Impending legislative reforms to NSW construction industry

The NSW building and construction industry is in a period of enacting significant legislative change. This is centred on duties of care and obligations owed by building contracts and persons, and has emerged from legislation and case-law following same over the last 24 months.

Coupled with a targeted focus by the NSW Building Commissioner on defective construction work (including defective design and planning), the major reforms so far have been focused on high-rise residential buildings. The Government has now proposed three bills to restore consumer confidence in the NSW construction industry. The proposed reforms will apply to builders and designers.

Stakeholders will be required to revise risk management processes and procedures. This includes engaging legal and risk advisers to understand their respective exposure, and otherwise to ensure compliance with the various changes. See our recent article here.

Since implementation of the Design and Building Practitioners Act 2020 (NSW) (DB Act), and the Building Commissioner’s work, various industry commentators consider that there have been improvements in the quality of residential high rise construction.

We take this opportunity to provide you with a summary of the proposed reforms which were subject to public consultation and are now under review by Parliament.

One of the amendments proposed by the changes is the increased level of accountability for the suppliers of building products on the basis there is insufficient onus and accountability on those suppliers.

Under the current framework buildings and designers rely on information/representations made by suppliers and manufacturers about the suitability of building products and it is licensed builders that are penalised for non-compliance due to the use of these products.

The Bill proposes to include ‘non-conforming building products’ as consumer goods such that consumers are afforded remedies under the Australian Consumer Law.

Amendments also introduce a chain of responsibility for a building product extending to a person who designs or deals with the product, a person who uses the product in a building and a person who knows or ought reasonably to know that the product will or is likely to be used in a building.

Persons in the ‘chain of responsibility’ impose a range of duties on persons in the supply chain and to ensure that certain information to accompany a building product is passed down to the next person in the chain.

The Building Compliance and Enforcement Bill 2022 will standardise the NSW Fair Trading’s investigative powers to enable officers to carry out inspections and audits in powers surrounding the security of payments and obligations of owners corporations to maintain common property. It will replace the Residential Apartment Building (Compliance and Enforcement Powers) Act 2020.

Importantly, the power to order the rectification of building work will be expanded to all classes of building where a serious defect may exist, as will the power for the Secretary to prohibit the issuing of an occupation certificate (OC) where there are non-compliant and serious defects in buildings.

The amendments proposed by the Government largely increase both the breadth and scope of responsibilities and professional obligations on construction professionals. The amendments are wide reaching and, if made law, effectively create a whole new set of obligations governing building work in NSW.

Summarily, the amendments intend to broaden the focus of the reforms of late which were focused on residential apartment buildings, to the broader building industry implementing best practice regulation across all construction work.

The amendments to the Building Bill as regards the expanding duty of care will now mean other construction professionals such as certifiers to future owners, following the recent decision in Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624) see our article here.

First and foremost, construction industry participants should take heed of the proposed amendments to ensure that once enacted, expanded duties and obligations are understood and steps are taken, where necessary, to ensure policies and procedures are in place. This will enable organisations and their employees (including any contractors they engage) to comply with the amendments.

The concerns for builders, designers and certifiers includes an expansion of the duty of care in respect of defective building work for any building type. Designers will also be subject to revised licensing requirements for non-Class 2 buildings. Expanding duties of care and new obligations for industry participants, including new obligations under the Australian Consumer Law, are likely to result in an increase in claim costs for stakeholders and their insurers. This is problematic for insurers, and we are seeing some react by even excluding claims brought under the DBP Act.

For further information and advice on how proposed changes to legislation may impact your liabilities, please contact us via the form below.