NSW Government ambitious plan to transform building industry

NSW Government’s Construct NSW strategy aims to restore consumer confidence by focusing on reform in 6 key areas of the building and construction industry. These include regulation, ratings, education, contracts, digital tools, and data and research. Led by the Office of the Building Commissioner (OBC), the changes will affect all building classes and stakeholders, including developers, builders, designers, certifiers, building inspectors and manufacturers within both residential and commercial sectors.

The following proposed legislation are now open for public consultation:

1. Building Bill 2022
2. Building Compliance and Enforcement Bill 2022 (BCE Bill)
3. Building and Construction Legislation Amendment Bill 2022 (Amendment Bill) and Building and Construction Legislation Amendment Regulation 2022 (Amendment Regulation)

1. Building Bill 2022

The Building Bill 2022 is set to replace the Home Building Act (HBA) and will regulate all stages of the residential and commercial building process. At present, it excludes the civil sector, however this is open to consultation. The new Building Bill will detail relevant licensees, approval processes, fire safety requirements and consumer protections for building works as well as tighten guidelines on owner-builder projects. Some key features include:

• broadening the definition of “developer” to hold more parties accountable for defective building work;
• expanding licensing requirements beyond residential builders and specialist workers to include designers, engineers and building inspectors within both the residential and commercial sector;
• consolidating all areas of post-approval building certifications and duty of care provisions from the Environmental Planning and Assessment Act 1979 NSW (EP&A Act) and the Design and Building Practitioners Act 2020 (NSW) (DBP Act) into the Building Bill;
• regulating pre-fabricated and manufactured housing including new consumer protections for building owners;
• mandating and reporting of maximum progress payments per home-building stage;
• expanding duty of care to all stages of the building process, including building, subdivision, inspection and certification, and consequentially to those involved in each stage including builders, designers and certifiers; and
• expanding residential statutory warranty scheme and scope of parties liable by including supply and assembly of off-site components, broadening definitions of “developer” and “owner” and aligning definition of “major defect” with “serious defect”. There is also consideration to extend warranty periods from 6 to 10 years for serious defects and 2 to 3 years for minor defects.

2. Building and Compliance Enforcement Bill 2022 (BCE Bill)

The BCE Bill is set to replace the Residential Apartment Buildings Act (Compliance and Enforcement Powers) Act 2020 (RAB Act) and endeavours to establish a central legislative framework for all building classes that governs the compliance and enforcement of several building Acts known as “building enforcement legislation”. Some key features include:

• expanding notice requirements, prohibition orders, building work rectification orders and stop work orders from Class 2 buildings to all building classes;
• increasing authority for regulators to investigate and take action against non-compliant buildings through entry to premises, issuance of orders and demand of remedial works;
• implementing disciplinary action for all licence holders in the form of demerit points, increased penalties and personal liability;
• proposal to review existing levy on developers every 3 years; and
• encouraging voluntary undertakings where possible to avoid costly disciplinary action.

3. Building and Construction Legislation Amendment Bill 2022 (Amendment Bill) and the Building and Construction Legislation Amendment Regulation 2022 (Amendment Regulation)

The Amendment Bill and the Amendment Regulation aim to achieve compliance within the building and construction industry through the amendment of several Acts:

Building Projects (Safety) Act 2017 (NSW):

• imposing responsibility on participants of the supply chain to ensure building products are accompanied by information on their use, are fit for their purpose and are compliant. Non-conforming building products (NCBPs) are expected to be reported on; and
• authorising the Secretary to issue building product warning notices, supply bans, recall notices and trading bans on repeat offenders.

Strata Schemes Management Act 2015 (NSW):

• allowing inspectors to issue defects on final inspection and giving owners’ corporations access to bond if defects are not rectified within 90 days;
• extending bond period to 4 years;
• being more transparent with requirements for appointment of building inspectors and Authorised Professional Associations; and
• penalising persons who misrepresent themselves as building inspectors.

Building and Development Certifiers Act 2018 (NSW) (BDC Act):

• allowing greater flexibility for authorised industry bodies to assess and register industry practitioners;
• standardise continuing professional development requirements; and
• enable building inspectors to issue education and training notices instead of infringement notices for low-risk offences.

Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) to:

• providing transparency to owner occupiers during SOP Act claim process by requiring claimant to provide a Homeowners Notice containing vital information about process;
• protecting against insolvency and securing more contracts by lowering retention threshold in trust accounts from $20 million to $10 million;
• allowing claimants and respondents to request a merit review by an alternate adjudicator on existing issues and holding disputed amount in a trust account until decision is finalised; and
• allowing adjudicators flexibility to engage an expert to advise on relevant matters for the adjudication.

Other Legislation

• amending the EP&A Act to enable certifiers to address serious defects sooner via a “written direction notice;
• amending the RAB Act to redefine “serious defect” so that it takes into account both the Building Code and the National Construction Code when assessing performance requirements;
• using Fair Trading as a first point of call for resolving strata building disputes under the HBA;
• amending several legislations to clarify that right against self-incrimination is not applicable to corporations;
• allowing regulator to recover own investigation costs; and
• amending BDC Act, DBP Act and HBA to define “intentional phoenix activity” and placing onus on registered practitioners to ensure they do not deal with businesses who have been involved with illegal phoenixing in the building and construction industry.

Expected timeframe for reforms

Once the Bills have been consulted on by the public and then passed by both houses of parliament, it is expected that the Building Bill and BCE Bill will come into effect in 2024, and the changes outlined in the Amendment Bill and Amendment Regulation will incrementally come into effect over a 12-month period.

Effect on stakeholders within the building industry

Developers

Developers can expect increased overall liability. Defective works will need to be covered for all building classes and for an extended 10-year warranty period, as well as an extended 4-year bond period for strata building disputes. Additionally, Class 3 or 9c buildings may be subject to the DBP Act and OC audit regime.

Builders

Builders will have an expanded duty of care and additional licensing requirements for all building classes. Further obligations include extending statutory warranty period to 10 years, more diligent contract writing with regards to costs and discrepancies and capacity to hold retention money in trusts for disputed adjudication decisions.

Designers

Designers will have an expanded duty of care and additional licensing requirements for all building classes.

Certifiers/Building Inspectors

Certifiers/Building Inspectors will have an expanded duty of care and additional licensing requirements for all building classes, as well as increased authority to issue rectification or training orders.

Manufacturers

Manufacturers of building materials or pre-fabricated off-site buildings will have increased liability to consumers over the materials they provide.