In the new financial year we look forward to the implementation of various recently introduced legislative changes as well as the continued development of key themes in the market and reform programs already underway.
The recent NSW and federal elections have already brought us announcements of the next cycle of major infrastructure projects. Last month, we touched on the major projects the Coalition Government committed to during the federal election campaign and in March we looked at the major projects the NSW Government committed to during its state election campaign.
We now take a look at the recently introduced legislative changes and reforms that are likely to impact the industry in the new financial year - and beyond.
National Construction Code
A major change for the building and construction industry is the 2019 National Construction Code (NCC), which became effective on 1 May 2019, repealing the NCC 2016. The NCC is a performance-based code that applies to all states and territories across the country, and all persons involved in the construction of buildings, by setting out guidance and code compliance levels that must be followed. Overarching the guidance and code is a minimum level of performance requirements. The NCC 2019 will apply as follows:
- Volume One contains requirements for multi-residential, commercial, industrial and public buildings and structures
- Volume Two contains the requirements for residential and non-habitable buildings and structures
- Volume Three contains the requirements for plumbing and drainage for all classes of buildings.
The NCC 2019 includes a number of key changes:
- structural changes to simplify readability, improve access, awareness and understanding.
- Performance Requirements
- an estimated 40 per cent of the Code's Performance Requirements are quantified either directly or by an NNC Verification Method (VM).
- Fire Safety
- from 1 May 2020, a new non-mandatory Fire Safety VM will be introduced
- new Deemed-to-Satisfy Provisions for fire sprinklers must be installed in apartment buildings and other residential buildings of four or more storeys and up to 25m in effective height.
- Energy Consumption
- a number of compliance measures to focus on reducing energy consumption by up to 35 per cent.
- Condensation management
- provisions to reduce the likelihood of risks associated with condensation within buildings.
- Roof-top spaces
- additional provisions to clarify the application of requirements to occupiable outdoor areas, such as roof-top spaces.
- heated water temperature control, cross-connection control and rainwater harvesting and use requirements.
Building and Development Certifiers Act 2018 (NSW)
On 31 October 2018, the NSW government passed the Building and Development Certifiers Act 2018 (the BDCA).
The BDCA implements a number of changes to improve the certification process relating to building works throughout NSW, including:
- the registration of certifiers
- requirements surrounding the independence and impartiality of certifiers
- the process for pursuing disciplinary proceedings
- increasing accreditation standards.
Certifiers will need to be "registered" by the Secretary of the Department of Finance (Secretary) and the duration of a registration license is extended from one year, until at least five years, which allows the Secretary to reward low-risk certifiers.
To improve impartiality, the conflict of interest provisions under the BDCA have been broadened to cover all, rather than some, types of work undertaken by certifiers. This means if a certifier undertakes certification work whilst having a conflict of interest they will potentially be in breach of the BDCA and subject to a maximum penalty of $33,000.
The BDCA replaces the two-stage disciplinary process under the Building Professionals Act 2005 (NSW) with a more modern compliance framework. It deletes the terms 'unsatisfactory professional conduct' and 'professional misconduct' and empowers the Secretary with a number of grounds to rely on when enforcing disciplinary action. The Secretary may also serve a written notice on the certifier to show-cause why disciplinary action should not be taken.
The new disciplinary process also involves changes to how a certifier can challenge the merits of a decision and have it reviewed. The existing review process has been replaced with the standardised internal review provisions found in the Administrative Decisions Review Act 1997 (NSW).
The introduction of the BDCA comes at a time when certifiers are under increased public scrutiny, in particular following recent high rise apartment evacuations in NSW. Future reforms in this area will need to confront the gulf between the public perception that the role of the certifier is to inspect work and pass it for quality and the reality on the ground.
Further, in support of the BDCA, on 30 December 2018 the NSW Government announced a four-point plan focussed on compliance and enforcement reforms to improve certification. The plan includes new disciplinary policy that will see certifiers penalised for not complying with relevant legalisation or negligently signing off on a building which is unsafe or structurally unsound.
Shergold Weir Report
In February 2019, the NSW Government released its response to the Shergold Weir Report 'Building Confidence'. The report was commissioned to follow compliance issues in the construction industry at state, national and international levels.
The NSW Government's response states that it plans to implement the following:
- appointment of a Building Commissioner
- overhaul compliance reporting
- require building practitioners with reporting obligations to be registered
- ensure that there is an industry wide duty of care to homeowners, which in effect would reverse the High Court decision of Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288  HCA 36.
We are yet to see the substance of the implementation of the NSW Government's response and pressure will build in the new financial year to see these big ticket aspirations delivered.
Security of payment legislation
NSW's security of payment legislation has been subject to a new tranche of amendments following the Murray Report released on 31 December 2017. The amendments to the Building and Construction Industry Security of Payment Act 1999 (NSW) (the SOP Act), whilst passed on 21 November 2018, have not yet commenced. A commencement date of December 2019 is proposed to give the necessary time to make regulations and administrative changes.
Aimed at providing greater financial security and prompter payments for subcontractors, key amendments include:
- concept of reference date deleted and replaced with monthly claims
- entitlement to make a [single] payment claim after termination
- reinstatement of the 'magic words' on payment claims
- reduction in time for payment from an head contractor to a subcontractor from 30 days to 20 days
- deletion of the residential exemption under s7(2)(b) of the current SOP Act
- SOP Act is unavailable for a claimant in liquidation
- court is able to set aside part of a determination for jurisdictional error (rather than entire determination)
- making directors and officers personally liable for offences under the SOP Act
- a more robust investigative and enforcement framework by way of increased penalties and new offences as well as improved investigation powers for Fair Trading.
More details of the changes can be found here.
The NSW Government continues to respond to the cladding crisis.
- in December 2017, the NSW government enacted the Building Products (Safety) Act 2017 (NSW) (the BP Act), which notably permits enforcement authorities (generally councils) to make building product rectification orders. he BP Act continues to take precedence over the NCC and all other current and future building codes
- in August 2018, the Commissioner for Fair Trading imposed a building product ban under s 9(1) of the BP Act on Aluminium Composite Panels (ACP) with a core comprised of greater than 30 per cent polyethylene by mass for various types of external cladding construction with respect to residential and commercial buildings
- significantly, the use of a banned product is captured within the definition of 'major defect' in the Home Building Act 1989 (HBA), meaning the six year statutory warranty period applies instead of the two year statutory warranty period which would have otherwise applied
- both the Environmental Planning and Assessment Amendment (Identification of Buildings with Combustible Cladding)Regulation 2018 (NSW) (Regulation) and the State Environmental Planning Policy Amendment (Exempt Development – Cladding and Decorative Work) 2018 (NSW) (SEPP) commenced on 22 October 2018. The Regulation requires building owners with external combustible cladding to register their buildings with the NSW Government within prescribed timeframes. The SEPP makes amendments to eight existing State Environmental Planning Policies concerning the approval process for cladding and decorative works on buildings.
The impacts of the cladding crisis reach further than those who are faced with the responsibility of addressing affected buildings, either as owners or industry participants. Together with some other factors, the cladding crisis has contributed to a tightening in the professional indemnity insurance market. It may well be the issue which defines the industry for the next several years as project owners grapple with accommodating reduced risk appetites from consultants both large and small and design and construct contractors who are confronted with escalating premiums and tightening policy terms.
AS11000 – status update and use of NEC suite of contracts as an alternative
Since Standards Australia's announcement on 4 April 2017 that all work would cease (although not permanently) on the draft AS11000, there has been increased interest in alternative standard forms of contract, particularly collaborative or relationship principled contracts rather than traditional adversarial forms of contract (such as the AS4000 suite).
The NEC4 suite from the UK Institution of Civil Engineers (ICE), which was first published in 1993, is one potential alternative. The NEC suite has been endorsed by the Governments of UK, South Africa and Hong Kong, and is currently been used by Main Roads in Western Australia.
The NEC4 suite includes a range of options that parties may choose from, allowing it to be easily adapted to a variety of projects without the need for significant amendments, including with respect to pricing, design responsibility, incentive payments, Early Contractor Involvement (ECI) and dispute resolution mechanisms.
The optionality of the NEC4 suite combined with the focus on collaborative and relationship contracting principles that are embedded within the suite, may see the NEC4 suite being increasingly used as a preferred alternative to the standard construction contracts that are currently being used in Australia.
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.