NSW Government strengthens powers of Building Commissioner and introduces new levy on developers to support DBP Act - Construction & Planning

Just 10 months after the commencement of the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) (RAB Act), and as the Design and Building Practitioners Act 2020 (NSW) (DBP Act) came into force on 1 July 2021, the NSW Parliament has passed amendments to both Acts.

Since the commencement of the RAB Act, the NSW Building Commissioner has conducted over 40 Occupation Certificate Audits (OC Audits), which have uncovered waterproofing, structural integrity, essential service, external cladding and fire safety issues in range of residential apartment buildings across NSW.

With the Building Commissioner publicly stating that his team is aiming to complete 100 OC Audits by the end of 2021 and 200 OC Audits by the end of 2022, this legislation is designed to ensure that the Building Commissioner and NSW Fair Trading have adequate powers to enforce the legislation and restore confidence in residential apartment buildings in NSW.

The Building Legislation Amendment Act 2021 (Amending Act) was passed by the NSW Parliament on 8 June 2021, and aims to:

strengthen the powers of the NSW Building Commissioner and NSW Fair Trading to enforce the new regulatory scheme; and
introduce a new levy on developers to pay for the administration of the DBP Act.

The Amending Act received Royal Assent on 5 July 2020 and has now commenced, with the exception of some minor items under the DBP Act which will commence at a later date once appointed by proclamation.

A previous Corrs Insight on the RAB and DBP Acts can be found here.

Levy on developers introduced

As part of the changes, developers will be required to pay a levy into the Home Building Administration Fund, which will be used to administer the DBP Act.

The levy is designed to provide an ongoing source of funding for the regulator, including administering the new practitioner registration scheme and conducting occupation certificate audits.

Although the levy imposes an added cost on the developer at the start of the design and building process, it will support the regulator's new schemes and is hoped to avoid defects and rectification costs during a project's life cycle.

The levy will operate on a sliding scale, with larger projects attracting a higher levy and smaller developments being eligible for an exemption.

Further details of the levy, including the required contributions, will be dealt with in the Residential Apartment Buildings (Compliance and Enforcement Powers) Regulation 2020 (NSW) (RAB Regulations), which are yet to be released. This will allow the NSW Government to receive industry consultation on the quantum and timing of the levy.

Daily penalties for developers

In addition to the existing penalties under the RAB Act, the Amending Act imposes daily penalties for each day a developer fails to notify the Secretary of the Department of Customer Service (Secretary) of:

the intended completion date (maximum of 100 penalty units ($11,000) per day for a body corporate and 20 penalty units ($2,200) per day otherwise); or
a change of expected completion date (maximum of 50 penalty units ($5,500) per day for a body corporate and 10 penalty units ($1,100) per day otherwise).

Failure to comply with a direction from an authorised officer made under Part 3 of the RAB Act will also incur additional daily penalties (1,000 penalty units ($110,0000) per day for a body corporate and 200 penalty units ($22,000) per day otherwise).

The daily penalties are designed to ensure that the correct completion date is provided to the regulator, allowing it to better plan and execute OC Audits.

Additional ground for a prohibition order

The Amending Act introduces an additional ground for the issuance of a prohibition order. If a developer of a residential apartment building scheme fails to comply with a direction to provide additional information and records (such as designs necessary to fix defects or records of who has down work on site), or answer questions regarding matters which they are suspected on reasonable grounds to have knowledge of, a prohibition order can be issued.

A prohibition order prevents the issue of occupation certificates and strata plan registrations.

This power has been added in response to the issue of some developers refusing to cooperate with the directions and decisions of the Building Commissioner to fix defects.

Court orders for non-compliance

The Amending Act has strengthened the regulator's powers to enforce orders and notices by providing for the issuing of court orders.

If a person is convicted by a court for failing to comply with an order or direction under the RAB Act or RAB Regulations, the Court may issue a court order requiring the person to comply.

Failure to comply with the court order will constitute an offence carrying a maximum penalty of 3,000 penalty units ($330,000) and 300 penalty units ($33,000) for each day the offence continues for a body corporate, and 1,000 penalty units ($110,000) and 100 penalty units ($11,000) for each day otherwise.

The introduction of court orders into the enforcement process makes it more streamlined and cost-efficient, enabling rectification works to begin sooner. This amendment also responds to some members of the industry who 'drag their feet' when directed to fix substandard building work.

Clarification of design compliance declarations

The Amending Act amends section 20 of the DBP Act to require a building practitioner to take reasonable steps to lodge variations to regulated designs on the NSW Planning Portal and obtain design compliance declarations before building work on that variation can commence.

This remedies the inconsistency in the previous position which allowed variations to be lodged after the work commenced, yet required the initial regulated design to be lodged before building work commenced.

Further regulation-making powers

The Amending Act amends the DPB Act to enable:

regulations to be made relating to the recognition of professional bodies and engineers by the Secretary;
administrative review of the Secretary's decisions relating to the recognition of a professional body of engineers; and
regulations to be made to exempt persons from the operation of the Act.

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