Australia: Residential building targeted by strict regulation

In brief - Developers, builders and designers need to be aware that the NSW Building Commissioner is cracking down on faulty practices with a new era of strict regulation

Builders, designers, suppliers and supervisors, under the Design and Building Practitioners Act:

• now retrospectively owe a statutory duty of care to current and future owners to avoid economic loss caused by defects in respect of certain buildings; and
• ought to account for this duty of care when assessing risk, pricing and insurance arrangements;
• will need to register to issue "Building Compliance Declarations" and "Design Compliance Declarations" as part of a new scheme;
• will be subject to stronger enforcement powers including stop work orders.

Commencement

The duty of care provisions commenced operation on 11 June 2020.

All other provisions relating to regulation of design and building work, and registration of key industry participants, will not commence until 1 July 2021.

This allows industry a brief grace period to familiarise itself with the requirements.

Occupation Certificates

The first focus is on the issuing of Occupation Certificates or "OC" as a means to "look back down the design and compliance work chain".

Under the Practitioners Act, liability for non-compliance will extend to all building practitioners to which the OC relates. This includes the relevant certifier, developer and builder.

Affected persons may be required to halt a project until compliance with the OC audit is demonstrated.

This stands to significantly increase the obligations of involved parties comparative to the current statutory regime.

This strategy may hold accountable a greater array of building and construction participants where faulty work is identified, as opposed to potentially levelling blame at a single person.

Duty of care

Practitioners now owe a retrospective statutory duty of care to owners and subsequent owners of the land on which construction takes place.

The duty arises either where defects are identified in a building where the practitioner has completed work, or where the defects have arisen directly from the practitioner's construction work.

This increased liability stands in addition to the significant obligations practitioners owe under the Home Building Act 1989 and Civil Liability Act 2002.

The Act imposes this duty of care retrospectively, albeit to a limited extent.

The duty of care applies to all builders and designers. It cannot be contracted out of or delegated to another party.

Those who suspect that an existing development or project may be covered should seek advice, as damages may be sought where reasonable care was not exercised by the building practitioner.

"Building Compliance Declarations" and "Design Compliance Declarations"

The Practitioners Act requires design and building practitioners to provide separate building and design compliance declarations following the completion of works.

These declarations must confirm that the design and building requirements comply with the Building Code of Australia and any other relevant codes or statutes, with further conditions likely to be incorporated in future regulations.

A failure to provide an adequate declaration may see fines of up to $165,000 issued to the offending body.

Where a contravention of a declaration could result in significant harm or loss to the public or occupiers, the Act allows for stop work orders for up to 12 months and relief from the Land and Environment Court of NSW to remedy or restrain a breach of the Act.

Register of Practitioners

Practitioners making a Building Compliance Declaration or a Design Compliance Declaration, must register with the NSW Department of Customer Service.

While the exact form of this register is yet to be determined, the Act states that it will be managed by the Commissioner's office, and available to the public online.

The Commissioner is currently undertaking consultation with key industry stakeholders to determine what form the register and other substantive mechanisms contained in the legislation will take. These will be announced in the coming months, and enter into force on 1 July 2021.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.