The NT Government has been urged to expand the number of contractors included in warranty schemes and compensation provisions for the Territory’s residential home-building industry.

A 265-page report prepared by global law firm Squire Patton Boggs details ways to reduce the time and cost burden of red tape for many NT contractors “while improving the levels of protection afforded to Territory consumers and subcontractors”.

The report, Review of Building Industry Regulatory Framework in the NT, targets measures to “prevent and reduce the consequences of payment defaults and construction failures in the building industry”.

“Without [reform] the systemic weaknesses of the building industry will continue to cause significant economic and social damage… to the Territory.”

In a swipe at the NT’s construction sector, the report states:

“This report does not seek to find a permanent cure for financial incompetence, inexperience, neglect and fraud being encountered in the Territory’s building industry.”

It recommends that the industry registration system be expanded from the present system’s limited application to residential builders. It calls for the inclusion of all contractors, “whether builders or trade contractors”, across all industry sectors but excluding civil contractors.

The primary manner of compensation under the recommended residential warranty scheme would include a scheme administrator that could step in to “promptly” assist the consumer in the case of construction failure, “such as by engaging others to complete the work or fix the defect”.

“This will enable the scheme administrator to manage and mitigate the costs of rectification or completion and will reduce the immediate financial and personal stress placed on a home owner trying to manage the construction failure of their residential builder.”

The report also makes a “strong recommendation” for the introduction of statutory subcontractors’ trust accounts.

Contractors would only be able to draw their cashflow from the trust account when subcontractors have been paid first in any payment cycle.

“The compulsory subcontractors’ trust account model is considered the most effective way of dealing with subcontractors losing payments because of contractor failure.”

The report urges the NT Government to “approach the building industry regulatory framework holistically” in implementing its recommendations.