Home Insights Changing legal landscape forces builders and developers to revisit their obligations and liabilities
Share

Changing legal landscape forces builders and developers to revisit their obligations and liabilities

Developers and builders will need to carefully consider their liabilities and obligations under current and impending legislative requirements which govern the building and construction sector in NSW.

This will include making assumptions about the status of occupation certificates as endorsements that building work has been accepted by authorities as undertaken in accordance with the relevant building standards.

This assumption has been clarified earlier this month in a case where the NSW Civil and Administrative Tribunal (NCAT) dismissed an appeal by the developer and builder against an initial decision involving the replacement of combustible cladding on a building where an occupation certificate had been granted by the relevant authorities.[1]  

In November 2019, NCAT had earlier found that the use of external ’Biowood’ cladding installed on the façade of the apartment building was not compliant with clause 2.4 of the Building Code of Australia (BCA) Specification C1.1 as it was “indisputably combustible” and caused “undue risk” of fire spread between different levels of the building.   

As a result, the use of Biowood cladding was found to be in breach of the statutory warranties under section 18B of the Home Building Act (NSW) (HBA) at the time the building work was carried out.  Both the builder that carried out the residential building work, and the developer, were ordered to rectify the breach of the statutory warranties by removing the Biowood cladding and replace it with materials that complied with the codes, standards and statutory warranties. 

The builder and the developer had argued that the issuing of an Interim Occupation Certificate (IOC) signified that the cladding material was BCA compliant, consistent with Section 6.30 of the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act). 

However, NCAT was not satisfied that the issuing of an IOC created an “irrebuttable presumption” that building materials complied with the BCA and HBA, holding that NCAT has the power to determine whether building material complies with the BCA, regardless of whether an IOC has been issued. 

Recent legislative changes 

Recent legislative changes now mean that developers and builders and designers will be required to implement a more stringent quality assurance framework and governance structure in particular, to comply with the Design and Building Practitioners Act (NSW) (DBP Act) and the Residential Apartment Building (Compliance and Enforcement Powers) Act (NSW) (RAB Act) - which also takes into account the Building Products (Safety) Act (NSW) (BPS Act).

Design and Building Practitioners Act

As part of the DBP Act, design and building practitioners will be required to issue ‘compliance declarations’ at various levels of the building cycle. These compliance declarations will require design and building practitioners to confirm the building work they have undertaken and the building elements which they have used complies with the required industry standards, including the requirements imposed by the BCA. 

The DBP Act will have broad application in the sector, with building and design practitioners, building elements and building work broadly defined as follows:

  • ‘building work’ includes the construction, alteration, repair or renovation of a building or part of a building of a class or type prescribed by the regulations;

  • ‘building elements’ includes fire safety systems, waterproofing, load-bearing components, parts of a building enclosure, and any other mechanical, plumbing or electrical services;

  • ‘building practitioners’ includes anyone who is engaged, under a contract or other arrangement, to do building work, or if more than one person is doing the building work, the principal contractor for that work; and

  • ‘design practitioners’ includes any practitioner who prepare designs for building elements or building work. 

The DBP Act also requires the registration of design and principal design practitioners, building practitioners, professional engineers and specialist practitioners, and imposes insurance obligations as a criteria for registration. The changes are designed to ensure accountability is more readily achieved in the industry. 

The NSW Government is creating a regulatory framework with proactive building assurance to ensure that proper consideration given to building standards throughout the building cycle, rather than waiting for a project to be completed before compliance and enforcement mechanisms are put in place. 

Principal certifiers will be required to obtain all the necessary compliance declarations for the relevant building work from all design and building practitioners involved in the project before granting occupation certificates. 

Residential Apartment Building Act

The RAB Act requires that developers notify the Secretary of the Department of Customer Service 6-12 months prior to applying for an occupation certificate that they have an intention to apply for the certificate. This change will enable government to undertake quality assurance checks, before occupation certificates are issued, in an attempt to prevent defective building work from being discovered in the future.  

The changes will also enable the Department to issue prohibition orders prohibiting the issuing of an occupation certificate where:  

  • notification requirements regarding the intention to apply for an occupation certificate have not been met;

  • there is a serious defect in the building; or

  • payment of a full strata bond has not been made.

Under the RAB Act, a new defect category of ‘serious defect’ has also been established, which includes: 

  • non-compliant building elements which are attributable to a failure to comply with the Building Code of Australia, relevant Australian Standard or approved plans;  

  • a defective building element or building product that is attributable to defective design, defective or faulty workmanship or defective materials and likely to cause an inability to inhabit or use the building, or the destruction of the building or any part of it, or a threat of collapse of the building or any part of it;

  • any other defects prescribed as a serious defect under the regulations; and

  • the use of a building product which is prohibited under the Building Products (Safety) Act 2017 (NSW), legislation which gives the NSW Government the power to identify and prohibit the use of unsafe building products. More information on the legislation and its implications can be found here

Implications 

It is likely that had the RAB Act been in place when the interim occupation certificate was issued in the Taylor case, the Biowood combustible cladding would likely have been considered a ‘serious defect’ under the RAB Act. This would have prevented an Occupation Certificate from being granted. This highlights the practical implications the new regulatory framework is likely to have on developers and builder.  


[1] Taylor Construction Group Pty Ltd v The Owners - Strata Plan No 92888 [2020] NSWCATAP 163


Authors


Tags

Construction, Major Projects and Infrastructure Environment and Planning Real Estate

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.