Are You Breaking the Law for Your Owners Corporation?

Roscon is in the reporting field. Owners Corporation managers often ask us, once we provide a report, “Can you please give me a quote to complete these works?”

Typically, the works we’re discussing are not simple painting or plaster repair jobs. They often involve major building defects like failed balcony/rooftop waterproofing, severe brick/concrete cracking, or combustible cladding replacement. While it might seem logical to ask a provider who conducted an inspection for a quote, the reality is more complex. Not following the correct procedures could lead to legal issues, and you may be breaking the law.

As an Owners Corporation manager, it’s crucial to grasp the legalities and nuances surrounding the arrangement and management of building works. This understanding is particularly vital for larger, more complex projects, as it’s not as straightforward as requesting a quote and having the contractor complete the work. In Victoria, the following regulations apply:

• A Domestic Building Contract must be entered if the proposed works are over $10,000.
• A builder must not enter a major domestic building contract unless registered as a building practitioner under the Building Act 1993. If the value of the proposed works is over $16,000, in addition to a Domestic Building Contract, the building practitioner must obtain Domestic Building Insurance (Warranty Insurance) before a Domestic Building Contract is signed.
• In most cases, a building permit is required; if so, a ‘Private Building Surveyor’ must be appointed so they can issue the permit to the registered builder or practitioner.

If you’re overseeing building works for a third party, such as an Owners Corporation, it’s important to note that you may be required to engage a registered project manager. According to the Victorian Building Authority (VBA), a project manager’s role is as follows: “Project Managers are responsible for managing or arranging the carrying out of domestic building work by registered domestic builders. They cannot carry out the domestic building work themselves or arrange for unregistered builders to carry out the work.” This underscores the need for a qualified professional to handle such tasks.

If you, as an Owners Corporation manager, are arranging small-scale repair works, then there will be no issue with obtaining quotes and overseeing these works; however, once the works are valued more than $10,000, a Domestic Building Contract is required to be signed by both the owners and builder/contractors. A project manager is responsible for arranging and managing the works carried out by registered builders. Thus, this should not be completed by an Owners Corporation manager.

Before you can obtain tenders from registered builders to complete large-scale maintenance/repair works, you must complete several crucial steps, depending on the job. It cannot be expected for an Owners Corporation manager to completely understand all steps involved in the rectification process and the sequence of events required to complete all types of rectification work. This would necessitate the creation of a ‘scope of works’ document that lays out strictly what will be necessary to achieve the objective of the Owners Corporation. Once this scope of work has been created, the project can be taken to tender, and multiple builders can provide quotations to undertake the work. Each will have different methodologies and systems for achieving the same outcome, and again, comparing these differences is not something that an Owners Corporation manager would be expected to know to complete competently.

This is a vital step in the process, as different builders’ methodologies can drastically impact a building’s residents while rectification works are being completed. For example, if a building in the CBD has the rooftop re-waterproofed, one builder might transfer all staff, building waste and new materials through the lobby and up one of the two lifts to the rooftop. This will mean constant disruptions for residents and the loss of 1 lift for the duration of work, which could be months. An alternative approach from a more knowledgeable builder may be to install a temporary lift on the side of the building from a common area laneway/courtyard. This will have minimal impact on residents and cause the builder less hassle than using one of the main lifts in the lobby. A small detail that can be lost in many dozens of pages is that unless you are an experienced and registered project manager, you might not even look for it. However, when work is completed, this can significantly impact residents and the builder.

Numerous important tender aspects should be scrutinised before a registered builder is awarded a tender, which an Owners Corporation manager likely won’t know about.

Firstly, the builder needs to be investigated. Do they hold the proper registration for the category of works being performed? Do they hold current Public Liability and Professional Indemnity insurance? Do they have experience with projects of this nature?

Secondly, the methodology and inclusions/exclusions of the tender. How does the builder propose to go about completing the work? What is included in the tender price, and what is excluded? These are vital questions often overlooked by inexperienced individuals who don’t know the right questions to ask. What is included and excluded from the tender price can have severe financial impacts on the total cost price of the works and should not be skipped over lightly. Quite often, we see builder’s tenders, either through inexperience or maliciously, that allow them to add pricey variations to jobs hence costing the Owners Corporation significantly more money than the initially quoted price. A registered project manager must review all aspects of tenders to ensure the best interests of the Owners Corporation are kept at the forefront, and the project can be completed in a timely manner and for the right price.

This issue can be even more pronounced for cladding replacement works due to the intricacies typically involved and the potential scale of the job. As a practical response to this, the governing body, Cladding Safety Victoria (CSV), will assign an Independent Project Manager (IPM) for each building funded through this program. CSV understands the complications that often arise during large-scale repair/rectification works and stresses the importance of IPMs to ensure the job proceeds smoothly for all parties.

This is an excellent precedent to follow, and it is highly recommended that engaging an experienced and registered project manager be the first port of call for owners of Corporations when they are faced with the reality of large-scale rectification works. Owners Corporation managers need to be aware of the realities of these situations and advise their clients in the best possible manner to encourage them to engage the services of a registered project manager in such an instance. This is not simply a job that can be completed by an inexperienced manager, as there are severe real-world and financial consequences if mistakes are made or the best path is not taken. This one should be left to the experts with the correct registration and insurance for these situations. At Roscon, we only employ ‘Senior Project Managers’ who are all registered building practitioners with the Victorian Building Authority – VBA, all with 30 + years of experience.

For more info, please contact us at 1800 767 266 or email info@roscon.com