July 2020

NSW Construction Industry Reforms Commence: Part 1 – What Building Practitioners Need to Know

Whilst work on-site continues in the building and construction industry despite COVID-19, so too does the work of reforming an industry in urgent need of rebuilding and regaining the confidence of the public, in particular purchasers of multi-unit residential apartments.

This two part series outlines the recent reform measures introduced in NSW aimed at restoring trust in completed buildings.

Background

Shergold Weir Report

In mid-2017, partly in response to the fires involving non-compliant combustible cladding that occurred at the Lacrosse Tower in Docklands, Victoria in November 2014 and the Grenfell Tower in 2017, the Building Ministers’ Forum (“BMF”), which oversees policy and regulatory issues affecting Australia’s building and construction industry, requested that an expert assessment of the effectiveness of compliance and enforcement systems for the building and construction industry be carried out.

The BMF appointed Professor Peter Shergold AC and Ms Bronwyn Weir to co-lead the assessment and in February 2018, their report, entitled ‘Building Confidence – Improving the effectiveness of compliance and enforcement systems for the building and construction industry across Australia’ (commonly referred to as the Shergold Weir Report) was delivered.

The Shergold Weir Report found that:

  • accountability in the construction industry was unclear;

  • that there were insufficient controls in place to ensure the accuracy of the documentation that is produced; and

  • that documentation in the current building processes lacked a requirement for those documents to demonstrate compliance with the National Construction Code (“NCC”).

The Shergold Weir Report recommendations included the introduction of:

  1. a national approach to the registration and training of building practitioners; and

  2. a new statutory duty to be placed on design practitioners to prepare documentation that demonstrates that proposed buildings comply with the NCC.

NSW Government Response

In response to the Shergold Weir Report, the NSW Government in February 2019 committed to implementing four major reforms across the NSW construction industry:

1. The appointment of an expert Building Commissioner;

On 14 August 2019, Mr David Chandler OAM, commenced the role of NSW Building Commissioner.

 “David has more than 40 years’ industry experience, which will be invaluable as we move to restore confidence in the building and construction industry,” Ms Berejiklian said at the public announcement of his appointment.

2. An overhaul of compliance reporting;

The NSW Government will implement ‘new laws that require building practitioners involved in designing buildings to submit building plans to the Commissioner (so that they may be audited), declare that the plans are BCA compliant and meet other relevant requirements and provide reports explaining why that is the case for performance solutions. Builders will also have to declare that their buildings are constructed in accordance with these plans’.

3. A requirement for all Building Practitioners with reporting obligations to be registered; and

The NSW Government will implement reform to ‘ensure that building plans are completed accurately by having the Building Commissioner register the building practitioners who can lawfully make a declaration that plans are compliant or make a declaration that plans accurately reflect a building’s as-constructed design.

These practitioners will have to maintain the necessary skills and insurance to meet the registration requirements and will be subject to disciplinary action for professional misconduct".

4. The introduction of an industry wide duty of care to home owners.

The NSW Government will ‘ensure that building practitioners owe a duty of care to owners’ corporations and subsequent titleholders of residential developments, as well as unsophisticated construction clients who are small businesses. This means that homeowners will have a right to pursue compensation when they suffer damage because of a building practitioner’s negligence’.

The NSW Government recently passed 2 new laws as part of its implementation of these reforms. 

Design and Building Practitioners Act 2020 (NSW)

Registration of Practitioners

Commencing 1 July 2021, the Design and Building Practitioners Act 2020 will introduce a new registration system, aimed at ensuring that design practitioners and building practitioners that are involved in the building and construction process, are competent, qualified and suitably insured. For example, engineers will now need to be registered in NSW, as they are so required in Queensland and Victoria.

Applications for registration will be reviewed and determined by the Secretary of the Department of Customer Service who can grant or refuse a registration application. Registrations may also be varied, suspended or cancelled by the Secretary in order to ensure compliance with the proposed framework.

New requirements for compliance declarations

The Design and Building Practitioners Act 2020 also introduces the concept of “regulated designs”, which are designs that are prepared for a specific building element (fire, waterproofing, structural elements and services) or a design prepared for a specific performance solution, under the Building Code of Australia (“BCA).

A ‘regulated design’ is defined as:

(a) a design that is prepared for a building element for building work; or

(b) a design that is prepared for a performance solution for building work (including a building element); or

(c) any other design of a class prescribed by the regulations that is prepared for building work.

Effective 1 July 2020, a registered design practitioner must provide a design compliance declaration in relation to a regulated design prepared by that registered design practitioner.

All design compliance declarations must declare whether or not a regulated design complies with the requirements of the BCA. Any subsequent major variations of the design must also be declared as being compliant before being provided to the building practitioner.

All registered building practitioners must build in accordance with these designs and before an application is made for an occupation certificate, must issue a building compliance declaration stating that:

(a) the building works, including any variations, complies with the requirements of the BCA; and

(b) where a regulated design was used for the building work, that the regulated design was prepared by a registered designer and that the building work was built in accordance with that design.

Additionally, builders will also need to:

  1. ensure that no building work is undertaken prior to the designer practitioner providing a design compliance declaration, stating that the design to which the declaration relates ‘complies with all the requirements of the BCA’;

  2. provide the design and all other relevant documents to the Secretary, within 90 days of the occupation certificate being issued;

  3. take all reasonable steps to ensure that the building work fully complies with the BCA; and

  4. be adequately insured.

New Statutory Duty of Care

Commencing 11 June 2020, the Design and Building Practitioners Act 2020 establishes a new statutory duty of care owed by builders, designers, manufacturers and project managers to owners of land and subsequent owners of the land (including owners corporations).

The duty of care applies to construction work, which includes residential building work within the meaning of the Home Building Act 1989 (NSW) and any other building class or type prescribed by the regulations. No regulations have been released to date.

This new statutory duty of care, effective immediately, imposes a duty to exercise reasonable care to avoid economic loss caused by defects .

This duty of care cannot be delegated to another person, nor can it be contracted out to ensure the rights of owners.

More detailed analysis and understanding of this newly introduced statutory duty of care, including its interaction with the Home Building Act 1989 (NSW),  can be accessed here.

Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW)

Commencing 1 September 2020, the recently enacted Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) is said toboost the Building Commissioner’s power to stop dodgy builders and developers in their tracks.

This act applies only to building work in respect of a residential apartment building, being a 'class 2' building or building containing a 'class 2' component within the meaning of the BCA. This means that it extends to the entirety of mixed-use buildings which include a residential apartment component.

Delivering on the NSW Government's commitment to arm the Building Commissioner with a range of comprehensive powers against non-compliant developers and serious defects identified in residential buildings, this act empowers the Building Commissioner, by delegation from the Secretary of the Department of Customer Service,  to issue to developers:

  1. prohibition orders, to block the issue of an occupation certificate (or strata plan);

  2. stop work orders; and

  3. building work rectification orders (with the ability to recover costs associated with such orders).

To support the Secretary, the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 also provides for:

1. authorised officers to be granted broad investigative powers;

2. developers to provide advance notice of expected completion dates, by requiring developers to notify the Secretary at least six months, but no more than 12 months, before an application for an occupation certificate is made.

Failure to notify, or to notify within the required timeframes, will have serious consequences for the developer. In those circumstances, the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 empowers the Secretary to make an order prohibiting the issue of an occupation certificate and, if relevant, the registration of a strata plan for a strata scheme;

3. the creation of offences for non-compliance with orders issued under this act; and

4. developers' directors, and others with management control, to be potentially exposed to personal liability for corporate contraventions of this act.

If a ‘serious defect’ is found, the Secretary will have a range of powers available to immediately address it.

The Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 enables the Secretary to issue building work rectification orders to the developer if the Secretary is of the reasonable belief that the building work was or is being carried out in a manner that could result in a serious defect in a building.

A ‘serious defect’ is defined as:

  1. Non-compliant building element: non-compliance with the performance requirements of the BCA, any relevant Australian Standard or the relevant approved plans;

  2. Defective building element or building product: a defect attributable to defective design, defective or faulty workmanship or defective materials, which causes or is likely to cause the inability to inhabit or use the building or part of the building for its intended purpose, or the destruction of the building or any part of the building, or a threat of collapse of the building or any part of the building;

  3. Non-conforming building product: the use of a building product in contravention of the Building Products (Safety) Act 2017 (NSW).

Conclusion

The New South Wales Government has made good on its initial promises for industry reform, following the publication of the Shergold Weir Report by :

  • the appointment of David Chandler as the inaugural NSW Building Commissioner; and

  • the introduction of the:

    • Design and Building Practitioners Act 2020; and the

    • Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020

These reforms are expected to go a long way towards achieving what David Chandler refers to as the trustworthiness of completed buildings.

Whether you are a home owner, owners corporation, property developer or building or design practitioner, these reforms will have some effect on your rights and obligations. Bartier Perry’s team of building and construction lawyers are available to assist you with issues arising from these reforms or with your construction project generally.

Authors: Mark Glynn & Jack Williams

See also: NSW Construction Industry Reforms Commence Part 2 – A New Duty of Care for Building Practitioners