Anti-phoenixing laws
The building industry has high rates of insolvency when compared with other industries. Sometimes, directors of building companies liquidate a company and intentionally create a new one to carry on the same business. They may do this to avoid completing work, fixing defects or paying debts, including subcontractor wages. This practice is known as illegal phoenix activity. There are national anti-phoenixing laws that address this issue. NSW also has powers to refuse and cancel building licenses where a person has been involved with a company that has become insolvent in the previous 10 years.
Before you settle on a home design, check if your preferred builder has a valid contractor licence at Service NSW. If you cannot find it, contact Fair Trading to confirm that the company holds a contractor licence.
You can also:
- research companies through ASIC Connect and ABN Lookup searches
- check whether they have an iCIRT rating (a register of trustworthy contractors)
- check the NSW Fair Trading complaints register
All builders require home building compensation cover for work over $20,000 including GST. This helps homeowners if the builder is unable to complete work or fix defects because of insolvency, death, disappearance or licence suspension.
Anywhere, anytime inspection powers
New inspection laws in NSW aim to improve customer protection for homeowners. Building Commission NSW inspectors can proactively inspect houses that are under construction. Inspectors may examine, test, take samples or seize things to determine building compliance.
Inspectors may issue a rectification order to the contractor for:
- defective building work
- work that could result in a defect
- damaged structures or work arising from a defect.
Inspectors may also issue a stop work order to a developer under certain conditions.
New suspension powers
The Building Commission NSW can immediately suspend registered practitioners while disciplinary action is being finalised. This includes:
- certifiers
- design practitioners
- principal design practitioners
- building practitioners
- professional engineers
This power is already in place for builders and contractors under the Home Building Act 1989.