Understanding the QBCC Act: A Guide for Contractors

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Navigating the complexities of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act) and the Queensland Building Construction Commission Regulation 2018 (Qld) (Regulations) can be overwhelming for contractors. Uncertainty about key obligations can lead to costly mistakes and legal issues.

To ensure compliance and peace of mind, schedule a free initial consultation with our expert building and construction lawyers today.  Our team has assisted countless builder and contractors protect their businesses and resolve disputes effeciently.

Executive Summary

The Act and Regulations impose a variety of obligations and warranties on contractors performing building works.

Understanding and adhering to the QBCC Act and Regulations is crucial for contractors to avoid disputes, legal issues, penalisation and ensure high standards of their work.

The QBCC Act and Regulations however can often be overwhelming, complex and challenging to navigate and comprehend what is expected of a contractor.

Within this article, our expert building and construction lawyers will breakdown a contractor’s key obligations and statutory warranties under the Act and Regulations.

Key Obligations

Under the QBCC Act and Regulations, a contractors key obligations include the requirement:

1.    to be licensed;

2.    to ensure their contracts met the requisite requirements;

3.    to comply with the consumer protection requirements; and

4.    to ensure that they obtain the appropriate home warranty insurance coverage.

Licensing

Under the QBCC Act and Regulations, all persons who carry out, undertake or cause building work (incl. building work services) to be carried out must be licensed whether they perform domestic building work or commercial building work. Building work services can include management, advisory, administrative or supervisory services.

The definitions under the QBCC Act and Regulations are intentionally broad to ensure that all persons involved in building work are required to hold a licence.

Section 42 of the QBCC Act states that it is an offence for an unlicensed person to carry out building work under the Act, unless that person is exempt. The maximum penalty is:

1.    for a first offence—250 penalty units; or

2.    for a second offence—300 penalty units; or

3.    for a third or later offence, or if the building work carried out is tier 1 defective work—350 penalty units or 1 year’s imprisonment.

NOTE: Subsection (2) states that ‘An individual who contravenes subsection (1) and is liable to a maximum penalty of 350 penalty units or 1 year’s imprisonment, commits a crime.’

As a further consequence, the contractor is precluded from utilising the Building Industry Fairness (Security of Payment) Act 2017.  It is therefore crucial that a contractor ensures that they are appropriately licensed to perform the respective works they are engaged to do.

Entitlement to contractor’s licence

Section 31(1) of the QBCC Act outlines that a person (not a company) is entitled to a contractor’s licence if:

1.    they are a fit and proper person to hold the licence; and

2.    they have the qualifications and experience required by Regulations in relation to a licence of the relevant class; and

3.    they satisfy the minimum financial requirements for the licence; and

4.    they can lawfully work in Queensland; and

5.    they are not an excluded individual for a relevant event or a permanently excluded individual; and

NOTE: Pursuant to section 56AC of the QBCC Act, an excluded individual is an individual that takes advantage of the laws of bankruptcy or becomes bankrupt, and three (3) years have not elapsed since the relevant bankruptcy event.

6.    they are not a disqualified individual;

NOTE: Pursuant to section 67AU of the QBCC Act, a disqualified individual is an individual that has been given notice that they are not considered to be a fit and proper person.

7.    they are not a banned individual; and

NOTE: Pursuant to section 67AC of the QBCC Act, A banned individual is an individual that has been given notice that they are not considered to be a fit and proper person.

8.    they do not have an unpaid judgment debt for an amount the commission may recover under section 71.

Further, section 31(2) of the Act outlines that a company is entitled to a contractor’s licence if:

1.    the directors, secretary and influential persons for the company are fit and proper persons to exercise control or influence over a company that holds a contractor’s licence; and

2.    the company’s nominee holds a licence specifically identifying, as a class of building work that the nominee may supervise, the same class of building work for which the licence is sought by the company; and

3.    the company satisfies the minimum financial requirements for the licence; and

4.    the company is not an excluded company; and 

NOTE: Pursuant to section 56AC of the QBCC Act, an excluded company is a company that appoints a liquidator, provisional liquidator, administrator or controlled or is wound up, or three (3) years have not elapsed since this any of these events. 

5.    the company is not a company for which a banned or disqualified individual is a director, secretary, influential person or nominee; and

6.    neither the company, nor a director, secretary, influential person or nominee of the company has an unpaid judgment debt for an amount the commission may recover under section 71.

Minimum Financial Requirements

Most contractor licences (with some exceptions) require the holders to meet the minimum financial requirements (MFR) in accordance with the Queensland Building and Construction Commission (Minimum Financial Requirements) Regulation 2018 (MFR Regulations).

The MFR Regulations require contractors to provide the QBCC with (among other things):

1.    Pursuant to section 9, the relevant financial information, including (without limitation) to a declaration about the licensee’s revenue and net tangible assets or the licensee’ internal management accounts or a signed financial statement (subject to the respective licence held).

2.    Pursuant to 11A and 11D, MFR reports prepared by a qualified accountant.

3.    Pursuant to 11F, notice and information about any significant change to the business.

4.    Pursuant to 13, information about a decrease in net tangible assets. 

NOTE: Under section 12 of the MFR Regulations a licensee must hold net tangible assets, excluding any deed of covenant asset, of not less than $0 (for a builder contractor’s licence, they must hold net tangible assets of at least $46,000.00).

Applicants for a contractor’s licence are required to provide information within their application to show compliance with the MFR of the MFR Regulations.

The QBCC will impose penalties due to a failure of a licensee to comply with the financial reporting obligations under the MFR Regulation. This can include a fine, a suspension or cancellation of a licence.

In our experience, the most common occurrence of this escalating is simply as a result of the contractor or their accountant failing to notify the QBCC of any change of address of the business or the accountant, resulting in any notices from the QBCC being issued to the incorrect address.

This can have serious consequences for a contract if their licence is suspended or cancelled without their knowledge, including the building contracts being terminated the by owner or principal.

Contract Requirements

All Contracts other than Domestic Building Contracts

Division 2, Part 4A of the QBCC Act sets out the requirements for all contracts, including (without limitation):

1.    building contracts must be in writing;

2.    provisions relating to giving directions under building contracts;

3.    sets out limits for retention amounts and securities for contracts and subcontracts;

4.    sets out requirements for notification before exercising set off rights;

5.    regulates the suspension of works;

6.    imposes penalty interest rates for late progress payments;

7.    regulates the statutory defects liability period;

8.    makes payment provisions void if they provide for progress payments later than 15 business days after submission of a payment claim for construction contracts and later than 25 days for subcontracts; and

9.    contains special provisions for construction management trade contracts and subcontracts and commercial building contracts.

Penalties will apply if the contractor fails to provide a contract that meets these requirements.

Domestic Building Contracts

Section 67AZN of the QBCC Act states that domestic building contracts are regulated under Schedule 1B and the provisions of Schedule 1B apply to domestic building contracts and the parties to those contracts.

Schedule 1B of the QBCC Act sets out the requirements for domestic building contracts, including (without limitation):

1.    the contract must be in a written form, dated and signed on behalf of each of the parties.

2.    The contract must contain all of the following:

a.    the names of the parties to it, including the name of the building contractor as it appears on the contractor’s licence;

b.    the building contractor’s licence number as it appears on the building contractor’s licence;

c.     a description of the subject work;

d.    any plans and specifications for the subject work, including all plans and specifications required for carrying out the work in compliance with any development approvals or similar authorisations that are required by law for carrying out the work;

e.    the contract price or the method for calculating it, including the building contractor’s reasonable estimate;

f.      a provision that states the date for the start of the subject work at the building site, or how the date is to be determined;

g.    a provision that states the date for practical completion or how the date is to be determined;

h.    a statement of each of the statutory warranties that apply to the subject work;

i.      a conspicuous notice advising the building owner of the right the owner may have to withdraw from the contract under schedule section 35 [cooling off period].

3.    If the contract price is fixed, it must be stated in a prominent position on the first page of the contract schedule.

4.    If the contract price is not fixed, the method for calculating it, including any allowances, must be stated in the contract schedule.

5.    If the contract price may be changed under a provision of the contract, the contract must also contain— (a) a warning to that effect; and (b) a brief explanation of the effect of the provision allowing change to the contract price.

6.    The warning and explanation mentioned above must be in a prominent position on the first page of the contract schedule.

7.    The contract must not state the name of any person— (a) as the building contractor; or (b) so it may reasonably be mistaken to be the building contractor; unless the person is the building contractor under the contract.

 Example— a domestic building contract stating a company name as the building contractor if an individual is actually the building contractor under the contract.

8.    The contract must also comply with all other requirements prescribed by the Regulations.

Schedule 1B of the QBCC Act, also places obligations on contractors to provide a copy of:

1.    the contract to the owner within five (5) business days after the contract is executed; 

2.    the commencement notice to the owner within ten (10) business of commencing the work on site, which is signed by the contract and state the date the works commenced and the date for practical completion;

3.    if the contractor is responsible for engaging a building certifier, of each certificate of inspection issued by the building certifier for the subject work as soon as practicable after receiving the certificate.

4.    the consumer building guide to the owner before they sign the contract.

A failure of a contractor to comply with the Act can result in penalisation, such as monetary penalties.

Statutory Warranties

Further, Schedule 1B of the QBCC Act sets out the statutory warranties (in addition to the Australian Consumer Law) that are implied into the domestic building contract, which includes (without limitation):

1.    that all materials supplied will be good and suitable for the purpose for which they are used;

2.    that all materials supplied will be new (unless otherwise stated in the contract);

3.    that the work will comply with all relevant laws and legal requirements;

4.    that the work will be carried out in an appropriate and skilful way and with reasonable care and skill;

5.    that once the work is completed, the detached dwelling or home will be suitable for occupation;

6.    that the work will be carried out in accordance with any plans or specifications (as the case may be);

7.    that any provisional sum has been calculated with reasonable care and skill, having regard to all the information reasonably available when the contract is entered into; and

8.    that the work will be carried out with reasonable diligence, if the contract is a cost-plus contract and does not have a stated completion date or period.

Warranties cannot be excluded from a contract for domestic building work. Any provision of an agreement that seeks to exclude a warranty is void. The original consumer and subsequent building owners can enforce the statutory warranties.

The warranty period for a regulated contract is:

1.    for a breach that results in a structural defect, six years; or

2.    in any other case, 1 year.

The warranty period starts on completion of the work, or if the work is not completed:

a.    the date of termination – if terminated;

b.    the date on which work ceased – if not terminated; or

c.    the date the contract was entered into – if the contract is not terminated and work was not started.

If the breach of a statutory warranty becomes apparent within 6 months of the end of the warranty period, the relevant party may start proceedings a further 6 months after the end of the warranty period.

Insurance

Part 5 of the QBCC Act establishes the Queensland Home Warranty Scheme, a mandatory statutory insurance program. This Scheme mandates that builders undertaking residential construction work valued over $3,300 directly for homeowners must secure appropriate home warranty insurance.

This insurance benefits both the consumer and future owners of the property.

The term ‘residential construction work’ is comprehensively defined in the Act and Regulation, encompassing the construction of new homes, as well as renovations and extensions.

The Scheme offers protection against:

a.    Incomplete work as per the contract;

b.    Defective construction;

c.    Subsidence or settlement of the insured work; and

d.    Acts of vandalism, forcible removal, and damage from fire, storm, or tempest.

The insurance coverage is valid for 6 years and 6 months from the earliest of the following dates: the contract signing, the payment of the insurance premium, or the commencement of construction. The statutory policy, which has evolved over time, imposes strict deadlines for claim notifications.

Conclusion

Navigating the complexities of the QBCC Act Act and Regulations can be overwhelming for contractors. Uncertainty about key obligations can lead to costly mistakes and legal issues.

To ensure compliance and peace of mind, schedule a free initial consultation with our expert building and construction lawyers today.