Court of Appeal Decision Clarifies the Process for Calculating Building Permit Levy

A recent noteworthy case, Victorian Building Authority v May 21 Pty Ltd and Ors [2024] VSCA 150 (VBA v May 21 Pty Ltd) is the subject of this article given its significant implications on the calculation of the amount of the building permit levy payable by developers under the Building Act 1993 (Vic) (the Act).

Section 205l(2)(a)(i) Levy explained

The Act imposes a building permit levy (s 205l(2)(a)(i)). This levy is based on the cost of the building work and is required to be paid by the applicant before a permit can be issued.

The Act holds that a surveyor should ‘have regard’ to the contract price when estimating the cost of building work for purposes of calculating the applicable building permit levy. The questions raised in the case of VBA v May 21 Pty Ltd is whether in estimating the cost of building work, there is a bar against considering other relevant matters, outside of the contract price.

Facts of Case

The facts of this case include the following. There was a ‘design and construct’ contract between the Builder (Multiplex Constructions Pty Ltd) and the Developer (May21 Pty Ltd and FEC May 22 Pty Ltd) for works at 250 Spencer Street, Melbourne. A relevant building surveyor was engaged to assess the application for a staged building permit, including to decide on the levy amount. The relevant building surveyor determined that the estimated cost of the Works was inclusive of components such as GST, preliminaries, profit, and other matters considered to be non-building works costs/expenses.

At first instance, the Developer disputed the purported levy amount, arguing that the estimate included items that were not leviable as they were non-building works under the Act (these included things such as trade breakdowns).

The Supreme Court reviewed the specific words of the Act and the intention of parliament to reach the decision that there is no prohibition on the relevant building surveyor considering other relevant matters, in addition to the contract price.

The Court of Appeal upheld this reasoning and decision of the Supreme Court.

Accordingly, a relevant building surveyor is not restricted to the contract price in estimating the cost of building work for the purposes of calculating the applicable building permit levy. In this regard, the cost of building work upon which the levy is calculated may not always be the contract price (although in some circumstances, it may be).

Conclusion

In summary, the key takeaway from this case is that the contract price does not act as a limitation of the levy nor is definitive of the relevant building surveyor’s estimation to be undertaken under s 205I. While the relevant building surveyor must have reference to the contract price specified, they are not confined or limited to that price when estimating the cost of the whole of the building work.

This decision is noteworthy as it will change the way that building permit levy is calculated in the future, impacting building surveyors and developers state wide.

Please contact Chris Moshidis, Director and Principal Lawyer at Urban Lawyers if you would like to discuss the case or require any legal assistance on +61 9521 7956 or chris@urbanlawyers.com.au.