17 September 2020
The NSW Government has implemented legislative reforms to strengthen the regulation and performance of builders, certifiers and designers. The Government has passed the Building and Development Certifiers Act 2018 (BDC Act) and the Building and Development Certifiers Regulation 2020 (BDC Regulation). Both took effect on 1 July 2020. The NSW Government’s reforms also include Six Reform Pillars administered by the NSW Building Commissioner.
The BDC Act and BDC Regulation replace the former Building Professionals Act 2005 (NSW) and are designed to improve public confidence in the building and construction industry. The NSW Government has also implemented reforms to the building industry via the Design and Building Practitioners Act 2020 (DBP Act) and the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (RAB Act). The RAB Act commenced operation on 1 September 2020 whilst the majority of the DBP Act will come into force on 1 July 2021.
In the Second Reading Speech for the BDC Act, the Minister for Innovation and Better Regulation at that time identified that the BDC Act was intended to ensure building work is ‘fit for use by the public’. The Government’s reform agenda is focused on improving public confidence in the building industry, preventing defective building work and enhancing the accountability of building certifiers.
Some key elements of the new legislative framework are set out below.
Certifiers are considered public officials under the Public Interest Disclosures Act 1994 (NSW) (PID Act) and are also subject to the provisions of the Independent Commission Against Corruption Act 1988 (NSW) (ICAC Act) and the Ombudsman Act 1974 (NSW). Corrupt conduct can lead to prosecution and disciplinary action. Penalties can be imposed on anyone who tries to influence a certifier to act in a way that conflicts with the responsibility to act as a public official.
Corrupt conduct by a certifier may also result in investigation by the Independent Commission Against Corruption. The ICAC Act defines certain conduct as corrupt. A certifier may act corruptly if they:
Public officials also have a duty to report possible corrupt conduct. Public officials are protected from reprisal when making disclosures in accordance with the PID Act.
Registered certifiers have an important role in regulating building construction and subdivision work. Depending on their accreditation, a registered certifier can:
The Commissioner for NSW Fair Trading may suspend, cancel or place conditions on a certifier’s registration for contravention of the BDC Act and BDC Regulation. In addition, the Commissioner may require a certifier to pay as a penalty up to $110,000 for an individual and $220,000 for a body corporate.
The BDC Regulation includes a Code of Conduct (Code) that establishes principles, values and standards of behaviour for certifiers. The Code requires certifiers to act in the public interest and avoid conflicts of interest. The Code commenced operation on 1 July 2020.
To act in the public interest, registered certifiers are required to take all reasonable steps to not adversely affect the health, safety and amenity of people and their property. Certifiers assess public interest in terms of the health, safety and amenity of current and subsequent building owners, occupiers, users, visitors and neighbours, and quality of the built and natural environment.
Certifiers don’t work for builders or developers. Certifiers are appointed by the owners and a builder cannot appoint the certifier or influence the owner’s choice of a certifier. A certifier can be replaced if the owner, existing certifier and replacement certifier agree and the council and consent authority are notified that the certifier is being replaced. If not, then NSW Fair Trading assesses the reasons the owner wishes to replace the principal certifier.
A breach of the Code carries an $11,000 maximum penalty for an individual and $22,000 for a body corporate. A breach of the requirement to act in the public interest is also grounds for disciplinary action under the BDC Act.
The BDC Act and BDC Regulation restrict a certifier from carrying out certification work if there exists a conflict of interest.
A certifier is taken to have a conflict of interest if a reasonable person would conclude that the registered certifier has a private interest in the certification work and the private interest comes into conflict with, and may affect, the duty of a registered certifier to act in the public interest when undertaking the certification work.
A certifier must be objective, impartial and free of any conflict of interest. Under the Code, it is a breach of the Code for a Certifier to solicit or accept an improper benefit. The Code also prohibits a certifier from improperly using their status, position, powers or duties for the purpose of obtaining, either directly or indirectly, any personal benefit or benefit for a relative or close associate. A certifier must take all reasonable steps to ensure that a relative or close associate does not solicit or accept any improper benefit.
An improper benefit means a gift, hospitality or other benefit that could reasonably be expected to give rise to a conflict of interest or perceived as an inducement or reward for:
A perception of bias is also considered damaging to the standards expected by the community. Consequently, the Code prohibits any conduct that could bring the profession of certifiers into disrepute.
Any breach of the conflict of interest provisions of the BDC Act has a $33,000 maximum penalty. A breach is also ground for disciplinary action under the BDC Act.
The Practice Standard for registered certifiers issued by the Commissioner of NSW Fair Trading sets out the expected conduct of registered certifiers carrying out building certification work. The first volume of the Practice Standard focuses on certification of new residential apartment buildings. NSW Fair Trading will expand the Practice Standard over time to cover other certification work.
The Practice Standard is issued under the BDC Act as a specified standard which can be prescribed as a condition of registration. Certifiers who certify new residential apartments will be required to adhere to it.
The Practice Standard outlines a number of operational requirements for certifiers. For example, certifiers must diligently review an application for a construction certificate and its accompanying documentation as well as conduct critical stage inspections and adopt a risk-based approach for additional inspections.
Liability can arise from a breach of the certifier’s professional duty. Under the BDC Act and BDC Regulation, a registered certifier must be adequately insured and have professional indemnity insurance that complies with part 3 of the BDC Regulation.
The professional indemnity policy must provide indemnity to all liability incurred at any time since the registered individual became a registered certifier, indemnify the certifier against the liability defined in the BDC Regulation and not have any gaps in cover.
In addition to these requirements, the policy must provide the minimum level of cover required by the BDC Regulation. For example, the BDC Regulation requires that the maximum claim limit for a professional indemnity policy must not be less than $1,000,000 plus an additional 20% of that limit for relevant expenses. Carrying out certification work without adequate insurance carries a fine of up to $11,000.
Certifiers are also required to complete continuing professional development (CPD) to stay up to date with industry developments. All registered certifiers (with the exception of swimming pool inspectors) must undertake at least 25 points of relevant education and training annually. Swimming pool inspectors, from their second year of registration onwards, must achieve 6 CPD points each year. In addition, a certifier is required to complete any mandatory CPD required by NSW Fair Trading.
Certifiers are a critical part of the building industry and have an important responsibility to act in the public interest. When combined with the Six Reform Pillars, the NSW Government has demonstrated it is focused on improving transparency, accountability and the quality of work within the building industry.
This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.