New obligations imposed on design and building practitioners in a bid to improve building standards
In June 2019 the NSW Government published the aptly named “Building Stronger Foundations” discussion paper, which recommended legislative reform to improve the building standards in New South Wales (NSW). More recently, the Design and Building Practitioners Act 2020 (DBP Act) and Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (RAB Act) have commenced, which are aimed at ensuring development is built to a high standard and key design and building practitioners are held to account for works that are undertaken across the planning, design and construction stages of a development, in the event that such works fail to comply with the Building Code of Australia (BCA) and other regulatory standards.
Statutory duty to exercise reasonable care
Perhaps the most noteworthy change introduced under the DBP Act is the duty imposed on any person who carries out construction work to exercise reasonable care to avoid economic loss caused by defects in or related to a building for which the work is done, and arising from the construction work.
The DBP Act provides that this statutory duty of care is to operate retrospectively and that it is owed to each owner of the land in relation to which the construction work is carried out and to each subsequent owner of the land. These persons to whom a duty of care is owed are entitled to damages for the breach of the duty as if the duty were a duty established by the common law. This duty is in addition to those duties and statutory warranties and other obligations imposed under the Home Building Act 1989, other Acts or the common law.
Certain designs and building work classified as ‘regulated designs’
Under the DBP Act, a new concept of ‘regulated designs’ has been introduced. Regulated designs are defined as those designs prepared for a ‘building element’ for building works or a design that is prepared for a ‘performance solution’ for building work. The building elements that the regulated designs relate to include fire safety systems, the load bearing components of a building, waterproofing and those aspects of the mechanical, plumbing and electrical services for a building that are required to achieve compliance with the BCA.
The DBP Act introduces prescribed categories of ‘regulated designs’ and a requirement for registered design practitioners who prepare regulated designs to issue a compliance declaration stating compliance with the BCA. There is now also a requirement that major variations to designs must be declared as compliant before being provided to the builder, and that registered building practitioners must obtain, rely upon and build in accordance with these declared designs and issue a compliance declaration stating that the final building, including any variation, complies with the BCA.
New scheme for mandatory ‘compliance declarations’
The requirement for ‘compliance declarations’ has been introduced in relation to such regulated designs for certain building work (‘applicable building work’). For registered design and building practitioners who carry out applicable building work, the DBP Act imposes obligations to take all reasonable steps to provide building compliance declarations and to secure compliance declarations for regulated designs. This new scheme requires certain designers and building practitioners to declare that their regulated designs or building works are compliant with relevant industry standards, including the BCA. The DBP Act provides that registered design and building practitioners are not to provide a compliance declaration if they are not adequately insured in relation to the specific declaration they are making and the design or works that the declaration relates to.
Capacity to vary ‘declared’ designs
Where it is proposed that a regulated design or performance solution is to be varied, the proposed variation must be documented and supported by the necessary declarations from the designer and builder.
For any major variations to designs, the DBP Act requires that this varied design must be declared as compliant before being provided to the builder. Registered building practitioners must then obtain, rely upon and build in accordance with the declared designs and issue a compliance declaration stating that the final building, including any variations that may have been made, comply with the BCA.
Written notice of intention to apply for Occupation Certificate
Notably, the DBP Act introduces a requirement for each registered building practitioner who did building work on a development to be given written notice of a developer’s intention to apply for an occupation certificate within a prescribed period. In addition, written notice is to be given when an application for an occupation certificate has been made. The DBP Act provides that a person who fails to comply with this section is guilty of an offence.
New registration requirements for certain designers and building professionals
A new registration scheme exists under the DBP Act which applies to certain designers and building practitioners. The registration of a broad range of practitioners involved in the design and construction of buildings seeks to expand the existing licensing system provided for under the Home Building Act 1989, extending this licensing system to persons who undertake any residential building work valued over $5,000 (which will include builders working on high-rise buildings). The registration system introduced under the DBP Act aims to ensure that suitably qualified and properly insured persons are able to properly perform the aforementioned ‘declaration’ functions provided for under the new scheme. Accordingly, the DBP Act obligates registered practitioners by law to hold insurance, with the minimum insurance requirements to be prescribed by the Regulations.
In connection with the obligations imposed on registered practitioners to not carry out applicable building work until they have obtained compliance declarations, the new Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (RAB Act) has been introduced which aims to prevent developers from carrying out building work that may result in serious defects to building work or result in significant harm or loss to the public or current or future occupiers of the building.
Under the RAB Act, the Secretary of the Department of Customer Service (Secretary) is authorised to issue stop work orders which may remain in force for up to 12 months, and to seek relief from the Land and Environment Court of NSW to remedy or restrain any breach of an order. In addition to this, the Secretary has been given the power, regardless of whether a complaint has been made, to investigate:
- a registered practitioner or former registered practitioner, or
- the preparation of regulated designs or the carrying out of building work, professional engineering work or specialist work or the provision of compliance declarations, or
- other matters that may constitute a breach of the RAB Act or the regulations.
Furthermore, the Secretary has the broad power to conduct an audit of a registered practitioner at any time.
Under the RAB Act, and consistent with the DBP Act, developers are obligated to notify the Secretary at least six months, but not more than 12 months, before an application for an occupation certificate is intended to be made in relation to building works.
Investigative and enforcement powers for authorised officers are also provided for under the RAB Act, to ensure compliance with the requirements of the proposed Act.
Significant penalties for contravening the new requirements of the RAB Act have also been introduced.
For building and design practitioners
While the statutory duty of care regime commenced as of 11 June 2020, the new registration and certificate regime provided for under the DBP Act will take effect from 1 July 2020.
In light of the significant changes introduced under the DBP Act and the expansive investigative and enforcement powers that the Secretary has been given, practitioners in the building and design industry must ensure that they keep this statutory duty of care in mind, noting that this is likely to influence how they assess risk and what type and level of insurance they should obtain. It is likely that a number of building and design practitioners may wish to increase their rates for professional services in response to the changes which increase their liability and exposure to greater risk.
Importantly, the relevant practitioners will need to review and familiarise themselves with the new registration requirements, noting that significant penalties will apply if a registration certificate has not been complied with.
We note that these legislative changes will affect all certifiers, including local government certifiers. Local government certifiers should be aware that if a developer fails to comply with any orders issued by the Secretary, or fails to give notice of an application for an Occupation Certificate, then the Secretary may issue a prohibition order that would prevent an Occupation Certificate from being issued for the relevant project. If a prohibition order is issued by the Secretary, being just one of the enforcement actions that the Secretary may take to require a developer to rectify defects that have been identified, the Secretary must then give notice of the prohibition order to the relevant certifier for the building work, which may be the local government.
The homeowners affected by defective works
For homeowners who think they may have a claim for defective building works, they may wish to consider whether the extended statutory duty is available in respect of such a claim.
For further information on how the new DBP Act and RAB Act may affect you, please contact the Planning and Environment Team at McCullough Robertson Lawyers.
Thanks to Elizabeth Ryan, Lawyer for her assistance in putting this article together.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.