Building watchdog that failed for years to do its job says sorry. Now it will be abolished, replaced

Families were left traumatised, out of pocket and with unfinished homes after Victoria’s building watchdog failed to respond to complaints about dodgy builders, allowing poor work and unethical conduct to flourish.

The findings of an independent review, to be released on Thursday, have prompted an apology from Victorian Building Authority chief Anna Cronin and triggered plans for a new larger regulator with tougher powers over builders, and insurance reforms to protect consumers.

Planning Minister Sonya Kilkenny has vowed to overhaul the Victorian Building Authority. Credit: Scott McNaughton, Natalie Boog

“There is no doubt that the VBA’s management and culture failed consumers,” said the independent report commissioned by Cronin.

Its authors examined seven separate complaints made by the Victorian public, dating back to 2014, where the regulator failed its duties to respond to significant misconduct. They covered 75 affected properties, 22 of which still remain incomplete.

While the seven examples were among the most complex, they represent a fraction of the complaints made over the past decade: More than 3400 building and plumbing matters were lodged in the 2022-23 financial year alone, investigators said.

Among the shocking examples of VBA failings were a woman who lodged 17 complaints over three years as her builder stopped work for months, leaving the site exposed. When a complaint was made about defective plumbing work, the VBA took no disciplinary action and told her to claim plumbers insurance, telling her she would have to find the insurer’s details using freedom of information laws.

In another instance, a family signed a $2.6 million contract only to have the price increased to $4.6 million two years later. After they paid the extra money, the contract was terminated, leaving them with an additional $2.6 million bill to rectify defects and finish the job.

The move comes following revelations by The Age and 60 Minutes about a toxic culture within the authority and an investigation that found it had risked breaching its own laws by doing hundreds of audits by smartphone.

Investigators Bronwyn Weir and Frances Hall found most of the building practitioners involved in the seven case studies had breached legislation or engaged in unprofessional or incompetent conduct.

But many of the breaches were not picked up by the VBA during investigations and even fewer led to enforcement action.

Customers have complained to the VBA about being left with unfinished homes and extra costs. Credit: Eamon Gallagher

“Because ineffective regulation of the building industry has continued over many years, poor standards of building work and unethical conduct have been allowed to flourish in Victoria’s building industry,” their report said.

“It is critical that the system is reformed, and the VBA continues its transformation to become a trusted and effective regulator, otherwise owners will continue to be faced with debilitating outcomes including protracted and expensive legal proceedings.”

The report says each complainant identified had suffered and continued to suffer “severe financial, emotional and physical distress”.

“Every aspect of their lives has been negatively impacted. They have watched their savings or superannuation be replaced with debts they cannot bear,” it said.

“The families and friends of these people have been called on for financial and emotional support, extending the impacts of defective building work and buildings well beyond the VBA.

“If the regulator does not have the capability and culture to identify what practitioners are doing wrong, the chances of holding them to account are very slim. These case studies highlight the regulator’s failure to hold practitioners to account.”

In 2018, the VBA was tasked with implementing a statewide cladding audit while also being told to proactively inspect 10 per cent of the approximately 100,000 building permits issued each year.

Despite being given additional funding, the report found the organisation failed to carry out its backlogged “business as usual” work while addressing these new duties. Staff had poor IT systems and resources were not always used effectively.

The authority told the investigators it had been working hard to improve and that the “inadequate and dismissive responses to the complainants as highlighted below no longer reflect current practices at the VBA”.

Cronin was last year appointed to lead the authority and later became chief commissioner, after the toxic internal culture and virtual inspections were revealed by The Age and 60 Minutes.

She commissioned the review late in 2023, telling the public she wanted to restore the VBA as a “trusted regulator”.

“I sincerely apologise to those who’ve been let down – we can and will do better,” Cronin said.

“I commissioned this independent report because consumers deserve better – we are learning from past mistakes and already putting in place changes to become a more effective and trusted regulator.

“This report is more evidence the VBA needs to be much more effective as a regulator to better protect consumers and meet broader community expectations.”

Planning Minister Sonya Kilkenny will on Thursday pledge to go further than merely reforming the VBA.

The government will seek to replace it with a more powerful watchdog over building and plumbing, bringing together regulation, insurance and disputes into one agency.

The state government will commit to introducing tougher powers requiring builders to fix substandard work and prevent the sale of defective apartments.

They will also pledge to provide better access to building insurance, seeking to prevent costly legal claims against builders, and introduce a new requirement for developers to provide a bond to cover the cost of fixing poor work on buildings over three storeys tall.

This will kick off planning for a 10-year insurance product for apartments. A proposal for how this will work will be put forward by a working group.

“For most of us, building a home will be the biggest investment we ever make, and Victorians rightly expect to get what they pay for – a properly built, affordable home,” Kilkenny said.

All builders involved in the seven cases cited in the VBA report have had their registration suspended, cancelled or are under investigation. The report made 20 recommendations, identifying gaps in the VBA’s powers and changes to the organisation aimed at ensuring complaints are handled properly.

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