On 25 May 2022, the Queensland government passed legislation to reverse changes which would have seen the requirements for builder licensing extend to parties which have previously been exempt from holding a licence.
This will come as welcome news to many construction industry participants.
Head contractor exemption
A person requires a licence under the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act) to carry out, or undertake to carry out, building work, unless exempt under Schedule 1A of the QBCC Act.
We have discussed the impacts of carrying out building work without the appropriate licence here.
One exemption to the requirement to hold a licence is the “head contractor exemption” in section 8 of Schedule 1A to the QBCC Act.
It provides that an unlicensed person who enters into a contract to carry out building work does not contravene section 42(1) merely because the person entered into the contract if the building work is to be carried out by a person (an appropriately licensed contractor) who is licensed to carry out building work of the relevant class.
Also, the unlicensed person does not contravene section 42(1) merely because the person:
(a) directly or indirectly causes the building work to be carried out by an appropriately licensed contractor; or
(b) enters into another contract, with an appropriately licensed contractor, to carry out the work.
The exemption does not apply where the work is residential construction work or domestic building work.
Although the section has not been the subject of significant judicial scrutiny, some recent cases have illustrated its utility:
- In Trustee For Hardev Property (Dev 10) Unit Trust v Palmgrove Holdings Pty Ltd  QSC 208, although the contractor did not have the requisite licence for certain anticipated work to be carried out, the intention to engage sub-contractors who did have the requisite licence was enough to enliven the exemption.
- In Panel Concepts Pty Ltd v Tomkins Commercial & Industrial Builders Pty Ltd  QDC 322, it was found that section 8 can be used by those who are not strictly ‘head contractors’ (that is, it may apply down the chain to various tiers of subcontractors).
What is the current status of the head contractor exemption?
The head contractor exemption was due to be removed from the legislation in July this year.
The Queensland government has passed legislation to instead retain the exemption, with modification. This follows consultation which showed reliance on the exemption in commercial contracting, including development agreements, agreements for lease, and numerous projects and contracts that involve a minor element of building work.
The proposed modification is to introduce a regulation-making power to require certain head contractors to obtain a licence in specific circumstances. It is expected that the exceptions to be prescribed by regulation include where there is high risk work such as fire protection and mechanical services.
The proposed changes to the legislation were introduced in the Building and Other Legislation Amendment Bill 2022. The Bill was passed on 25 May 2022 however the commencement date for these changes is to be advised. We will publish further updates about the changes to the exemption when they are available.