A leading accounting firm has warned that a fund proposal under a new bill, which aims to protect consumers against unscrupulous builders, has the potential to force many small operators out of the industry.

The Domestic Building Consumer Protection Fund is a key feature of the new Building Amendment Bill, tabled by the Victorian Government recently and aims to create a ‘one-stop shop’ for building regulation and consumer protection. If approved, the new fund will replace the current Builders Warranty Insurance system, which itself has been widely criticised for stifling growth and jobs in the industry because of its inability to provide adequate levels of cover.

Property Expert at William Buck Chartered Accountants and Advisors, Neil Brennan believes the proposed new system also has major flaws and could result in increased insurance premiums and red-tape that would force many small operators out of the industry.

According to Neil, obtaining and maintaining insurance has always been one of the major barriers for growth in the industry. The number of insurers providing builders’ warranty insurance in Victoria has dwindled over the past two years to the point where insurance is practically only available through one provider and the amount of cover available is often limited. This has stifled the capacity of many builders to take on new projects and also blocked many new operators from entering the industry.

With these new reforms the industry was hoping for a system that would enable builders to take on new work, particularly jobs outside of their normal style of construction. Unfortunately the new fund puts more emphasis on protecting consumers than providing assistance to builders.

Neil said that replacing the current system with a fund structure meant that consumer compensation claims and insurance premiums were now very closely linked. The new system is likely to increase the incidents of quality builders subsidising those few builders who let down the business, which could lead to some small builders being driven out of the industry altogether.