NSW major reform in the building and construction industry: the clock is ticking for comments

15 Jul 2019
The reforms proposed in the NSW Government's "Building Stronger Foundations" discussion paper, if adopted, will have far-reaching impacts on the State's building and construction industry, particularly the changes to insurance, accreditation requirements and the liability of participants in building projects.

If you haven't already, you should consider making a submission, in light of the extensive nature of these proposed reforms. The closing dates for submissions is Wednesday 24 July, with legislation to be introduced into NSW Parliament by the end of 2019.

Re-cap of the NSW Government’s response

The NSW Government's Response to the Shergold-Weir Report in February confirmed that it would support the vast majority of the 24 recommendations to improve the national best practice model for effectively implementing building regulation and the National Construction Code, outlining four key reforms to deliver a more robust regulatory framework for building and construction:

  • requiring categories of building practitioners who are defined as "building designers" to formally declare that plans, specifications and performance solutions are compliant with the Building Code of Australia (BCA), and that builders declare that buildings are built according to the declared plans;
  • introducing a new registration scheme for "building designers";
  • an industry-wide duty of care owed by building practitioners to owners’ corporations and subsequent residential homeowners, as well as unsophisticated development clients; and
  • appointing a Building Commissioner to act as the consolidated regulator for the construction industry in NSW, with powers to investigate and take disciplinary action against building practitioners that engage in improper conduct.

The Discussion Paper delves further into the NSW Government's Response by looking at the potential scope of the first three reforms and asking targeted questions for feedback to take the proposed reforms to the next stage of development.

A focus on "building designers"

The NSW Government proposes to introduce legislated obligations on a broader range of participants in the building and construction industry. "Building designers" will be required to declare that their plans and performance solutions comply with the BCA, and documentation will be required to be made available to the building regulator on request. The term "building designer" is intended to represent a category of practitioners who provide designs, plans and specifications for buildings that are required to comply with the BCA, including architects, builders, draftspersons and some categories of engineers.

Building designers would have two new obligations:

  • declare that plans comply with the BCA; and
  • explain how any performance solutions used in the design and construction of a building comply with the BCA.

To support these functions, builders would also have a new obligation to declare that buildings are constructed according to building plans that have been declared to be BCA-compliant.

The NSW Government is also contemplating introducing a registration scheme to increase assurance that only suitable professionals are performing building design work. The registration scheme is intended to enhance accountability by ensuring that practitioners have the relevant skills, hold appropriate insurance and can be held accountable for their actions, including being subject to disciplinary action.

Registered building designers would also be required to:

  • maintain a form of insurance compliant with any requirements prescribed by legislation; and
  • meet certain skills, qualifications and experience to demonstrate that they are able to complete documentation to a high standard.

To complement these reforms, the NSW Government has announced that it will appoint a Building Commissioner with a suite of enforcement powers to enable it to oversee compliance with the scheme. The Premier announced on 14 July that the Building Commissioner would be appointed within a few weeks.

Industry feedback is needed on:

  • the process for signing off plans, and any variations to plans, and declaring them as compliant with the BCA, including the role of builders;
  • the process for providing plans and other documentation to the Building Commissioner;
  • the methods of documenting performance solutions and their compliance with the BCA;
  • the occupations, specific activities and minimum requirements that should be included in the registration scheme for building designers;
  • the form of insurance, skills and qualifications that should be mandatory for building designers under the registration scheme; and
  • the powers given to the Building Commissioner to support and enforce compliance by registered building designers.

Stronger protection for homeowners and subsequent title holders

Another significant feature of the proposed reforms is the Government’s plan to amend the law to ensure there is an industry-wide duty of care owed to building owners.

Building owners currently have certain protections for building defects in the form of statutory warranties and other avenues of recourse through the legal system. The Discussion Paper highlights the NSW Government’s concern that the existing framework calls into question the degree of protection afforded to building owners; currently, a duty of care cannot be imposed other than in the case of a vulnerable owner who was not in a position to protect itself from the defendant’s lack of reasonable care.

To address this concern, the NSW Government proposes to amend the law to ensure an industry-wide duty of care is owed to homeowners, owners' corporations, subsequent titleholders and small businesses so that a broader range of building and construction practitioners are held to account for defective work, and to provide stronger protections for individuals to whom the practitioners will be liable. The duty of care is intended to apply to builders, developers, building designers, architects, contractors and other building practitioners.

Industry feedback is needed on:

  • the form of the duty of care;
  • the types of practitioners who should owe the duty of care and the type of work to which the duty should apply; and
  • the individuals to be protected by the duty of care.

NSW Certifiers Insurance

As part of the NSW Government's long-term solution to address the changed landscape for professional indemnity insurance (PI insurance), it has amended the Building Professionals Regulation 2017 (NSW) to allow for exclusions to PI insurance. This amendment was prompted by confirmation by PI insurance providers that new policies entered into from July 2019 will exclude indemnity for certifiers on work that relates to non-compliant and non-conforming cladding in building work. The amendment is intended to ensure that building certifiers can continue to be compliant and remain accredited under the Building Professionals Regulation even if PI insurance is unavailable. The amendment will not alter the obligations of all building professionals to undertake work that fully complies with other NSW laws, and the Building Code of Australia and relevant Australian standards. The NSW Government intends to remove the amendment in less than 12 months with the expectation that other reforms will be introduced over this period to improve the insurance market.

Having your say on reforms to the NSW building and construction sector

The NSW Department of Fair Trading has invited interested organisations and individuals to provide submissions on the issues raised in the Discussion Paper. The NSW Government has advised that it will remain open to considering reforms consistent with those in other jurisdictions to harmonise the national response.

If you are interested in providing feedback, you will have until 24 July 2019 to make a submission via mail, email or online.

Contact us if you would like assistance in preparing a submission during the consultation period or to get ready for the overhaul of NSW building laws that are coming.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.