Why you should not engage an unlicensed building contractor

In Queensland, building work is governed by the Queensland Building and Construction Commission Act 1991 (Act).  Under Schedule 1 of the Queensland Building and Construction Commission Regulation 2018 (Regulation), subject to some qualifications (i.e. design work, plumbing, gas fitting etc), work is not building work (as that term is defined in Schedule 2 to the Act) if it is valued at less than $3,300.00.  Pursuant to section 42(1) of the Act, a person can only carry out or undertake to carry out building work if the person holds a contractor’s licence for the appropriate class under the QBCC Act and the Regulation.  Building work performed by an unlicensed person is unlawful building work and has significant implications for a person who engages someone who is unlicensed to perform building work.

What are the implications for engaging an unlicensed building contractor?

The decisions in Yongwoo Park v Betaland Pty Ltd [2017] QCAT 228 and Zhang & Lin v Lane [2017] QCAT 366 are clear authority that section 42 of the Act does not operate to deny a client who engages an unlicensed building contractor from being able to enforce the building contract, including any claim for damages.

That right may however be pyric if the unlicensed building contractor is a $2 company with no assets capable of meeting a judgment monetary order.  The Act does contain a statutory insurance scheme, but it is limited and contains extensive exclusions under section 67WB of the Act, even if the building contractor is licenced.  For example, subsection 67WB(1)(a)(viii) excludes commercial or industrial premises.

Reg. 26 of the Regulation excludes work on or for a duplex or multiple dwelling if the duplex or multiple dwelling is more than 3 storeys.  Thus, a commercial client, however small and faced with a building defect issue, at best has recourse against the builder and any professional indemnity insurance it may have which extends to the building work performed.

Given such insurance policies require the builder to be licenced to perform building work, then even if the unlicensed builder had such insurances in place (which is highly unlikely), an insurer confronted with a claim for indemnity will no doubt decline to provide it because of the illegal actions of the unlicensed building contractor in performing unlicensed building work.

Under section 67X of the Act, the statutory insurance scheme is focussed on providing assistance to consumers of residential construction work for loss associated with defective or incomplete work.  However, in order for a consumer of residential construction work to make a claim upon the statutory insurance scheme, section 68H(1)(a)(ii) of the Act requires that the contract is with a licensed contractor unless among other things, such as section 68H(1)(c) of the Act, the consumer has entered into a contract for residential construction work with a person who fraudulently claims to be licensed.

Knowingly contracting with an unlicensed building contractor to perform residential building work means a consumer of residential construction work will, if faced with defective or incomplete building work, be unable to make a claim on the statutory insurance scheme.

Entering into a written contract for residential building work which fails to list a QBCC licence number as required by Part 2 Division 1 of Schedule 1B to the Act runs the risk that a consumer of residential construction work may be hard pressed to establish that the unlicensed builder fraudulently represented they were licensed to perform that work.

Takeaways

Always check before entering into a contract for building work that the contractor has the appropriate licence for the class of building work to be performed.

A licence check is easy to perform by accessing the QBCC licence search facility which can be found here.

Links and further references

Cases

Yongwoo Park v Betaland Pty Ltd [2017] QCAT 228

Zhang & Lin v Lane [2017] QCAT 366

Legislation

Queensland Building and Construction Commission Act 1991 (Qld)

Queensland Building and Construction Commission Regulation 2018 (Qld)

Related insights

Top ways to avoid a building dispute in Queensland

Implications of non-compliance with the Queensland Building and Construction Commission Act (Qld) 1991

Implications of performing unlicensed building work

Further information about construction law

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Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.