news, act-politics, Master Builders Fidelity Fund
The controversial fund designed to protect homeowners from failed builders will be reviewed, with the ACT government to consider broadening its scope amid criticism it’s too hard for Canberrans to win compensation for construction defects. But the ACT government has ruled out forcing the fund’s trustees to publish details about its operation, meaning information about the number of applicants and payouts would remain a hidden secret. Sustainable building and construction minister Rebecca Vassarrotti has agreed to review the laws which set out the scope of the Master Builders Fidelity Fund, following a recommendation from the ACT Legislative Assembly’s building quality inquiry. The wider building insurance products system would also be reviewed. The ACT’s fidelity fund scheme was established in 2002 to provide owners with a means to secure compensation for defects and incomplete building work in the event their builder died or went broke. It has faced criticism from Canberra apartment owners and lawyers, who have complained the narrow criteria under which the trustees were obliged to consider claims makes it almost impossible for owners to secure a payout. The most high-profile claim to the fidelity fund came from the owners of the Elara apartments, who sought $10 million in compensation for defects to their 120-unit Bruce complex. The application was rejected on the grounds the claim didn’t meet the eligibility criteria, prompting the owners to launch two ultimately unsuccessful appeals to the Federal Court. The owners’ final bid for compensation – a claim to Chief Minister Andrew Barr for $6 million – was knocked back earlier this year. Strata lawyer Chris Kerin, whose firm represented the Elara owners, said it was a “wonder any successful claims are made at all” given the strict eligibility requirement and the lack of public awareness about the scheme. Mr Kerin said it was particularly difficult for apartment owners to complete all of the steps needed to confirm a defect in their building, such as hiring an expert to inspect the complex, inside the required 90 days. He accused the fidelity fund of “misrepresenting” the criteria for making a claim because it hadn’t updated its website to reflect the findings of last year’s federal court case involving the Elara owners. A spokesman for the fidelity fund did not respond directly to Mr Kerin’s accusation, but said it had made “operational changes” immediately after the judgement was handed down. The spokesman welcomed the ACT government’s review as an opportunity to improve the system and said the fund would adjust its operation in response to any legislative changes. But he said it was important for the financial viability of the fund that changes to the scope of the scheme weren’t applied retrospectively. One trustee last year warned inviting historic claims would “probably break the fund”. While the government has agreed to a review, it knocked back a recommendation to require the fund to provide audited accounts and an annual report on its operations to the ACT Legislative Assembly. There was no publicly available information on the number of people who had applied for and received compensation, although the Assembly inquiry was told the fund paid out more than $1 million a year. In rejecting the inquiry’s recommendation, the government said the fund, a private sector business, would be put at a competitive disadvantage if it was required to publish commercially sensitive information. The government had noted the fund had been been complying with its auditing and reporting obligations. Ms Vassarotti anticipated public consultation on potential changes would happen in the second half of next year, after an initial review and analysis of the impact different changes might have was completed.
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The controversial fund designed to protect homeowners from failed builders will be reviewed, with the ACT government to consider broadening its scope amid criticism it’s too hard for Canberrans to win compensation for construction defects.
But the ACT government has ruled out forcing the fund’s trustees to publish details about its operation, meaning information about the number of applicants and payouts would remain a hidden secret.
Sustainable building and construction minister Rebecca Vassarrotti has agreed to review the laws which set out the scope of the Master Builders Fidelity Fund, following a recommendation from the ACT Legislative Assembly’s building quality inquiry.
The wider building insurance products system would also be reviewed.
The ACT’s fidelity fund scheme was established in 2002 to provide owners with a means to secure compensation for defects and incomplete building work in the event their builder died or went broke.
The most high-profile claim to the fidelity fund came from the owners of the Elara apartments, who sought $10 million in compensation for defects to their 120-unit Bruce complex. The application was rejected on the grounds the claim didn’t meet the eligibility criteria, prompting the owners to launch two ultimately unsuccessful appeals to the Federal Court.
Sustainable building and construction minister Rebecca Vassarotti. Picture: Sitthixay Ditthavong
Strata lawyer Chris Kerin, whose firm represented the Elara owners, said it was a “wonder any successful claims are made at all” given the strict eligibility requirement and the lack of public awareness about the scheme.
Mr Kerin said it was particularly difficult for apartment owners to complete all of the steps needed to confirm a defect in their building, such as hiring an expert to inspect the complex, inside the required 90 days.
A spokesman for the fidelity fund did not respond directly to Mr Kerin’s accusation, but said it had made “operational changes” immediately after the judgement was handed down.
The spokesman welcomed the ACT government’s review as an opportunity to improve the system and said the fund would adjust its operation in response to any legislative changes.
But he said it was important for the financial viability of the fund that changes to the scope of the scheme weren’t applied retrospectively. One trustee last year warned inviting historic claims would “probably break the fund”.
While the government has agreed to a review, it knocked back a recommendation to require the fund to provide audited accounts and an annual report on its operations to the ACT Legislative Assembly.
There was no publicly available information on the number of people who had applied for and received compensation, although the Assembly inquiry was told the fund paid out more than $1 million a year.
In rejecting the inquiry’s recommendation, the government said the fund, a private sector business, would be put at a competitive disadvantage if it was required to publish commercially sensitive information.
The government had noted the fund had been been complying with its auditing and reporting obligations.
Ms Vassarotti anticipated public consultation on potential changes would happen in the second half of next year, after an initial review and analysis of the impact different changes might have was completed.
