Key Changes in NSW Building Laws: Building Legislation Amendment Act 2023

KEY TAKE OUTS:

• On 21 November 2023, Parliament passed The Building Legislation Amendment Bill 2023, which will now become the Building Legislation Amendment Act 2023.
• The Bill was introduced to enhance the efficiency, transparency and safety of the construction industry.
• There are a number of reforms in the legislation that will impact all building industry participants in NSW.
• The Building Commission NSW is a newly established regulator in NSW of the building and construction industry and began its new role on 1 December 2023.

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The Building Commission NSW

The Building Commission NSW is a building regulator that combines teams from the NSW Fair Trading and the Office of the Building Commissioner into one. From 1 December 2023, the Building Commission NSW will take on the role of regulator of the building and construction industry in NSW.

Key Reforms

As part of these legislative changes, there will be various reforms to the building and construction industry. We discuss those key reforms in further detail below.

Inspection Powers Expansion

This section will impact owners of buildings as well as builders and tradespeople, under the Home Building Act (1999). The reform has established that site inspections are no longer required to be initiated due to a building dispute with the regulator. The new reform has instead allowed residential construction sites and premises, where building work has been undertaken, to be put on notice of inspection at any time. Investigative powers have been expanded as under the Home Building Act 1989; inspectors of the Building Commission can investigate the construction of buildings. Buildings that can be investigated will be classified under Class1 buildings of the National Constructions Code.

Under investigative power, the Inspector will have the power to issue the contractor a rectification order for:

• Defective building work
• Work that could result in a defect
• As a result of the defect, other structures or work that has been damaged

Additionally, inspectors can issue the developer a stop work order on the basis that if work is continued, it will cause significant harm to the:

• Public
• Occupier

It is important to note that if the Building Commission NSW issues a stop work or rectification order and it is not complied with, then penalties will apply.

Anti-phoenixing laws

The Bill has expanded powers to cancel the issue of contractor licenses and prevent individuals and corporations from holding an authority.

Intentional phoenixing is when a director of a company within the construction industry creates a new company for the purpose of carrying on the business activities of an existing liquidated company. This is generally created to avoid completing work, remedying defects or paying debts.

The new reforms in the Home Building Act will prevent individuals and businesses from engaging in intentional phoenixing activity. The aim is to decrease poor corporate behaviour, whilst also ensuring consumers and tradespeople in the construction industry are not harmed or impacted by intentional phoenixing.

Regulators will have the power to refuse an application, cancel a licence or disqualify a person from holding a contractor licence, if it is found that they are part of the management of an insolvent company of a number of years.

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Decennial Liability Insurance and amendment to the Strata Schemes Management Act 2015 (NSW)

The Bill will amend the Strata Schemes Management Act 2015 (NSW), by exempting developers to the Strata Building Bond and Inspection Scheme (SBBIS) and can instead take into effect the Decennial Liability Insurance (DLI). This reform will impact consumers, developers and builders of Class 2 apartment building projects and insurers who offer DLI products. A DLI is an insurance product that for a period of 10 years, protects common property of strata apartment buildings against defects.

The developer can take out the insurance policy before occupation of the building as opposed to the SBBIs. The SBBIs only covers the costs of defect rectification to the value of the bond paid. Whilst in opposition, the DLI covers the rectification up to the contract cost of the apartment building, even with insolvency or if the developer ceases operation.

From 1 July 2024, the Act will amend the existing strata building bond. The existing Strata Bond Scheme requires developers to lodge a bond of 2% against defects. If no defects are identified, after a period of 2 years of the date of issue of the occupation certificate, the bond will return. The amendment is to increase the bond to 3% from 1 February 2024.

Another amendment to the Bill is that where a bond has not been provided, developers are required to provide the Secretary with a copy of a certificate of currency for DLI before making an application for an occupation certificate. Under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW), the Secretary will have the power to issue an occupation certificate for lack of compliance.

New Suspension Powers

The Bill will enforce a number of enforcement measures to the Secretary for non-compliance or if they engage in unlawful conduct in the building industry. The new suspension powers will impact certifiers registered under the Building and Development Certifiers Act 2018 and practitioners registered under the Design and Building Practitioners Act 2020.

The reform has introduced immediate suspension of the following persons in the event of non-compliance or unlawful conduct:

• Certifier
• Design practitioner
• Principal design practitioner
• Building practitioner
• Professional engineer

Building Products Safety

The Act introduces a chain of responsibility and new duties for stakeholders involved in building product supply. They will be subject to broader obligations and penalties in relation to building product safety under the Building Products (Safety) Act 2017 (NSW). Stakeholders impacted by these amendments to the Act include:

• Manufacturers
• Suppliers
• Importers
• Designers
• Tradespeople

Responsibilities and duties include ensuring products are compliant and safe for their intended purpose. Additionally, it is required that certain information about the product is available to people who are involved in the building product supply chain.

Other additional powers include the right to issue building product warnings and direction, as well as to ban, recall and investigate building products that do not conform with these requirements.

These reforms will come into force during 2025 and is essential individuals involved in the building product supply chain comply with these changes.

How can Coutts help?

It is essential to be aware of the changes in legislation in the building and construction industry if you are an individual or company working within the industry or if you a person who is building or looking to build in the near future and may be impacted by these changes. It is important to stay up to date to ensure you avoid any possible legal consequences.

If you require any assistance with navigating the new reforms in The Building Legislation Amendment Bill 2023, and how it may impact you, or further detail on how the newly formed Building Commission NSW may be able to assist you, our Building and Construction expert, Melissa care and her team at Coutts Lawyers and Conveyancers can provide you with assistance every step of the way.

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