Reform package to combat defective building work.
In June of this year the NSW Parliament passed two measures to better regulate building work in the state: the Design and Building Practitioners Act 2020 (the Practitioners Act) and the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (the Compliance Act). These two pieces of legislation follow a Parliamentary inquiry into the NSW building industry in held in 2018 and the subsequent appointment of the NSW Building Commissioner almost 12 months later. These measures are a direct response to poor design and poor quality construction issues that have manifested in recent years that have left owners of new dwellings with significant defects to repair and manage.
The Practitioners Act is now partially in place; with the remainder of the measures and further Regulations to that Act to commence from 1 July 2021. “Practitioners” under this legislation are defined generally as builders, designers, product manufacturers, professional engineers (who must now be subject to mandatory registration), project managers and others involved in the design and construction of residential buildings. It is mooted that this Act will be expanded to capture other types of construction. The wide-ranging nature of this definition means that most persons engaged in building work will be required to register with the NSW Department of Customer Service (the Department) and must be “adequately insured” before undertaking building work.
With the introduction of this Act these parties now owe a statutory duty to take reasonable care to avoid subsequent impacts to a party for economic loss caused by defects relating to, or because of, that construction work. This duty applies to the owner of the land on which the construction is being built and to the subsequent owner(s) of that land (including owners corporations). This duty is effective immediately and retrospectively for the 10 years prior to 11 June 2020. If a practitioner breaches their duty of care, the property owner will be entitled to damages to compensate for their loss
Practitioners must now also make ‘compliance declarations’ to the Department to state clearly that the building work they have undertaken complies with the Practitioners Act and other required standards (including the Building Code of Australia). With this there is a regimen of disciplinary action against Practitioners involved in misconduct or false declarations, including the imposition of fines between $550 and $330,0000 and imprisonment terms of up to two years.The onus is on the Practitioner to demonstrate competency.
The second element of these reforms is found in the Compliance Act which will commence from 1 September 2020; its main function is to ensure that developers of residential buildings cannot attend to construction work that may leave serious defects, or economic loss, to current or future owners of a building (including owners corporations).
A foremost element in this Act is that within 6 months (but no more than 12) from seeking an occupation certificate a developer must advise the Department. This notification will allow for the Department, via its own retained and authorised professionals to undertake quality assurance inspections before new owners take possession of the building. If seriously defective work is found the Department may, amongst other things, issue orders for the developer (and builder) to immediately stop work, prohibit the issuing of that occupation certificate as well as directing developers to rectify any serious defects found. A serious defect under this Act includes a threat of collapse of the building or its required destruction, an ability to prevent safe habitation, a failure to comply with the Building Code of Australia or a relevant Australian Standard, or a deviation of the “as approved” plans.
There are mechanisms for developers to appeal such orders however they must be lodged in the Land & Environment Court within a 30-day time frame. Any appeal made by a developer cannot be used to stay (i.e. delay) a stop work order unless otherwise directed via the Court. In addition to such orders, there are also mechanisms available under the Compliance Act to impose severe penalties on developers, including the directors personally; this is coupled with an ability to recover costs of imposing such actions as necessary.
These Acts have major, and some say welcome, implications for a raft of parties involved in the building industry by imposing a new statutory duty of care and a regime of loss prevention. These new powers will go some way to assist in improving the quality of residential buildings and will assist subsequent owners, including owners corporations, with the vexed issue of defects rectification.
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