Overview

On 12 October 2023, the NSW Government introduced the Building Legislation Amendment Bill 2023 (the Amendment Bill) to the NSW Parliament. It passed the NSW Legislative Council on 19 October 2023, read the Second Reading Speech here and is currently with the Legislative Assembly, awaiting concurrence.

The Amendment Bill is stage one of the reforms' roll out. If passed by Parliament, the NSW Government intends to introduce the Building Bill 2022 (see the public consultation draft here) and the Building Compliance and Enforcement Bill 2022 (see the public consultation draft here) to Parliament in 2024. The three Bills were open to public consultation in 2022.

These Bills form the next stage of Construct NSW's six-pillar transformation strategy, which aims to restore public confidence and create a customer-facing building and construction sector by 2025.

The Amendment Bill proposes to amend the following:

  • Home Building Act 1989 (HB Act)
  • Building Products (Safety) Act 2017 (BPS Act)
  • Strata Schemes Management Act 2015
  • Strata Schemes Management Regulation 2016
  • Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020
  • Residential Apartment Buildings (Compliance and Enforcement Powers) Regulation 2020
  • Building and Development Certifiers Act 2018.

Has the Amendment Bill changed since the public consultation draft?

The Amendment Bill has shrunk since the public consultation draft, published 2 May 2022, which included an additional seven schedules. For a discussion of the public consultation drafts, access our webinar here.

Schedules deleted from the Amendment Bill include the amendments:

  • of the Building and Construction Industry Security of Payment Act 1999 (SOP Act)
  • of the Environmental Planning and Assessment Act 1979
  • relating to corporate self-incrimination
  • relating to training or education as alternative to disciplinary action
  • relating to intentional phoenix activity
  • relating to continuing professional development
  • relating to investigation cost recovery.

In relation to intentional phoenix activity, for example, the Amendment Bill no longer directly imposes a duty on registered practitioners to take reasonable steps to ensure those they are in business with have not been involved in intentional phoenixing activity in an industry relating to building and construction. Instead, the Amendment Bill increases regulators' powers to target activities like intentional phoenixing through disqualifying persons from holding authorities under the proposed section 33A of the HB Act.

More importantly, the Amendment Bill will no longer amend the SOP Act. This was one of the key amendments proposed in the public consultation draft which involved:

  • requiring payment claims to owner occupiers to attach a Homeowners Notice, containing information to help them understand their obligations in responding to payment claim and the consequences of not doing so
  • requiring retention money to be held in trust for projects with a value threshold of $10 million
  • giving adjudicators power to arrange for the testing and investigation of, and reports on relevant matters
  • establish a right for claimants and respondents to apply for a review of an adjudication determination.

Changes between the public consultation draft and the Amendment Bill have not been explained. Nor has the Government indicated if the removed amendments have been dropped altogether or will be included the proceeding Bills. The reforming building laws in NSW website still states that the public consultation is under review, with a final report still to come.

Key elements of the Amendment Bill

New duties for persons in the building product supply chain

Currently, not all persons in the supply chain for a building product are held to the same level of accountability.

The Amendment Bill proposes to impose a range of duties under the BPS Act on persons who form part of the building product supply chain, including designers, manufacturers and any person who imports or supplies building products.

The primary duty, in section 8E, imposes an obligation on persons to ensure that products used on buildings are conforming and complaint. Building products must meet the performance standards under the National Construction Code (NCC) or a prescribed standard. Further, they must be used in a way that conforms with how they have been manufactured to ensure they do not create a safety or build quality risk. If they fail to meet these requirements, they are deemed to be non-confirming building products (NCBP).

Persons in the building product supply chain will also have a positive duty provide certain information to the next person in the supply chain. This requires persons to making available certain information about building products as practicably as possible, including how the product meets the relevant Australian Standards for its intended use.

Powers of the Secretary

Under the amended BPS Act, the Secretary will have additional powers around:

  • restricting the supply of NCBP
  • requiring building participants to report the use of NCBP
  • issuing building product warning notices, building product supply bans and building product recall notices regarding NCBPs, as well as trading bans for repeat offenders.

The Secretary can also apply to the Supreme Court of NSW for an order to prohibit persons who engaged in supplying NCBPs from carrying on business.

Rectification orders

Proposed amendments to the RAB Act will enable rectification orders to be used proactively. This is to ensure that inspectors can identify issues early and therefore rectify defective work before the building is occupied.

The Amendment Bill does this by granting regulators the power to inspect, investigate and issue relevant orders while class 1 buildings are under construction. This includes the power to enter houses under construction and seek the production of information regarding building work.

Failure to comply with a rectification order will also attract large penalties of up to $330,000 for a corporation and $110,000 for an individual. For every day that the offence continues, corporations may incur penalties of up to $30,000 per day or $11,000 per day for individuals.

Strata Schemes

The amount of the strata building bond for class 2 construction will be allowed to increase from 2% and will be set by regulation, which will be 3% from 1 February 2024.

The holding of decennial liability insurance (which satisfies the Secretary) for class 2 building work will operate as an exemption to the strata inspection and building bond scheme. Further, regulation may provide for the holding of decennial liability insurance to exempt a person from complying with sections 92 and 96 of the HB Act.

The effect of these amendments will be to promote decennial liability insurance as the default option for defect risk management.

Impact

These are just some of the key elements in the Amendment Bill, which will impact the sector.

Professionals in the sector will need to be aware of their new, positive duties and the increased regulatory powers, in anticipation of the Amendment Bill passing. We would expect it to commence, at least in part, on 1 February 2024.

  • to not design, supply, manufacture or install NCBPs and to provide information about a building product as it passes from them to the next person in the supply chain.

Implications for being unaware of these new duties may result in stringent penalties for both corporations and individuals. Tough penalties for failing to comply with rectification orders also apply.

For homeowners, these changes will likely prevent significant harm of loss caused by non-conforming building products or defects discovered after occupation.

We predict the Amendment Bill will pass both Houses. We therefore advise reading the Amendment Bill and its Second Reading Speech to understand the multitude of changes that will commence on its date of assent. This will likely be at the start of 2024.

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.