way of compensation.

Is a Special Resolution required to refer a matter to DBDRV?

It is unclear whether the DBDRV process constitutes legal proceedings, the commencement of which requires a special resolution by bodies corporate. The conciliation process is very different to how traditional legal proceedings are conducted, but the fact the DBDRV can make orders compelling the parties to do certain things creates some doubt around this question.

Hopefully, this issue will be clarified fairly soon after the commencement of DBDRV. Until then, it might be prudent to obtain a special resolution to avoid any difficulties down the track.

Conclusion

This highlights the importance of a well-drafted management agreement and a smooth transition when changing strata management companies. Just as in personal relationships, clear communication and careful planning can prevent unnecessary difficulties.

Change Body Corporate Victoria helps body corporates change their body corporate manager. There are tonnes of unvetted and untrustworthy managers in Victoria, and we help body corporates find the best strata manager for them.

If you would like further advice on body corporate matters, James can be contacted by email at JCollier@moray.com.au or by telephone 03 8687 7354. Moray Agnew https://www.moray.com.au/