Shoddy building construction, particularly in apartments is the topic de jour. How bad is it, who’s to blame and how to fix it? They’re the burning questions. Many hoped that the last year’s report “Building Confidence - Improving the effectiveness of compliance and enforcement systems for the building and construction industry across Australia” would answer those questions. Commonly known as the Shergold-Weir report, for the two lawyers who authored it, it was comprehensive, relying as the authors pointed out on a mass of existing reports.
It had answers. Unfortunately to the wrong questions. The report never identified the key issue because they were directed to look somewhere else. Not that there aren’t problems: from the deeply troubling structural faults to waterproofing problems and a myriad of quality defects. The report identified those problems, and then set about finding a fix by concentrating on compliance and enforcement. Admirably it looked to make a better system, but it also appears to have a tacit acceptance that little could be done with the builders themselves.
The report had harsh words for architects, engineers and certifiers in particular, but by attempting to identify those who should be controlling, regulating, inspecting and ensuring quality in the buildings, they've misunderstood that the ultimate responsibility lies with the person who actually builds the building. The report did not deal directly with builders, who are the central issue as we shall see, but rather with the many players around the builder.
However, in the context of large buildings such as apartments, it is actually the developer, controlling the builder, who is ultimately responsible for the building. Rich but reviled, developers are usually twinned with unscrupulous and greedy, as they are the entity that stands to profit the most from the building. Since developers should be the focus of the reforms, we need to sort out the relationship between builders and developers.
There are some who are both, builders who plough profits from building projects into their own developments. Generally, they have worked for a substantial time and, having created a strong and secure background with banks and insurance companies, they exhibit a greater degree of responsibility. By and large, their buildings are not in question.
On the other hand, there are ‘contract builders’, so named as they build to contract for a developer, often smaller and less experienced. These developers, often of apartments, may have little more than an approval to build and are driven by the possibilities of huge profits from apartment sales. And they need to engage a builder to construct those apartments. The cheaper the building contract the greater the profit. To finance the project the developer often has to have pre-sales for the apartments, with the consequent loss of incentive for quality, a problem discussed in last week's column.
In either case a builder has responsibility to build in accordance with three controls: the approved drawings, the building code and Australian Standards. It is essential to hold the builder, and hence the developer, to account for the work that they do on all three controls. If builders have ongoing responsibility for their work, then it will be always be in their interest to ensure that the building is built correctly.
This can be done in two ways: by policing what the builders do, or by making them liable. Not a stick or carrot, but a stick and a bigger stick. The small stick is having inspections from a variety of experts, the bigger one is making builders financially liable to repair any and all defects, for a substantial period. The Shergold-Weir report is long on policing, but very short on builder liability. Why is this so? My speculation is that this is just too hard. Let’s examine three options.
The first is to have an entity (developer + builder) that can be held responsible. That is far from what happens now where builders and/or developers form a company for the project and fold it immediately on completion so that no-one can be held liable. The same people re-appear on the next project with no carry-over responsibility. It’s called phoenixing, and it’s rife. But to have directors held responsible for the actions of a company goes against the whole thrust of corporation’s law, particularly as championed by the right-wing free marketeers in power federally. A complete overhaul of having director’s financial responsibilities and liabilities spelt out and enforceable? That’s a step, or rather a leap, too far, like re-writing the Bible, it’s never going to happen.
A second option is a form of circumventing the first: the entity (again developer + builder) would have to put up a bond or bank guarantee, held for say 5-7 years. This is to prevent phoenixing, by establishing a fund that can be called on if problems arise, one that cannot be phony bankrupted, one that guarantees purchasers have recourse. It delays the developer’s profits, which could be no bad thing, driving out some get-rich-quick merchants. But it would also drive up building costs. Not that better practices aren’t going to do that anyway.
The third option is to insure the workmanship. The fact that insurance cannot be obtained for building apartments, but it is mandatory for houses, is testament to two facts: there a long tradition of poor quality in apartments, and insurance companies often can’t find someone to take responsibility for that work. If insurers aren't willing to back the current process, then a major reconsideration of how buildings are procured is needed.
The best way to guarantee that a building has high quality is having the builder and developer held responsible for that quality for 5 to 7 years after its construction. By knowing that every single step that they make, on every part of the building, every day on site, may be called into question at some future time, and that their profits depend on it, will ensure that they will sharpen their mind to rule out the dodgy practices that are so prevalent at the moment.
The alternative being pursued as a result of the Shergold-Weir report, of having an ever-tightening regime of policing on site will always be a second-best option: it attacks the periphery not the heart of the matter. No matter how effective a compliance and enforcement system you can dream up it won’t stop some builders being pressured into cutting corners, building shoddy and then ‘closing down’ without any repercussions for them. Bad building will continue.
When asked on ABC 4 Corners if she would buy a current apartment Bronwyn Weir said “no”. If I am asked if I think that her report will fix the problem, and fix it soon, my answer is the same.
Tone Wheeler / environa studio
The views expressed are solely those of the author and are not held or endorsed by A+D.