A few months ago, I would have been astounded if someone
told me that a building certifier in Australia could legally issue an
occupation certificate with front path pedestrian access as shown in the photo
above. In order to use the path, it was necessary for pedestrians to step over
a concrete obstacle (14 cm on the driveway side and 23 cm on the house side).
There was no way anyone could plausibly claim that the concrete obstacle was
necessary for drainage, because water ran away from it toward the centre of the
driveway.
With the benefit of hindsight, it is obvious that before buying
a townhouse off the plan I had been lulled into a false sense of security by claims
of building regulators that the Building Code of Australia (BCA) sets minimum
standards for safety, health and amenity of buildings. I was not aware of the
existence of the National Construction Code (NCC) at that time, but it wouldn’t
have surprised me that it purports to provide “the minimum necessary
requirements for safety and health; amenity and accessibility, and
sustainability in design, construction, performance and livability of new
buildings”.
I should have known better! I knew from the experience of
many years working for governments that bureaucrats are no less prone to making
extravagant claims than are people working in other occupations.
You might be thinking that even though it would be most
unfortunate if someone was injured by tripping on the concrete obstacle, the
existence of an occupation certificate, certifying that building regulation had
been complied with, would protect the Owners Corporation against a compensation
claim. That might be too sanguine a view. Legal information available from a reputable online source suggests that owners might not be fully covered by
insurance if they could reasonably be expected to be aware of the issue and had
not taken steps to address it.
The bigger issue of regulatory capture
In drawing attention to this pedestrian access issue, I am
conscious that it is trivial by comparison with the building safety issues currently
in the news associated with high-rise apartments in Sydney (Opal Tower and
Mascot Towers). Michael Lambert, a former secretary
of NSW Treasury, who reviewed building regulation for the New South Wales
government and presented his report in 2015, has been quoted as saying that the
issues associated with the Opal Tower “are likely just the tip of the iceberg”.
The Lambert report found “the incidence of building defects
is significant” and “the incidence appears higher in NSW than elsewhere”. Lambert
was not able to be more specific about incidence because “comprehensive
information is not regularly collected on building defects”. He recommended
that performance data be collected to enable the performance of the system to
be assessed against clear objectives. In particular, he proposed a program of proactive investigations and audits of
certifiers, linked to an education and training program for them. Lambert also recommended action to reduce the conflict
between the accountability of certifiers for acting in the public interest and
their commercial drivers for commercial success, including maintaining good
relations with builders and owners/developers.
Michael Lambert has expressed
disappointment that the recommendations of his report have not been more fully
acted upon by the NSW government. It is not clear to what extent timely implementation
of Lambert’s recommendations would have improved the quality of high-rise
building in NSW, but the government’s failure to act more decisively on his
proposals for incremental improvement seems to indicate that regulatory capture
has become entrenched in this industry.
The theory of regulatory capture,
advanced by the Nobel Prize winning economist, George Stigler, among others,
refers to the tendency for regulatory systems created to act in the public
interest, to instead advance the commercial or political concerns of
special interest groups that dominate regulated industries. As it
currently operates, the system of private certification seems to provide more
protection to developers, builders, architects, engineers, and local
government agencies that provide planning approval, than to home buyers.
Does more regulation provide the answer?
The knee jerk reaction of many people to quality control
problems in the building industry is to urge that regulation be extended further
and enforced more rigorously. However, even if determined political leaders can
manage to steer some regulatory reform through the process of industry
consultation, we need to face the reality that it would be prohibitively
expensive for building regulation to be made much more than a ‘box ticking
exercise’. Regulators can certify that certain things have been done, but that
doesn’t ensure effective quality control. For example, regulators can certify that
concrete has been poured to construct foundations, but it takes the resources
of a building firm to control the quality of the concrete that is poured.
The main commercial incentives for firms to maintain effective
quality control are to enhance their reputation in the market and to avoid
litigation. Reform-minded political leaders should be seeking to identify how those
market and legal incentives are impaired, and what corrective action could be
taken.
Some readers might still be thinking that additional box
ticking regulation would be an appropriate response to the specific question of
safe residential access. I am wary of that approach because it could
end up adding excessively to building costs and make homes less affordable.
Consider, for example, the guideline for dwelling access proposed
by Livable Housing Australia:
“A safe continuous and step free path of travel from the street
entrance and / or parking area to a dwelling entrance that is level.”
Complying with that condition would not have added much to
the construction cost of our new townhouse, but in many instances a step free
path would impose excessive costs. In a paper written over a decade ago, Alan
Moran, pointed to evidence from government housing authorities - which
commission a considerable part of the housing that is specifically geared
towards the needs of people with disabilities - that the costs of the building
are increased by at least 4% and up to 20% where houses are built fully compliant
with the relevant Australian Standard.
The issue of liability
There are two overlapping aspects relating to the issue of
liability for safe pedestrian access to residences. The first aspect is
liability for compensation in the event of personal injury. My understanding is
that the law sensibly provides liability on all parties involved to exercise
reasonable care. I don’t know whether courts have held that developers and
builders maintain some liability after residences have been sold. It would be a
travesty, in my view, if they are able to hide behind an occupation certificate,
when that does not certify that minimal safety standards have been met for pedestrian
access.
The second issue of liability relates to the question of who
should be liable for ensuring that reasonable expectations of home buyers are
met in relation to safe pedestrian access. In thinking about this I have gone
back to a paper written many years ago by Ted Sieper, an astute Australian
economist who has been under-recognized because he eschewed academic norms to publish
or perish. (Ted’s paper was entitled: Consumer protection – boon or bane?
It was presented to a C.I.S.
conference held at Macquarie University in April 1978.) Ted argued that in
considering the choice between the alternatives, caveat emptor – let the buyer
beware – and caveat venditor – let the seller beware – law makers should compare
the relative transactions costs that would be imposed on buyers and sellers. He
noted:
“while consumers with different safety requirements can discriminate
cheaply among different products, producers can only with great difficulty
discriminate among consumers”.
(I am grateful to Greg Cutbush for suggesting that
I look for Ted’s paper.)
I think Ted’s transactions cost point is highly relevant to
the issue of safe pedestrian access. It seems reasonable to expect that that
developers and builders would generally show some care to avoid compensation
claims for personal injury. However, it is up to individual home buyers to shop
around to obtain the standard of access safety they require.
With the benefit of hindsight, we should have insisted that an appropriate standard for safe
residential access was written into the contract of sale before we agreed to
buy. If the developer had been reluctant to agree to that provision, that would have
set alarm bells ringing in our minds.
Regulators should stop making misleading claims!
There is irony in the fact that regulation to protect
consumers aims to discourage misleading claims by vendors, but apparently does
nothing to discourage building regulators from making misleading claims about
the products they are selling.
Regulatory authorities should be required to renounce misleading
claims they have made that the BCA and NCC provide minimum necessary standards
for safety.
If building regulators want to be helpful to home buyers,
they should advise them to consult their lawyers to ensure that contracts for
sale require developers to meet appropriate standards for safety and amenity.