Developers in the Queensland building and construction industry may be faced with regulatory requirements previously unseen in this State.
The role of developers in the construction industry has been the subject of review by the Developer Review Panel (Panel), appointed by the Queensland government.
The Panel has recently released its Discussion Paper which is open for public consultation until 23 January 2023.
The Discussion Paper recognises that developers have the primary role in setting the tone of a project and influencing payment security, as well as building quality and safety throughout a project’s life.
The Discussion Paper canvasses a range of potential options to promote high standards within the industry, focussing on developers’ conduct in contracting practices and execution of construction projects.
While there is no guarantee that any of the Panel’s recommendations will be adopted into Queensland law, it is important for developers and contractors alike to understand the range of possible regulations being considered and the potential impacts on developers and the industry.
Options for regulation of developers
The Discussion Paper outlines 38 options for feedback during the consultation stage.
Some of the options identified by the Panel include the following:
- Developer licensing scheme similar to the QBCC licensing framework for contractors, could be extended to apply to individual and corporations carrying out development activity. The licensing regime would include qualification, experience and fitness to practice considerations and would allow for monitoring and compliance in relation to standards of conduct and competence.
- Industry code of conduct, a code of practice or professional standards applicable to developers. Such codes may be voluntary or mandatory and enforced and monitored by government, an industry body or an independent body.
- Developer ranking system, similar to the independent Construction Industry Rating Tool (iCIRT) system implemented in New South Wales.
- Compulsory disclosure obligations. This would involve developers disclosing information to contractors before entering into contracts, with the purpose of assisting head contractors to understand a developer’s financial capacity at the point of entering into a contract. The disclosure may include land ownership and other assets, finance arrangements and compliance with health and safety and other legislation. The Panel also recognised the particular issues facing head contractors undertaking due diligence in relation to developers which use a Special Purpose Vehicle for a project.
- Tendering standards including introducing minimum standard requirements for tendering and the evaluation of responses, to support probity, transparency and accountability to tendering across the sector and support ethical behaviours.
- Cooling-off periods allowing either party to withdraw from tenders that are unsustainable and allowing contractors the opportunity to reprice when market shocks or severe weather events have occurred.
- Project Trust Account obligations may be extended to include developers. The intention would be to quarantine project funds to trust accounts, to provide transparency and certainty for head contractors and introduce minimum requirements on developers to operate a project trust.
- Improving documentation by requiring designs to adequately demonstrate compliance with the National Construction Code or include any relevant certificates of conformity, accreditation.
- Expand ‘fairness in contracting’ laws to comprehensively apply to developers. The prescribed requirements, restrictions and penalties would also apply.
- Contemporary standard contracts to ensure standard contracts are fit-for-purpose and relevant to the Queensland context.
- Improved transparency in amendments to allow parties to identify the changes that have been made to standard contracts and help parties better understand the proposed changes and their impacts.
- Improved ability for head contractors to suspend if non-payment by a developer.
- Extend the non-conforming building products chain of responsibility to developers.
- Strengthen whistle-blower protections for the reporting of non-conforming work.
- Superintendents – Mandatory requirements for superintendents to act reasonably and impartially (and not as agent of the principal) through a code of conduct and a review of licence requirements to ensure all elements of the role are licensed.
- Documentation of amendments – regulating the documentation of amendments made during construction similar to NSW, where registered design practitioners must lodge designs for certain buildings on a government portal, including any variations.
These issues have been considered by the Panel in the context of the flow-on effects for the quality of building work, safety in performance of building works and the overall risk carried by participants in the contractual chain.
The Panel has identified that contractual risk allocation and complexity of contracts is a key issue to be considered in the review of the role of developers.
The Panel considered the implications of risk transfer through contracting methods, with the impact on head contractors bearing unreasonable risks.
This issue has been addressed by legislation in the context of building contracts through prohibited building contract conditions (Queensland Building and Construction Commission Act 1991 (Qld), s. 67GB). However, although this provision was introduced in 2017, no “prohibited conditions” have yet been prescribed by regulation.
Where to from here
Public consultation is now underway for the Developer Review. The public consultation period ends on 23 January 2023.
Based on feedback received during the consultation period, the Panel will prepare a report to be submitted to the State Government. Batch Mewing Lawyers will keep you updated on the progress of the potential regulation of developers.