Australia: NSW cracks down on dangerous building products

Last Updated: 23 November 2017
Article by Christine Jones and Joshua Clark
Most Read Contributor in Australia, August 2018

The NSW Government has introduced the Building Products (Safety) Bill 2017 (Bill) to address safety risks arising from the use of non-conforming building products in the state. The Bill:

  • enables the Fair Trading Commissioner to ban the use of unsafe building products and to issue affected building notices
  • permits enforcement authorities to make building product rectification orders
  • confers a raft of investigatory powers on authorities to support the identification and elimination of unsafe building products.

Substantial penalties are attached to the offences established by the Bill.

The Bill is the latest in a series of steps taken in a 'whole of government policy response' to both the Lacrosse fire in Victoria and the Grenfell Tower fire in London, which resulted in the deaths of 71 people. Each incident has been determined or is considered to be linked to the use of aluminium composite panels, a form of cladding. The NSW Government's '10 point plan' included an audit of NSW buildings by the inter-agency Fire Safety and External Wall Cladding Taskforce, which found over 1,000 buildings out of the approximately 178,000 audited to be at risk from dangerous cladding. The policy response to concerns about unsafe cladding is described by Minister for Better Regulation Matt Kean as the most comprehensive of its kind in Australia.

The Bill is the cornerstone of the NSW regulatory response, with implications for all parties involved in building construction and ownership in the state. Whilst the Bill is in response to the high level of community concern about cladding in the wake of the Lacrosse and Grenfell fires, its application is much broader that cladding alone and its reach is not confined to residential buildings. Follow these links to access the explanatory memorandum and the second reading speech.

Building product use bans

The key concept in the Bill is that the Fair Trading Commissioner will be able to ban specified uses of a building product when satisfied on reasonable grounds that the particular use is unsafe. The key definitions are as follows:

the use of a building product in a building is unsafe if there is a safety risk posed by the use of the building product in the building

there is a safety risk posed by the use of a building product in a building if any occupants of the building are or will likely be at risk of death or serious injury arising from the use of the building product in the building.

Importantly, a safety risk can exist even where it only arises in certain circumstances, such as in the event of a fire.

A ban may be limited to certain uses of the product, certain buildings or classes of buildings or to the use of a product by certain persons or classes of persons. Reasons must be specified in the ban. Notice will not be required to be given to a manufacturer affected by a building product use ban where it is in the public interest that the ban not be delayed. Public submissions on whether a ban is warranted will be accepted before and after a ban is implemented.

The Bill also makes it an offence for a person to represent that a building product is suitable for use in a building if the use would contravene a building product use ban.

Identification and rectification of buildings

The Fair Trading Commissioner will be able to issue affected building notices to alert owners, councils and the Commissioner of Fire and Rescue NSW where a building has a fire risk due to the use of unsafe building products, or general warning notices to a class of affected buildings.

An affected building notice will be able to be issued in respect of a building regardless of whether the product the subject of the building product use ban was incorporated into the building before the building product ban took effect. Councils and enforcement authorities may issue rectification orders compelling the building owners to eliminate or minimise the safety risk. The Fair Trading Commissioner may publish an affected building notice online if it is in the public interest to do so.

The Fair Trading Commissioner will be able to authorise officers to conduct investigations into the safety of particular building products and the location of any building in which potentially unsafe building products have been used. Manufacturers and suppliers will be able to be compelled to conduct a product assessment, while any individual will be required to provide information in relation to the investigation. Officers will be empowered to enter and inspect any premises where it is necessary, including the ability to examine or inspect anything, make inquiries or tests or take and remove samples of a thing.

Building product undertakings

The Fair Trading Commissioner will be able to accept a written undertaking by a person who has contravene or is likely to contravene a building produce use ban. If accepted the undertaking will be enforceable.

Penalties

The flouting of a building product use ban, including by representing that the banned product is suitable for use, will be an offence with a maximum penalty of $1.1 million for corporations and $220,000 or two years' imprisonment, or both, for individuals. A further $110,000 fine will be imposed on corporations for each day the offence continues, or $44,000 per day in the case of individuals.

Directors can be personally liable for contravening a building product use ban, representing the suitability of a banned product and contravening a building product undertaking. Directors can face a maximum personal fine of $22,000. This liability extends also to individuals involved in the management of a company who are in a position to influence the conduct of the company in relation to the commission of those offences.

Prosecution for an offence under the Bill can be commenced up to two years after evidence of the offence comes to light in an investigation, with proceedings to be conducted in the Local Court or the District Court in its summary jurisdiction.

Disclosure of a building's safety risk

A council may be required to report the steps it has taken in relation to an affected building, including whether it has issued a rectification order and the progress or compliance with any order it has made. Full disclosure of an outstanding rectification order against a building will be given to any purchasers or successors in title.

Amendment of other Acts

The Bill proposes to amend the Environmental Planning and Assessment Regulation 2000 to prescribe that a building's planning certificate, which is accessible to the public through the relevant council's website, must include:

  • a statement of whether there is any affected building notice in force in respect of the building
  • a statement of whether there is any building product rectification order in force in respect of the land that has not been fully complied with
  • whether any notice of intention to make a building product rectification order has been given in respect of the land and is outstanding.

Further, the particulars of any outstanding building product rectification order will need to be disclosed on a certificate under s 184 of the Strata Schemes Management Act 2015.

Significantly, the Bill proposes to make the use of a building product in contravention of the future Act a major defect for the purpose of proceedings for a breach of statutory warranties under the Home Building Act 1989 (the HBA). This means that proceedings for a breach of a statutory warranty under that Act because of the use of a banned building product can be commenced up to 6 years after the completion of the building work. This is a significant part of the legislative response in so far as residential strata buildings are concerned, given the narrow definition of a major defect under the HBA.

Also, the existence of a building product rectification order that has not been fully complied will be an adverse affectation for the purpose of implied warranties in the Conveyancing (Sale of Land) Regulation 2017. A vendor's failure to disclose such an order in a contract for sale of land will therefore breach the warranty implied into the contract by s 52A of the Conveyancing Act 1919.

Status

The second reading debate on the Bill commenced today, with Minister Kean hoping that the Bill passes and comes into effect by the end of the week. Tomorrow is the NSW Parliament's last scheduled sitting day of 2017. If passed, the provisions of the Bill will come into force on a date to be fixed by proclamation. At the time of publication, it appeared that the ALP and Greens would move for amendments to the Bill but would not oppose it.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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