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02.03.2021

News

Property developers and licensing under review in Queensland

The role of property developers in the Queensland building and construction industry has been flagged for review by the Minister for Public Works.

Whilst licensing of developers is not specifically on the agenda, the stakeholders who called for the review have referred to the ACT's plans to implement a licensing regime for property developers like that for real estate agents.

Despite committing to the review in July 2020, so far no formal steps have been taken to convene a review panel or publish the review terms of reference.

Here, partner Kristy Dorney explains the background and what licensing property developers might mean for Queensland.


Background

In July 2020, as part of an overhaul of Queensland building and construction industry laws, the following section was inserted into the Queensland Building and Construction Commission Act (QBCC Act):

115D Review of role of developers

  1. The Minister must ensure a review is conducted of the role of developers in the building and construction industry.
  2. The Minister must appoint a panel of not more than 4 appropriately qualified persons to conduct the review.
  3. The Minister must give the panel directions or a terms of reference to guide the review.
  4. The Minister must table in the Legislative Assembly a report on the outcome of the review as soon as practicable after the review is completed.

The review arose as part of the public consultation process for the new Queensland Building Industry Fairness (Security of Payment) and Other Legislation Amendment Bill 2020 (Bill). The Committee reviewing the Bill recommended the Minister for Housing and Public Works "consider undertaking a review of the role of property developers in the building and construction industry, including consideration of the impact of their financial and operational capacity, ethical behaviours, and work practices".

That recommendation was accepted and implemented.


Timeframe

The Committee proposed the Minister should conclude the review and report on his findings by 1 July 2021. However, this deadline did not make its way into the QBCC Act.

At the time of writing this article, there have been no media releases or statements published confirming the review panel has been established or the terms of reference required to guide the review.


Licensing of property developers

Licensing of developers is not specifically mentioned as part of the review. However, it was a key feature of the submissions behind the introduction of the review, and it was noted the ACT is currently in the process of implementing its own licensing regime for property developers.

On that basis, it is expected that will be a key feature of the review.

The ACT Government announced in November 2019 it was committed to creating and implementing a property developer licensing regime. The ACT Minister for Building Quality Improvement, Gordon Ramsay, said "We have seen too many instances of property developers forcing builders to cut corners and save on costs, only to eventually wind up projects and leave owners with the bill."

It is not explained how developers are 'forcing' this behaviour, save for a reference to developers imposing unrealistic timeframes. There is also little reference made of the extensive regulatory system already in place requiring builders to adhere to minimum standards for their work and which ought to already avoid owners being left "with the bill". The suggestion seems to be that developers are driving a hard bargain and asking builders to cut corners which builders must yield to if they are to survive.

As of 2 December 2020, the ACT Government has confirmed the licensing regime is still intended and is being advanced. However, no draft legislation implementing the regime has been submitted.


What would developer licensing mean?

If the regime follows the one already in place in Queensland for builders, then it is likely to include—

  • conditions imposed on the issue of the licence as to what category of projects the developer is authorised to undertake
  • a trust account regime to secure retentions held by the developer and potentially a process to allow a direct link through to the developer's finance facility
  • satisfaction of minimum financial requirements to secure a licence and an annual reporting and auditing regime each year to verify continued compliance.

Also, if the proposed ACT regime and other amendments are adopted, then it might also see the inclusion of—

  • a fit and proper person assessment
  • the requirement to nominate an individual representative to take responsibility for the developer's conduct
  • enforcement penalties
  • potential liability of developers (in addition to builders) for breaches of statutory warranties under the building legislation (the ACT Government has announced it is committed to considering this as part of stage 2 of its building reforms).

One obvious preliminary issue will be determining what is a 'developer' for the purposes of the regime. There is no guidance on this question in any of the submissions or the Committee's report. The ACT Government's initial media release in November 2019 stated the first stage of work for it was clarifying what constitutes a 'developer' for licensing purposes.

In a July 2020 media release, it indicated licences would apply to "the most high-risk developments in terms of quality" with multi-unit residential developments being specifically identified.


Update

We will provide further updates once details of the Queensland review of the role of property developers in building and construction is progressed.


Authors

Kristy Dorney

Kristy Dorney

Partner

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