The ACT government is calling for the urgent introduction of strong federal anti-phoenixing laws, arguing it cannot "adequately" punish Canberra's dodgy builders without them.
But apartment owners say the territory government can do more, suggesting it could refuse to sell public land to companies with histories of poor construction work.
Illegal phoenixing is when a company deliberately folds to avoid paying debts, only for its directors to resurface and trade under a different name. The issue has reemerged, with the Coalition last month re-introducing a bill into federal parliament to combat the practice.
ACT Minister for Building Quality Improvement Gordon Ramsay said this week the Commonwealth must act "as a matter of absolute priority", suggesting the lack of such measures has hindered the ability of his government, and apartment owners, to hold builders to account for defective work.
In a submission to the federal government on the proposed laws, the ACT government said it had no power to prevent corporations from winding up to avoid their obligations, including to repair defects.
"Even if the ACT building regulator is successful in issuing or obtaining orders to rectify defective work, the licensee can start to wind up the corporation while still solvent to avoid doing the work, leaving work incomplete," it said.
It also called for the introduction of director identification numbers, which would make it easier for regulators to trace and take action against directors with "poor compliance histories".
It is not clear how tighter phoenixing laws will address Canberra's problem with building defects. It is standard practice for developers to use single-project companies that are wound up each time.
Owners Corporation Network president Gary Petherbridge said people stung by phoenixed companies were left emotionally stressed, out of pocket and with "no confidence" in the construction industry.
Mr Petherbridge said the ACT government could deter the practice by refusing to sell land to corporations with poor track records.
"The government could cut off their lifeline - that's one approach they could take," Mr Petherbridge said.
The head of the Australian Restructuring Insolvency and Turnaround Association, John Winter, said almost all big developments had a special purpose vehicle for the project, "a perfectly proper, valid and legal tool to quarantine development risk and also to allow very effectively for joint venture arrangements".
Most of them were wound up as fully solvent businesses at the end, with no phoenixing risk and no outstanding debts. But because the entity ceased to exist it was difficult to pursue directors if building defects were found later.
The federal anti-phoenixing laws would help liquidators hold directors to account for not paying creditors and avoiding debts, but future defective building claims wouldn't enter the equation, he said.
The director identification numbers, designed to stop shonky behaviour such as false names or information in company records, wouldn't help in these cases where the identity of directors was already clear.
ACT Master Builders head Michael Hopkins said the ACT government should take illegal phoenixing into account when it renewed or issued building licences.
Asked about cases where there had been no illegal phoenixing but homeowners were left with a defected or unfinished building, Mr Hopkins said that was dealt with through home warranty insurance and the building fidelity fund.
"The ACT has a solid regime of cover that does provide sound protection," he said.
Mr Ramsay told The Canberra Times that the government was looking into ways to make directors in the construction industry more accountable, but stressed oversight of corporation law was a federal responsibility.
"Given that is the case, it is incumbent on the Commonwealth to collect data to help enforcement agencies and the public, including tools like the director identification number," Mr Ramsay said.