Commentary
I suspect many in the industry spent yesterday and today reading the final report of Queensland's Developer Review Panel.
I don't propose to summarise it as the report contains a useful one, but I do want to make three quick observations.
In respect of 'Recommendation 1', there are a lot of developers I have spoken to who will welcome a registration framework. The stronger more established developers will be largely unaffected, and this will (in their view) 'weed out the cowboys' in the industry, so 'Recommendation 1' is fairly uncontroversial.
Second, 'Recommendation 4' is where I expect a lot of interest to be generated. 'Fairness in contracting' can have a broad meaning, and some of the potential clauses to be targeted include time bars, indemnities and preconditions to PC.
We have all seen examples of where amendments to these clauses are over the top; however, what is interesting to me is that the Panel suggests that 'the position of developers at the top of the contractual chain enables them to control contract terms and conditions'. That is not quite true.
Financiers play an important role in development and arguably sit at the top of the contractual chain, and their need for cost certainty drives a lot of the contractual terms, including time bars.
Also, builders need to stand up and be prepared to walk away from a job if the risk outweighs the reward. I think we are starting to see a little more of that this year and pressure the industry is feeling at the moment is driving that. Ultimately 'no deal' is better than a 'bad deal'.
Finally, 'Recommendation 2' might be seen by some as a little demeaning, as it appears to suggest that educating developers on how to do their job is the panacea for issues such as the 'unfair contracting and the unreasonable allocation of risk across the contractual chain'.
Lawyers are equally to blame here, and that's largely our role: To ensure that clients understand efficient ways to allocate and manage risks (where the common practice at times is to just 'shovel it down the chain').
The final report is available to download from the Queensland Government's Department of Energy and Public Works website.
About Blake Frost
Blake Frost has considerable experience working in the Resources, Energy and Projects, Real Estate, and Government sectors, having worked in back-end matters, ranging from large-scale court proceedings, through to bespoke alternative dispute resolution options for small-sized claims, for both private and government clients.
Reach out to Blake and HopgoodGanim’s Construction team if you would like to know more about the reforms and potential implications longer term, as well as what trends and behaviours we are seeing in the current market and strategies on how to best deal with them.