Occupation Certificate Audits (OC Audits) will play an important role in driving behavioural change in the building and construction sector, according to NSW Building Commissioner, David Chandler OAM.
The audit process poses a significant opportunity for financiers, who are encouraged to require borrowers to produce the results of an OC Inspection as part of their lending obligations.
Speaking at a briefing to financiers hosted by Corrs Chambers Westgarth, Mr Chandler provided an update on how the Occupation Certificate Audits process will work, and explained how the building lifecycle will change as a result of the implementation of Design and Building Practitioners Act 2020 (NSW) (DBP Act) and Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) (RAB Act).
During the presentation, the Building Commissioner discussed the ’Construct NSW Strategy’, which is a six-pillar reform program designed to transform the industry.
The core objectives of the reform program are to:
- establish appropriate regulatory settings to ensure buildings are safe and secure throughout their entire useful life;
- create an industry-wide culture that is customer-focussed, trustworthy and values quality;
- improve the quality and amount of data that is captured and shared throughout the supply chain; and
- develop a regulator that is empowered, organised and resourced to be impactive and efficient.
The top 10 takeaways from the NSW Building Commissioner’s presentation were:
- Under the RAB Act, the Building Commissioner has the power to conduct OC Audits, which assess building work before an occupation certificate has been granted. The OC Audits are designed to raise the standard of construction for class 2 buildings to give consumers more confidence in their purchase as they move from depositor to owner. OC Audits will be focused on projects where indicators suggest that work has not been performed in accordance with the BCA or approved designs, and not using products that meet the requirements of Australian Standards.
- As part of this process, the Building Commissioner is looking at projects as a whole, rather than individual players associated with an individual projects. This will involve assessing the work of developers, builders, designers, certifiers, manufacturers, suppliers and installers as part of the OC Audit Process. OC Inspections began in July, and the common theme on inspections to date has been deficient designs. The Building Commissioner stressed the importance of adequate designs to ensure that the rest of the building cycle can produce trusted products.
- Financiers’ should consider including requirements for borrowers to produce the results of an OC Inspection as part of their lending obligations, although practically financiers will be ensuring that notification obligations under facilities pick up the issuance of required compliance declarations at each stage of a development.
- As the reforms are rolled out, there will be a focus on encouraging builders and developers to become ’trusted players’ in the sector. It is possible that a number of ’privileges’, such as an exemption from the OC audit process, may be put in place for trusted players. This is designed to drive behavioural change in the sector. A ‘multi-party risk rating’ tool will soon be introduced, which will see builders, certifiers and developers given a score on the quality of their previous work. This will bring together data, which was previously spread across 20 different data silos, to provide an immediate picture of any faults or deficiencies in the work of key players in the sector. This data will be displayed in digital dashboards, allowing customers and financiers to easily identify the trusted players.
- In order to determine who is a trusted player, the Building Commissioner is focusing on ensuring players have adequate internal governance in place to ensure the work is completed in accordance with the regulations and required standards. In particular, ensuring protocols and processes are in place will be critical. The Building Commission has already referred single-director and suspected sham companies to ASIC for their investigation.
- Model clauses are now available for inclusion in construction contracts which ensure parties have an obligation to comply with the new legislation. Copies of model clauses for construct only contracts can be found here, and design consultancy agreements here. The draft clauses have been prepared by the Building Commisioner’s Pillar 4 working group, which includes Corrs’ partner Andrew Chew. Parties seeking to enter into new building contracts should have regard to these clauses to ensure designers are being engaged to prepare declared designs and builders are building in accordance with these declared designs.
- The Building Commissioner hopes the recent reforms will lead customers to have confidence that Fair Trading, as the regulator for the sector, will be able to work with parties to resolve defects issues. This will ensure customers can avoid costly litigation proceedings through NCAT or other courts.
- The draft Regulations to support the DBP Act will soon be released. They are currently being devised as part of an expert panel of key planners involved in the sector.
- While the RAB Act is already in place, the DBP Act will not come into effect until 1 July 2021. This will give industry players a number of months to become aware of their new responsibilities and change business behaviours accordingly. More information on the requirements of the DBP can be found here.
- The Building and Development Certifiers Act 2018 is another piece of legislation which has been passed in recent years to improve quality in the sector. As part of these changes, the NSW Government recently released a new Practice Standard for registered certifiers. This sets out the requirements that the certifier has to assess the building design and building work at each stage of inspection, prior to issuing an occupation certificate. A copy of the standard can be found here.
- The Building Commissioner is due to report back to the NSW Parliament in March 2022, with a business case about what a ‘future regulator’ in the sector might look like. Data and technology is likely to play an important role in the future regulation, although this will be considered more in the coming years before the 2022 deadline.
The Building Commissioner has also released a useful summary of his presentation, which includes footage from his presentation.
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