29 Apr 2021

NSW residential building sector reforms commence on 1 July 2021: Are you ready?

By Lina Fischer, Kristina Skamvougeras

The NSW Government's new legislative framework for the regulation of the residential apartment building sector will commence on 1 July 2021 and will impose extensive obligations on practitioners. We provide below a summary of the key obligations and some guidance to assist you in preparing your people and organisation for the reforms.

Last year the NSW Government enacted the Design and Building Practitioners Act (NSW) 2020 (DBP Act) to raise the standard of the NSW residential building sector and to re-instil confidence in multi-storey apartment buildings. Following a period of extensive industry and community consultation led by the NSW Government, on 9 April 2021, the Design and Building Practitioners Regulation 2021 was released in its final form to support the operation of the DBP Act. The release of the Regulation had been highly anticipated, given that it will have an important role in defining the scope and operation of the DBP Act. The DBP Act and Regulation will apply to design practitioners, building practitioners and professional engineers (Practitioners) who work on class 2 buildings (ie. multi-storey apartment buildings) and buildings that have a class 2 component.

Together with the Residential Apartment Buildings Act (NSW) 2020, the legislation establishes a new legislative framework that will drive change in the industry, by imposing serious obligations and penalties on Practitioners.

We outline below in a nutshell the key provisions of the legislative framework that you should be aware of.

Design and Building Practitioners Act (NSW) 2020

Imposes statutory duty of care

  • Imposes statutory duty of care on every person who carries out construction work to exercise reasonable care to avoid economic loss caused by defects (1) in or related to a building for which work is done, and (2) arising from construction work;
  • The statutory duty is owed to each owner of the land in relation to which the construction work is conducted (including all subsequent owners);
  • Statutory duty of care applies retrospectively where the economic loss suffered first became apparent within the 10 years prior to 10 June 2020.

Establishes regulatory framework

  • Most provisions commence on 1 July 2021 (except the duty of care which commenced on 10 June 2020);
  • Imposes requirement for Practitioners to be registered;
  • Imposes a declaration scheme (1) for submission of regulated designs by registered designers, and (2) in respect of building work by registered builders, prior to applying for an occupation certificate (Declaration Scheme);
  • Imposes requirements for Practitioners to be "adequately insured"; and
  • Provides investigation and enforcement powers to authorised officers and the Secretary of the Department of Customer Service (including the power to issue stop work orders). 

Design and Building Practitioners Regulation

Commencement and application

  • Commences on 1 July 2021 and applies to building and design work for which a construction certificate or complying development certificate is issued on or after 1 July 2021;
  • Applies to Practitioners who work on class 2 buildings and buildings that have a class 2 component. In the case of mixed-use buildings with at least one class 2 component, the legislative framework applies to all parts of the building;
  • Imposes obligations on Practitioners to comply with a detailed registration process, a comprehensive code of practice and to undertake continuing professional development.
  • Outlines penalty notice offences.

Building work

  • Clause 13 of the Regulation prescribes that certain types of work are excluded from constituting "building work" for the purposes of the legislation. Exempted works include (1) works relating to maintenance or protective treatment of fire safety systems, (2) works on a building to the extent that it involves mechanical, plumbing or electrical maintenance services, and (3) work that is excluded from being residential building work under the Home Building Act (NSW) 1989;
  • Following the Industry Consultation the Regulation was amended to confirm that waterproofing works carried out by individual owners within their lots (including works to bathrooms, kitchens, laundries or toilets) will not be captured. The Regulation will however capture waterproofing works performed by developers across multiple lots, either before or after occupation (even if aspects of the works are performed in individual lots).

Classes of registration of design practitioners

  • Schedule 1 lists the classes of registration of design practitioners;
  • A number of classes of registration that appeared in the draft Regulation have been amended to reflect the Industry Consultation. This includes the inclusion of two new classes of design practitioners: "Body Corporate" and "Vertical Transportation", the removal of Class "Electrical Design (Restricted)" and some amendments to other classes.

Registration of design practitioners

  • Practitioners can register as design practitioners if they have at least 5 years' recent relevant practical experience in the last 10 years in their area of practice. If at least 2 years' recent relevant experience has not been completed in Australia, a minimum of 10 years' recent relevant practical experience must be demonstrated as well as completion of a competency assessment documented by the Secretary or a person approved by the Secretary;
  • Relevant experience includes preparing designs, carrying out building work or performing professional engineering work (as applicable) in the practitioner's practice area on any class 2, 3, 9a or 9c buildings;
  • To enable highly skilled and experienced practitioners who do not otherwise satisfy the registration requirements to continue working, the Regulation offers a competency pathway. The requirements of the pathway are described in detail in the Regulation and it is available to building designers, fire system designers and vertical transportation designers;
  • Imposes obligations for registration of principal design practitioners. Principal design practitioners are not required for every building but may be useful in co-ordinating designs for more complex developments.

Registration of building practitioners

  • Three classes of building practitioners are established under the Regulation: "Body Corporate" (which was included following the Industry Consultation), "Body Corporate Nominee" and "General". The requirements for these classes are outlined in the Regulation.
  • In some cases developers will also need to be registered if they are principally contracted to do or co-ordinate the building work.

Registration of professional engineers

  • Prescribes registration of the various subject matter areas specified under the DBP Act, including geotechnical engineering, structural, civil, mechanical, fire safety and electrical;
  • Specifies that only individuals can register;
  • Prescribes 3 possible pathways for registration (Pathways to Registration), with minimum requirements for education, skills, expertise and experience set out in the Regulation. Each Pathway to Registration also has its own requirements for ongoing regulation, insurances and continuing professional development;
  • An alternative pathway is available to enable engineers with extensive experience in their field, who do not meet all the required requirements for registration under the Pathways to Registration, to continue working. The Regulation outlines 2 options for registering under this "competency pathway".

Declaration Scheme

Industry Consultation identified that the requirements outlined in the draft Regulation in relation lodgement of designs and the declaration obligations may add significant additional time to the building process. However, given that the purpose of the legislation is to raise standards of design and construction, the NSW Government felt that those requirements should remain. It was recognised that this will require a significant shift from current practices. Therefore, the following Declaration Scheme has been incorporated into the legislation, which imposes strict requirements for lodging documentation on the NSW Planning Portal:

Stage 1: Before building work commences, building practitioners must lodge:

  • copies of the construction issued regulated designs for the building;
  • copies of design compliance declarations for each design; and
  • where a principal design practitioner is appointed, a principal compliance declaration for the design.

Those documents must also be provided to the certifier at this point.

Stage 2: As variations arise after building work commences, a building practitioner must lodge, by no later than 1 day after commencing a variation to building work:

  • each design compliance declaration for varied regulated design;
  • the varied regulated design;
  • each design compliance declaration for a new building element or performance solution; and
  • the regulated design for the new building element or performance solution.

These lodgement provisions apply to variations requiring work to a building element and to performance solution variations. Other variations to building work, which do not relate to a building element or performance solution, only require the building practitioner to record the details of the variation in a document known as a variation statement, which is submitted at Stage 3. The NSW Government clarified this distinction in response to concerns raised in submissions regarding the variation process.

Stage 3: Before applying for an occupation certificate, a building practitioner must lodge:

  • where a principal design practitioner is appointed for building work, the building compliance declaration;
  • contractor document (which includes a range of documentation such as the construction contract);
  • copy of each variation statement required for building work;
  • copy of each regulated design that contains additional details not reflected in the construction issued regulated design (but only if the details do not cause the building work to which the design relates to be varied); and
  • other required documents.

Stage 4: Within 90 days after an occupation certificate has been issued, a building practitioner must lodge:

  • each regulated design that reflects the building work carried out; and
  • re-lodge the documents required for lodgement under stage 3, if they have changed since their previous lodgement.

Insurance

  • Registered Practitioners must carry adequate insurances and must be indemnified under a professional indemnity policy which covers all relevant work and indemnifies against 'all liability' incurred by them at any time since they became a Practitioner;
  • The Industry Consultation identified concerns relating to the availability of such broad insurance coverage. To give Practitioners an opportunity to make relevant arrangements and to enable the insurance market to meet this insurance demand, the Regulation exempts all design practitioners who register under Pathway to Registration 1 from having to comply with insurance obligations prescribed under the Regulation until 30 June 2023. Design practitioners who register under Pathways to Registration 2 and 3 will need to comply with the insurance requirements imposed by the relevant professional engineering body who has a scheme approved by Fair Trading or the Professional Standards Scheme (as the case may be); and
  • Practitioners must keep records (for at least 5 years) about the adequacy of insurance coverage.

Record-keeping

Part 7 of the Regulation imposes obligations on Practitioners for record-keeping.

Codes of practice and continuing professional development (CPD)

  • Establishes a code of practice for Practitioners (other than professional engineers) and a separate code of practice applicable to professional engineers. Compliance with these codes of practice is required to maintain registration.
  • Specifies requirements for CPD. Practitioners will need to complete at least 3 hours of CPD activities approved by the Secretary and the Regulation clarifies how multiple classes of registration should operate. Professional engineers who register under Pathway to Registration 1 will need to complete at least 50 hours of relevant education and training (including a minimum number of hours of prescribed subject matters), outlined by the Secretary.

Penalty notice offences

Prescribes offences and penalty notices for breaches. This includes lodgement of documents by persons who are not registered Practitioners. 

Transition arrangements

The following arrangements have been put in place by the legislation to facilitate a smooth transition:

  • Where building work on a project occurs before 1 July 2022, lodgement of regulated designs and declarations can be submitted on a staged basis for the duration of the project;
  • Where building work on a project commences after 1 July 2022, regulated designs and declarations will need to be submitted for the entire building before the commencement of building work;
  • If designs are prepared before 1 July 2021 by a design practitioner who is not eligible for registration under the legislation after 1 July 2021, the relevant designs can be declared by a different design practitioner who was not involved in preparing those documents (which is not otherwise permitted under the legislation);
  • To the extent that projects become subject to the legislation during the course of their life, the relevant building practitioner will need to lodge the designs even if those documents (1) do not need to comply with the new requirements, and (2) the compliance declaration under the Declaration Scheme will not need to cover these works;
  • Registration regime provides a 'grace period' of 6 months during which Practitioners will be deemed to be registered if they apply before 31 December 2021. The grace period will end on 31 December 2021.

Checklist: Are you ready?

The reforms are significant and will undoubtedly cause major changes in how the industry operates. The following checklist can assist you and your organisation in preparing for the commencement of the legislative framework:

Regulatory framework

  • Carefully consider the legislation and prepare a compliance plan to be used in relevant parts of your business to ensure your obligations are met;
  • Identify the classes of registration and associated requirements to be ready for registration by no later than 31 December 2021;
  • Identify personnel that may no longer comply with qualification requirements and investigate whether the legislation provides suitable pathways for registration;
  • Work with personnel that will need to upskill and/or build their experience to comply with qualification and registration requirements and develop a plan to support such training or upskilling;
  • Provide training and information to relevant personnel introducing the legislative framework and the various obligations that apply to your business;
  • Confirm that Practitioners hold appropriate insurances and, if required, investigate alternative insurance offerings to comply with the legislative framework;
  • Ensure that relevant personnel familiarise themselves with the code of practice and continuous professional development requirements. Consider whether any policy amendments or training opportunities need to be considered to support your personnel's compliance with these requirements.

Declaration Scheme

  • Consider developing a Declaration Scheme compliance plan;
  • Incorporate into your project plans and work programs, the milestones for lodgement of required documentation;
  • Review your contract management processes to ensure variations are managed in accordance with the requirements of the Regulation;
  • Work with your procurement team to develop procurement strategies that will maximise certainty in design with a view to reducing the need for ongoing variations;
  • Consider appointing personnel to manage the Declaration Scheme requirements and provide appropriate training to those persons;
  • Consider developing a check list or cheat sheet for distribution to key personnel outlining important obligations under the legislative framework and to provide guidance for compliance;
  • Developers should ensure your designers and builders are across their new obligations to ensure they are no delays in obtaining construction certificates, complying development certificates and occupation certificates;
  • Developers should consider whether they themselves need a Building Practitioner's registration, depending on their role co-ordinating work; and
  • If any design work has been done by a Practitioner who is not eligible for registration, ensure another Practitioner is available to declare those designs (which could have time and cost consequences).

Looking to the future

The legislative framework is one of a six-pillar strategy developed by the NSW Government to tackle the planned reforms. The intention is to review the operation of the legislation and make amendments that will continue to promote the ongoing improvement of building practices. The NSW Government has foreshadowed that this may include considering whether the operation of the legislation should extend to other classes of buildings (possibly class 3 and class 9 buildings), identifying other classes of Practitioners to be captured by the legislative framework or broadening the registration of professional engineers.

For further information on how the legislation may impact your business or construction projects in NSW, please contact a member of our team.

Related Knowledge

Get in Touch

Get in touch information is loading

Disclaimer

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.