Thousands of Victorian homeowners are being stranded with “orphaned” houses they cannot live in because of regulatory failures and bureaucratic dithering, according to industry experts.
Key points:
- One Victorian family have been kicked out of the house they built and have endured months in “limbo”
- The issue, driven in large part by insurance premiums, is in the too-hard basket for some authorities
- The Victorian government says councils should be able to deal with the problem
The Australian Institute of Building Surveyors (AIBS), which represents private and munipal construction inspectors, says there are up to 20,000 orphaned building permits across Victoria.
The term refers to permits that cannot be completed because a project’s building surveyor is no longer in business and no other surveyors are willing to take on the job due to crippling insurance liabilities.
Wayne Liddy from the AIBS said the phenomenon was a growing problem that was leaving thousands of consumers in the lurch and unable to live in their homes for months or even years at a time.
He said the institute had been warning authorities about orphaned building permits for more than a decade and called on the Victorian government to intervene.
“It’s very widespread,” Mr Liddy said.
“I would suggest that there would be an experience, and multiple experiences, in the majority of municipalities around Victoria.
Homeowner’s plea for help
The stand-off over building permits has left Deborah Child trapped in a nightmare for the past four months.
In June, the retired teacher and her family were kicked out of the house they had built at Mt Eliza, on Melbourne’s south-eastern fringe.
Ms Child said the catalyst for the eviction was an objection they lodged with the council over a neighbour’s building proposal.
She said that in dealing with the complaint, the council discovered they had failed to get a certificate of occupancy before moving into the house in 2015.
After being forced out, she said matters became infinitely more difficult when she in turn discovered that the building surveyor originally engaged for the project had been deregistered.
Since then, the 61-year-old said she had been turned away by almost two dozen surveyors who said they were unable to complete the task.
“It’s been horrendous,” Ms Child said.
“Naively, we thought that it was a matter of just getting someone to help finalise all other paperwork because the house was finished.
“It’s habitable — it’s a beautiful home, and so that’s what we thought we were facing.
“Then what we’ve ended up encountering is this incredibly complex situation that we actually don’t know how we’re going to solve.
“We desperately want to get back to our house, but we’ve got no way of solving the problem and, bizarrely, nobody is open to helping.”
Insurance crisis behind problem
Mr Liddy said a crisis in the professional indemnity insurance market for building surveyors was driving much of the problem.
He said a clampdown by the government on surveyors over the flammable cladding scandal had sent insurance premiums through the roof, threatening the viability of many providers.
Mr Liddy said while the problem was not unique to Victoria – there were related issues at play in New South Wales and Tasmania – it was most prevalent in that state.
“It’s purely risk, and many of the underwriters of the professional indemnity and indemnity policies will advise not to take on that risk,” he said.
Under Victorian law, the Victorian Building Authority (VBA) can step in and appoint a manager in the event a building surveyor dies, is imprisoned, or has their licence suspended or cancelled.
But Mr Liddy said the government had so far been unwilling to use the powers.
Go to council for aid: Minister
Victorian Planning Minister Richard Wynne declined to be drawn on whether the laws had ever been invoked.
He said the government was aware of the problem, but suggested affected homeowners approach local authorities.
“Homeowners let down by a private building surveyor can go to their local council for help,” Mr Wynne said.
“Municipal building surveyors can issue occupancy certificates and homeowners should seek a remedy from their local government authority.”
‘Circular’ arguments fail consumers
Natasha Stojanovich, a partner at Lander & Rogers specialising in construction insurance law, said the prevalence of orphaned permits pointed to regulatory and market failures in the building industry.
Ms Stojanovich said it was disingenuous to argue councils should take on unfinished building permits given their insurance risks would be similarly cost prohibitive.
She suggested the government had a responsibility to intervene, either by directly helping stranded homeowners or by backing a workable indemnity insurance scheme for surveyors.
“Under the legislation, yes, a municipal building surveyor can take it on, or the VBA can do certain things,” Ms Stojanovich said.
“But both the VBA and the councils are concerned about the liability risks as well and are not wanting to take on these poisoned chalice projects, so they’re not interested either.
“It’s just becoming a bit circular where councils are saying the VBA should sort it out, the VBA is saying councils should sort it out.
