Major reform of NSW construction legislation on the horizon

The New South Wales Government has recently introduced three new bills and one accompanying regulation which aims to improve the standards and accountability of participants in the construction industry within the state. The bills, which are currently in the consultation phase until 25 November of this year, are the:

1. Building Bill 2022;
2. Building Compliance and Enforcement Bill 2022;
3. Building and Construction Legislation Amendment Bill 2022; and
4. Building and Construction Legislation Amendment Regulation 2022.

The proposed legislation aims to restore the public’s confidence in the building industry, and seeks to improve consumer protection, whether for large, small, commercial or residential projects.

These bills will repeal existing legislation, create new obligations, and broaden liability for builders, developers and other people involved in the building process with the intention of creating ‘end to end accountability’ for building work in NSW.

The Building Bill 2022

The most significant changes stem from the proposed Building Bill 2022. This bill, which will repeal and replace the current Home Building Act 1989 (NSW), is the result of five industry roundtables, two focus groups and two written submission processes. It will regulate both the residential and commercial construction industry including, among other things, the:

1. expansion of the statutory duty of care under the recent Design and Building Practitioners Act 2020 (NSW) to include certification and inspection of building work;
2. mandating documentation for variations and maximum progress payments for stages for home building works;
3. expansion of the term ‘developer’ to include more parties to be potentially held liable for defective works;
4. extending consumer protections to manufacturers of construction materials off-site and pre-fabricated buildings;
5. consolidation of various works certificates currently required for building works into one system;
6. expansion of licencing requirements, meaning that designers, engineers and building inspectors of both residential and commercial building works will require a licence moving forward;
7. amendment of the definition of a ‘major defect’ for the purpose of enforcing the statutory warranties for home building work (and potentially extending the limitation periods in which owners may commence proceedings); and
8. greater supervision of non-licence holders in respect of owner-builder work.

The Building Compliance and Enforcement Bill 2022

As the name would suggest, this bill intends to fuse the various NSW construction compliance and enforcement legislation into one consolidated framework. It will also repeal and replace the recent Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW).

The bill’s central intention is to create greater enforcement powers for industry regulators including investigative powers granted to NSW Fair Trading and for the Building Commissioner to make rectification and stop-work orders to aged care premises and residential buildings (in addition to apartment buildings, which are already regulated).

The proposed legislation will create powers that grant further ability for regulators to ‘pierce the corporate veil’. Effectively, this will mean that a company’s director, in certain circumstances (for example, failing to comply with an undertaking or rectification order), can be held personally liable for the actions of the company if the director knows the offence is being committed (or is recklessly indifferent) and did not take all reasonable steps to prevent or stop the offence being committed.

The Building and Construction Legislation Amendment Bill 2022 & the Building and Construction Legislation Amendment Regulation 2022

Finally, this bill and regulation aims to strengthen the laws which currently regulate the building and construction industry, including amending:

1. the Building Projects (Safety) Act 2017 (NSW) to restrict the supply of non-conforming building products, require reporting on the use of such products, and to enable regulators to ban and recall such products;
2. the Strata Schemes Management Act 2015 (NSW) to enable strata inspectors to raise new defects in the final inspection report, allow owners corporations to have recourse to the building bond if defects are not rectified within 90 days, and extend the period for which the bond is held to 4 years;
3. the Building and Development Certifiers Act 2018 (NSW) to improve training for building certifiers;
4. the Building and Construction Industry Security of Payment Act 1999 (NSW) to allow for review of adjudication determinations by another adjudicator and a mechanism for payment of disputed sums into trust accounts while the review takes place; and
5. the Environmental Planning and Assessment Act 1979 (NSW) to harmonise the definition of ‘serious defect’ with the requirements of the National Construction Code, and to place a duty on building practitioners to avoid involvement in illegal phoenixing activity.

Conclusion

Interested parties are invited to make submissions on the proposed bills up until Friday, 25 November 2022, by completing a survey or submitting more detailed written submissions via the links on the NSW government website here.

The proposed reforms, assuming the Bills are passed, will fundamentally change the existing systems of regulation of the building industry in New South Wales. We will provide further separate detailed updates regarding the new obligations sought to be imposed under each separate Bill.

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Authored by:

Matthew Taylor, Partner
Del Chin, Senior Associate
Ryan James, Lawyer