In brief - The NSW Government has released and is consulting on draft legislation designed to strengthen accountability of building practitioners and to improve the quality and compliance of design and documentation within the NSW building industry 

In 2019, the NSW Government released the draft Design and Building Industry Practitioners Bill 2019 for industry feedback. The Bill is in response to the Shergold Weir Report commissioned by the BMF (Building Ministers Forum) which considered the efficacy of enforcement and compliance systems across the building and construction industry. 

The Bill was released amid a background of what has been termed by the media and industry spokespersons as a major confidence crisis in the building and construction industry at state, national and international levels. It follows a series of well-publicised events such as the major defects of the Opal Tower and Mascot Tower in Sydney, the Lacrosse and Neo 200 fires in Melbourne, and London's Grenfell Tower fire, which was caused by combustible cladding. In the Shergold Weir Report, it was stated: 

The problems have led to diminishing public confidence that the building and construction industry can deliver compliant, safe buildings which will perform to the expected standards over the long term. 

We have read numerous reports …[and of a] prevalence of serious compliance failures in recently constructed buildings. These include non-compliant cladding, water ingress leading to mould and structural compromise, structurally unsound roof construction and poorly constructed fire resisting elements.

How will the Bill address these issues?

The Bill contemplates a suite of reforms which are designed to strengthen the accountability of builders, architects and designers of multi-storey and multi-unit residential apartment buildings, and to improve the quality and compliance of design documentation. 

It also seeks to provide consumers with comfort that building professionals owe a duty of care to the end users of their products, and will be liable to subsequent owners for defects and economic loss caused by defective works. 

Compliance declarations and regulated designs

Under the proposed legislation, registered professionals (builders, architects and other design practitioners) will be required to make: 

  • Design Compliance Declarations: to be made by designers and architects, and which must declare that that design has been made in accordance with the BCA for Regulated Designs, and 
  • Building Compliance Declarations: to be made by builders who have undertaken works which are covered by the regime, and which must declare that the building works have been undertaken in accordance with the relevant standards and tolerances set out in the BCA

The Bill contemplates "regulated designs", which are designs for building elements for prescribed classes of building work or a specific building element such as fire safety designs, waterproofing, load bearing components of buildings etc. If a design falls within the category of a "regulated design" then design practitioners involved in that design must be registered under the new regime, and will be required to make a declaration that the design is compliant with the BCA. A builder must not commence any work involving a regulated design until a final design is received from a registered design practitioner and they have given a declaration in relation to that design.  

Registration requirements and penalties

Any building and design practitioners who make Building Compliance Declarations or Design Compliance Declarations must be registered on a register maintained by the NSW Department of Consumer Service. 

The Department of Consumer Service will have the power to: 

  • investigate an individual's fitness for registration 
  • conduct investigations and to take disciplinary action
  • impose conditions on, suspend or vary a practitioner's registration 
  • issue show cause notices for breaches 
  • issue stop work orders for contravention of the legislation, and 
  • suspend a practitioner's registration.

A penalty regime is also contemplated, carrying penalties of up to $220,000 for an individual and $330,000 for a body corporate, along with terms of imprisonment for knowingly making false declarations. 

Interestingly, the Bill does not contemplate engineers having a requirement to be registered. This has been publicly criticised by Engineers Australia. Currently, people who have no engineering qualifications or experience can describe themselves as an engineer and carry out unregulated work on major infrastructure and development projects. Engineers Australia has vocally sought for the NSW Government to introduce mandatory registration of engineers. 

Duty of care to subsequent owners

The Bill proposes an extension of the duty of care owed by builders to subsequent owners, regardless of who the builder originally contracted with in relation to the building work. This will be achieved by implementing a statutory avenue to overcome the current limitations in common law for successors in title. The current position under the common law is that builders owe a duty of care to the parties originally contracted with in relation to building work, but not to any subsequent owners of the property. Importantly, this exposure will be additional to the potential liabilities that builders face under the statutory warranties already imposed by the Home Building Act 1989.

These reforms intend to provide protection to subsequent owners for economic loss caused by defective building work. From a practical perspective, these reforms are designed to provide consumers with comfort that, in situations such as the defects occurring in Opal Tower, the builder will be liable for the consumer's economic losses. The categories of people protected will include owners corporations, individual titleholders, and community, precinct or neighbourhood scheme associations. 

It is clear that these reforms will affect builders, designers and architects, but how are developers affected by these changes?

While the introduction of the final legislation will create further levels of compliance for builders and their consultants (and therefore for the developer to manage during the development process), it is unlikely that the legislation and any subsequent regulations will capture developers or directly create obligations for developers in relation to construction or design. 

Market sentiment is that developers will bear higher development costs due to the costs of compliance and insurances for building and design practitioners being passed on. Ultimately, however, developers should benefit from improved consumer sentiment in relation to the building industry. 

So, what is next?

The final Bill is yet to be passed by the NSW Government. The Government has expressed its intent to finalise the Bill and the Regulations which will sit alongside the Bill in 2020. 

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2020.

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