Reforms imminent for the building and construction industry in NSW

The NSW Government has introduced the Design and Building Practitioners Bill 2019 (Bill) to the NSW Parliament.

The Bill responds to the Building Confidence report dated February 2018 by Professor Peter Shergold and Ms Bronwyn Weird (Report). The Report addressed the compliance and enforcement issues faced by the building and construction industry in NSW following serious defects with newly built apartment towers in Sydney.

We explore some of the key features of the Bill below.

Extended duty of care

A key feature of the Bill is the extension of the duty of care for any person who carries out construction work, which includes building works and the preparation of regulated designed and other designs for building work. It is proposed that the duty:

• is to exercise reasonable care to avoid economic loss caused by defects in or related to a building;
• is owed to each owner of the land subject of the construction work and each subsequent owner; and
• cannot be avoided by way of contract.

This duty will also extend to an owners corporation, where it is taken to suffer economic loss if it bears the cost of rectification works relating to defects (including damage caused by defects). The intent of this change is to make it easier for claims to be made with respect to economic loss caused by defects arising from construction work.

However, the Bill will not change the limitation periods established under the Limitation Act 1969 or section 6.20 of the Environment Planning and Assessment Act 1979 which relate to civil actions associated with defective building or subdivision work.

Other key reforms

The Bill also proposes:

• prescribed categories of "regulated designs", which include designs, specifications and plans for building work and performance solutions;
• a requirement for design practitioners who prepare regulated designs to issue a "building compliance declaration" (BCD) stating compliance with the Building Code of Australia (BCA);
• a requirement that major variations to designs must be declared as complying before being provided to the builder and building work has commenced;
• a requirement for building practitioners to obtain, rely upon and build in accordance with declared designs, and to issue a BCD stating that the final building, including any variations, complies with the BCA;
• a requirement for any practitioner who makes a BCD to be registered under a new scheme set out under the Bill.

The NSW Government’s aim to improve building standards under the Bill primarily arises under the new requirement to obtain a BCD to confirm BCA compliance. Specifically, the Bill sets out that a BCD will need to address:

• whether the building work complies with the requirements of the BCA;
• whether the building work complies with other requirements set out in the new regulations;
• the steps to be taken to ensure compliance if the building work does not comply with either of the above requirements;
• whether the building practitioner relied on (and built in accordance with) a design prepared by a registered design practitioner for each "regulated design";
• whether the building practitioner obtained a "design compliance declaration" (DCD) in relation to each of those "regulated design";
• whether a registered principal design practitioner was appointed in relation to the regulated designs to which the DCD relates; and
• whether the building practitioner obtained a "principal compliance declaration" (PCD) in relation to the DCDs.

New enforcement powers and penalties

The Bill also incorporates a number of the Report’s key recommendations with respect to enforcement action. These include:

• broad enforcement powers for the Secretary of the Department of Customer Service, including stop work orders, seeking injunctions from the Land and Environment Court of NSW and investigating and auditing practitioners; and
• powers for the Secretary to take disciplinary action against registered practitioners, including cautions, reprimands, suspensions and cancellations of registrations.

Maximum penalties of $330,000 for bodies corporate and $110,000 in any other case are proposed under the Bill. Penalties for some offences may also include imprisonment (eg making a BCD, DCD or PCD that is known to be false or misleading).

Next steps

At this time, the Bill is before the Legislative Assembly and may be amended or rejected by the NSW Parliament.

If the Bill is passed by the NSW Parliament, the Design and Building Practitioners Act 2019 will commence at a later date.

If you would like any further guidance on the proposed reforms, please get in touch.

By Tom Dougherty, Senior Associate, and Mina Rassam, Solicitor, Sydney.