Victoria’s building industry is failing consumers

The verdict on Victoria’s domestic building industry is in and on the public record. And it’s not pretty.

The evidence of the Victorian Auditor-General’s Office Audit into Victoria’s Consumer Protection Framework for Building Construction was released on 28 May 2015 and confirms the scheme has failed consumers, contrary to the bureaucratic spin.

Victorian building consumers have been conned, deliberately denied access to their supposed “consumer rights” regarding building defects as guaranteed under the law, and for 22 years owners and their families have been defenceless, open to exploitation and most shamefully unprotected.

While the VAGO’s audit findings are extremely damning, with the auditor-general calling for “urgent reform”, a close examination uncovers several unthinkable truths.

First, every single element of the so-called “consumer protection scheme” has failed. Yes, not one element of the consumer protection strategy serves the purpose of providing any protection for consumers. And in its totality, the Auditor-General concluded that the scheme is utterly inadequate and entirely ineffective.

The scheme is a scam. It is pointless in terms of the “stated objectives” of safeguarding consumers’ rights, or providing consumers access to their legal entitlements or any possible means of redress or recompense for building defects.

Most alarmingly, what the report highlights is that all the bureaucratic officials responsible for policy, administration and governance have been investigated and audited by many independent authorities over the last two decades and all reported findings have deemed the system a failure – over and again. Though nothing has changed.

The VAGO has completed three audits, the previous two in 2000 and 2011, and together with this third one, the Auditor-General has investigated the governance agencies across the full 22-year period of this system. Every time the findings have been damning, documenting the widespread systemic failure, conflict of interest, collusion and cronyism, and also identifying consumers’ vulnerability.

Every time the recommendations for improvement have been put to department and agency officials. And every time the officials have committed to implementing the recommendations and effecting change. Yet, every time the next independent audit, review or investigation is conducted, the findings reveal that the recommendations have simply been ignored, with no changes ever implemented.

Even more shocking, if possible, after each investigation, audit or review, these officials agreed to making their obligatory “improvements”. However, in reality all the VAGO reports have revealed that these officials have actually made the system worse. In place of “improvement”, these officials managed to inflict more damage upon more consumers.

An examination of the elements of the “consumer protection” scheme and the Auditor-General’s key findings demonstrates the officials involved’s culpability for harm to millions of ordinary Victorians.

Key findings of the VAGO Report

REGISTRATION

In relation to registration, the Victorian Building Authority (VBA) and the Building Practitioners Board (BPB) are meant to ensure that practitioners are only registered if qualified, experienced and of good character.

VAGO findings: “Registration does not provide consumers assurance that all registered builders are competent, qualified and of good character.”

The VAGO found many deficiencies in standards and processes for assessing applications, as did the Victorian Ombudsman in 2012. We now know that the overwhelming majority of registered builders do not meet the stated criteria for registration.

MONITORING AND COMPLIANCE

Surveyors have a key role in compliance. They are meant to issue building permits and conduct stage inspections. In reality, their business relationships with builders are underpinned by conflict of interest. In 2011, the VAGO examined building permits and the Auditor-General found that “96 per cent of building permits did not meet minimum building and safety standards”.

VAGO findings: “Monitoring and compliance does not provide consumers assurance that surveyors are acting in their best interest and that problems will be promptly discovered and addressed.”

Further, their “important role is undermined by a conflict of interest”.

Surveyors are supposed to ensure that buildings meet minimum standards, but “reliant on builders for ongoing work, this limits the surveyor’s independence to challenge non-compliant work”.

PRACTITIONER DISCIPLINE

The BPB and VBA are responsible for consumer complaints, investigations and discipline of building practitioners. In reality, very few building practitioners are called to account; they have but a 0.3 per cent chance. Under the VBA since 2013, they have less chance than under the Building Commission. Of those fined by the BPB, few pay the fine. Most appeal at VCAT and walk away.

VAGO findings: “No efficiency or timeliness standards for disciplinary functions, disciplinary sanctions appear ineffective, surveyors are over-represented and the Disciplinary Register is not prominent on the website (for consumers).”

“Over 27 per cent of offending surveyors appeared at disciplinary inquiries more than once within the same year.”

“Consumers cannot have confidence that they are protected from misconduct and that practitioners will be appropriately sanctioned when they offend.”

DISPUTE HANDLING

Consumers have no access to any fair, affordable or timely means of “dispute resolution”. From many hundreds of consumer case studies, we know the Consumer Affairs Victoria outcomes and VCAT outcomes. With CAV, there are very few conciliations. Of those, consumers rarely, if ever, obtain any satisfactory outcome.

As for what the VAGO was informed, CAV’s claimed 68 per cent of cases “resolved” is absolute nonsense. Another VAGO audit on CAV in 2013 found that CAV reported false statistics in its annual report.

And at VCAT, if owners “win”, they lose. Cases can last up to nine years, commonly hearings can go for 17 days and owners will leave much worse off financially than before they sought “justice” at VCAT.

VAGO findings: “Consumer Affairs Victoria does not measure its performance. Ultimate consumer outcomes are not known.”

“CAV assesses complaints and will not attempt conciliation unless it believes there is a ‘reasonable likelihood of resolution’. It reports a resolution rate from its dispute conciliation services of 68 per cent, but its definition of ‘resolved’ does not necessarily mean that parties to the conciliation are satisfied.”

“CAV only accepts a complaint for conciliation if both parties agree to participate.”

“Any agreed outcomes, such as building repairs or payments, are unenforceable.”

“Critically, CAV does not follow up or monitor actions agreed by parties.”

“If consumers aren’t satisfied by the outcomes achieved in the conciliation process they can go to VCAT, which may be time consuming and costly.”

“Consumers cannot rely on dispute resolution to provide a satisfactory, timely and cost-effective outcome.”

Consequences for consumers

The most recent CAV statistics, in 2010, found that 256,000 or 40 per cent of owners have suffered financial loss from building defects. Five years on, we know it is much worse.

The financial detriment to Victorian owners was $500 million in 2005 (according to the Building Commission) and according to CAV was $706 million in 2006, $1.6 billion in 2008 and around $3.8 billion in 2010. There are no official statistics since 2010.

However, we estimate that in 2014 the financial loss alone would have been around $15 billion for Victorian consumers.

If we compare this consumer disaster with natural disasters, it becomes beyond scandalous. Publicly available information says the Queensland floods of 2011 caused a financial loss of $16 billion. The damage bill for the 2009 Victoria bushfires was $4.4 billion. But our man-made consumer disaster is more expensive – but it is preventable and repeated every year. Across Australia in 2014, we estimate it cost owners $45 billion.

As this VAGO’s verdict has decreed in three reports covering 22 years, every element of consumer protection has failed. The blame for this is clearly with the governance agencies, the blighted Building Commission and its cloned regulatory successor, the Victorian Building Authority. Of course, the “regulator” did not manage to create the greatest consumer catastrophe ever all on its own.

It clear that the BC/VBA have been assisted by Consumer Affairs Victoria, the Building Practitioners Board and the Building Appeals Board, since these have had responsibility for protecting consumers.

Two government departments have responsibility for these policies and operation of these agencies. It seems senior policy officials have been critical in allowing this to happen. Instead of taking control of the building industry or enforcing compliance of building and consumer laws, or safeguarding consumers or ensuring good governance, consumers have been betrayed, and many have lost trust and confidence in the government. Those past and present officials, who failed in their obligations and duty of care, must now be held accountable.

Anne Paten is a consumer advocate who has worked for over seven years assisting building consumers and to reform the governance of the domestic building industry. She is president of the Victorian Building Action Group.