In brief - the recent Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) provides that from 1 September 2020 developers of residential apartment buildings may be subject to:
- orders prohibiting the issue of an occupation certificate;
- stop work orders; and
- building work rectification orders.
Developers should take action now to prepare so that projects are not inconvenienced or delayed by such orders.
The second tranche of legislation proposed by the recently appointed Building Commissioner concerns the Residential Buildings Act, which contains heightened compliance requirements and increased accountability mechanisms for developers and contractors in the context of residential developments.
Parties will have until 1 September 2020 to familiarise themselves with their new requirements before the Act commences.
The Act will affect existing construction projects and developments, subject to the standard six year warranty period for major defects.
What buildings are affected?
The Residential Buildings Act is limited in application to a relatively narrow class of residential apartment buildings, being "Class 2 buildings" that are typically multi-unit residential buildings where people live above and below each other.
Who is affected?
Developers are affected, broadly including any the person who contracted, arranged for or facilitated the building work to be carried out.
A "developer" includes any owner of the land on which the building work is carried out at the time the building work is carried out, the principal contractor for the building work and the "original owner" of a strata scheme.
Regulation may be made to expand on this definition but has not yet been.
The Commissioner is entitled to issue a rectification order if building work on a new or existing structure is deemed to have been carried out in a manner that may result in a serious defect.
An order of this nature will require the developer to conduct further works to ensure the defect is rectified within a defined time frame at their own expense.
Where a rectification order has been applied, the Commissioner has discretionary powers to prevent the issuing of an occupation certificate, and where relevant, to prohibit the registration of a strata plan for a strata scheme.
The Commissioner is permitted to carry out works to fulfil the rectification order where the relevant developer has failed to comply with its terms, which can extend to partial or complete demolition of the defective work.
Before a rectification order is issued, the Commissioner is required to comply with quite rigorous notice requirements, including providing information to the affected developer as to:
- why the order has been made;
- the terms of the proposed order;
- the period to which the order extends; and
- an opportunity for the developer to provide written protest of the order.
The notice requirement can be waived if the Commissioner's office is of the opinion that the works are a "serious risk" to public safety, or if there is an "emergency".
The Commissioner may issue a compliance cost notice where a rectification order has been lodged, requiring a developer to pay all reasonable costs and expenses associated with the rectification order and rectification works.
Stop work orders
The Commissioner may issue stop work orders to both new and existing developments.
A stop work order will be provided where the building work is, or is likely to be, carried out in a manner which could cause harm or loss to either the public, occupiers, or future occupiers of the affected premises.
Under the order a developer can be prevented from carrying out construction for a period of up to 12 months.
Developers who fail to comply with a stop work order will face a maximum penalty of $330,000, plus $33,000 per day while the breach of the order continues.
Developers are entitled to appeal a stop work order in the Land and Environment Court, so long as the appeal is lodged within 30 days of the notice being served.
Expected Completion Notice
From 1 March 2021 developers must not apply for, or permit an application for an occupation certificate unless an "Expected Completion Notice" is given to the Commissioner's office 6-12 months before the application is lodged.
The notice must include the "expected date" of the application for an occupation certificate.
If circumstances change, the developer must notify the Commissioner of the new expected date within 7 days (but only if not within 60 days of the original expected date).
A developer may rely on another developer's notice.
However, this requirement will not immediately apply to existing developments. Rather, developers will have 6 months from the date of commencement before this obligation will take effect, meaning notice will be required.
What to do now
Over the next 12 months, developers and building practitioners will see their rights and obligations change as the different sections of the Design and Building Practitioners Act and Residential Buildings Act come into operation.
During that time residential apartment building developers should:
- review the "expected date" of application for any occupation certificate;
- review projects for any defects that may potentially be subject of any rectification order or stop work order;
- review building contracts to ensure builders and designers are responsible and will promptly carry out any necessary rectification;
- consider insurance arrangements relating to any potential investigation or order.
We will continue to provide updates throughout this process, and encourage concerned parties to seek advice.
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 2021.