The Residential Apartment Buildings Act: 5 Things You Need to Know

Recent reports of structural defects in high-rise apartments including the Opal tower and Mascot tower have undermined public confidence in the quality of construction work carried out in New South Wales. It has also raised questions as to avenues open to property owners to seek redress for defective work and the enforcement powers available to government.

The Residential Apartment Buildings (Compliance and Enforcement) Act 2020, together with the Design and Building Practitioners Act 2020, is the New South Wales Government’s response to these consumer and public concerns.

The Residential Apartment Buildings (Compliance and Enforcement) Act (the Act) will commence on 1 September 2020.

Here are 5 key takeaways:

1. Residential Apartment Buildings: the Act recognises that many modern buildings are a combination of apartments, retail including food outlets and commercial office spaces. Accordingly, the Act applies to residential apartment buildings (Class 2 buildings under the Building Code of Australia) including those parts of the building which are not residential apartments. The regulations to be made under the Act may exclude certain apartment buildings including potentially smaller apartment blocks.

The Act applies to residential apartment buildings authorised pursuant to a construction certificate or development certificate, and which are yet to be completed or have been completed within 10 years. This gives the enforcement functions under the Act retrospective operation.

2. Notice of Completion: the Act requires developers to notify the Secretary of the Department of Customer Service at least 6 months, but not more than 12 months, before an application for an occupation certificate will be made. The developer must provide the Secretary with subsequent notices if the date for the application of the occupation certificate changes.

A developer is defined broadly under the Act to be:

• • a person who contracted, arranged for, facilitated or otherwise caused the building work to be performed;
  • the owner of the land;
  • the principal contractor under the Environmental Planning and Assessment Act 1979;
  • the developer within the meaning of the Strata Schemes Management Act 2015; or
  • any other person prescribed by the regulations.

To avoid liability under the Act, the parties to a construction contract (or otherwise involved in the development) should agree who will be responsible for providing the notices to the Secretary and performing other obligations under the Act.

3. Prohibition on Occupation: the Secretary may make an order prohibiting the issue of an occupation certificate or the registration of the strata plan if the notice of completion is not provided by the developer or within the time required by the Act. A prohibition order may also be made if the Secretary is satisfied that a serious defect in the building exists (discussed below), or a building bond required under the Strata Schemes Management Act 2015 has not been given to the Secretary. An occupation certificate issued in contravention of a prohibition order is invalid and penalties apply to principal certifiers who issue an occupation certificate in contravention of a prohibition order. The consequences of a prohibition order are obviously serious, including preventing the developer from achieving settlement of its contracts for the sale of apartments or the contractor from reaching practical completion under the building contract (resulting in potential exposure to liquidated damages).

4. Investigations: the Act provides the Secretary, the Building Commissioner and its authorised officers with wide-ranging powers to investigate breaches and enforce the Act. These powers include:

• • directing a person to give information and records;
  • entering onto premises including a building site to examine and inspect, take samples, conduct tests (including the power to open, cut open or demolish building work), and seize items;
  • directing a developer to carry out specified building work only after giving notice in advance so as to enable the authorised officer to inspect the performance of the work; and
  • issuing a stop work order if the Secretary is of the opinion that the building work is carried out in manner that could result in significant harm or loss to the public or occupiers or significant damage to the property.

Penalties apply if a person obstructs, hinders or interferes with an authorised officer in the performance of its functions or fails to comply with a direction of the authorised officer.

5. Rectification Orders: the Secretary may make a building work rectification order if it has a reasonable belief that building work was or is being carried out in a manner that could result in a serious defect. The rectification order may require the developer to carry out or cause to be carried out building work, or refrain from carrying out building work, as specified in the order.

A serious defect is defined in the Act to mean:

• • a defect due to a failure to comply with the Building Code of Australia, the relevant Australian Standards or approved plans;
  • a defect attributable to defective design, workmanship or materials that causes or is likely to cause the building to be unable to be used or inhabited for its intended purpose, the destruction of the building, or a threat of collapse of the building;
  • a defect prescribed by the regulations; or
  • the use of a banned building product (for example, combustible cladding).

Please contact our team if you would like to discuss how this legislation will affect you.

Authored by:

Michael Bampton, Partner
Del Chin, Senior Associate