NSW Government sets reform agenda for building standards

Lina Fischer, Danielle Mizrahi
28 Sep 2022 Time to read: 3 MIN

The NSW Government has an ambitious agenda for the reform of building legislation in light of high-profile building failures and defect issues.

The reform process for NSW building legislation has taken another step, with the release last month of the NSW Government’s response to the Public Accountability Committee’s report from the “Further inquiry into the regulation of building standards”, released in February. Its 20 recommendations focused on the efficacy and adequacy of the regulation of building standards in NSW.

We highlight below some of the key responses to the Committees' recommendations, many of which will generate further public consultation and legislative change.

No Building Minister or standalone Building Commission to be established

While the Committee recommended the establishment of a single, senior Building Minister and a standalone Building Commission, the NSW Government considered that the Office of the Building Commissioner (OBC) within the Department of Customer Service (DCS) is already effectively carrying out this role and no separate Minister or Commission is needed.

The NSW Government also didn't support the recommendation that the private certification scheme be abolished and a new Building Commission to be empowered to carry out this function in consultation with local councils.

Extension of building legislation beyond class 2 buildings

The Committee recommended the expansion of the Commissioner's powers to class 1 buildings (ie. single dwellings), but in fact the NSW Government is planning to expand the Commissioner's powers into a number of other building classes.

It has released for consultation a suite of new legislation that will implement wide-ranging reforms, including the expansion of the Commissioner's powers under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2022 (RAB Act) to all building classes and a new licensing regime to cover the design and construction of all building classes (not just residential buildings).

Stay tuned for a more detailed analysis of the proposed changes.

Phoenixing in the building and construction industry

The Committee recommended that the NSW Government implement additional statutory controls on phoenixing and phoenixing activity in the building and construction industry.

The NSW Government supported this recommendation and affirmed its commitment to respond to illegal phoenixing by partaking in the Commonwealth Phoenix Taskforce. The NSW Government also outlined additional steps it is taking, including:

  • the rollout of the iCIRT developer rating tool;
  • working with the industry on the design of a decennial liability insurance product to give a remedy to consumers dealing with defects;
  • improving data sharing arrangements with other regulators; and
  • consulting on amendments to legislative frameworks to help regulators track down companies and directors who have participated in illegal phoenixing.

OBC and NSW Fair Trading to ensure procedural fairness for decisions about building prohibition orders to protect the rights of purchasers

This recommendation was supported and noted to be the subject of stakeholder consultation. In particular, the NSW Government is consulting on the Building Compliance and Enforcement Bill 2022 which would expand enforcement powers under the RAB Act to all buildings and include clear procedural fairness requirements. It would also change the process for imposing and removing orders under the RAB Act.

Establish a program of support and education for strata residents and owners corporations on strata scheme operation and governance

This recommendation was supported and noted to be the subject of stakeholder consultation and upcoming legislative reform.

Improving fire safety

The NSW Government has commenced the design and implementation of the recommendations in Construct NSW's report on Improving Fire Safety. As part of this, it has commenced consultation on:

  • a draft Environmental Planning and Assessment (Developer Certification and Fire Safety) Amendment (Fire Safety) Regulation 2022 which would improve compliance with requirements for design certification and maintenance of fire safety measures, as well as requiring certification of installed fire systems by an accredited certifier before issue of an occupation certificate; and
  • a draft Building Bill 2022 which would move all fire safety obligations into a single regulatory framework, including an end-to-end licensing process for all practitioners working on fire safety systems.

Sufficiency of Council funding for regulatory and compliance activities

The Committee recommended that the NSW Government review the adequacy of clause 1 of Schedule 1 of the Environment and Planning and Assessment Amendment (Compliance Fees) Regulation 2021 in allowing councils to fund regulatory and compliance activities. This clause prohibits councils from charging compliance levies on development applications.

The NSW Government did not support this recommendation as it considered that the regulatory amendment has met its objective of transparency, accountability and consistency of approach. Despite this, the NSW Government acknowledged the pressure on councils and commented that it is continually looking at other measures to support them in undertaking their functions.

Government management and oversight for future government-endorsed or regulated rating system for corporate entities responsible for class 2 buildings

The NSW Government disagreed with the recommendation that rating systems should be overseen by Government. Its view is that ratings tools should be driven by market operators, such as the operation of the iCIRT rating tool by Equifax. This is intended to put responsibility on industry players to call out untrustworthy players.

Key takeaways for the NSW construction industry

The NSW Government has an ambitious agenda for the reform of building legislation in light of high-profile building failures and defect issues. This commenced over the past two years with the appointment of the Building Commissioner and the introduction of the DBP Act and the RAB Act, and will now continue to a full overhaul of the NSW regulatory scheme for residential and commercial buildings. Stay tuned for our further analysis of the upcoming changes, and your opportunity to shape them through the consultation process.

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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.