Increasing use of enforcement powers by the NSW Building Commissioner - Construction & Planning

There is an increased focus on enhancing consumer confidence and driving behavioural change in the building and construction industry by the NSW Building Commissioner. As a result, the Commissioner is actively using enforcement powers under the DBP Act and RAB Act to address developments which are unsafe, defective or non-compliant.

Since the commencement of the Design and Building Practitioners Act 2020 (NSW) (DBP Act) and the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) (RAB Act) (together, the Acts), the NSW Building Commissioner has issued over 30 Stop Work Orders, Prohibition Orders, Building Work Rectification Orders and Enforceable Undertakings.

There are currently eight in-force Stop Work Orders which are available on the online register maintained by the Department of Customer Service, with the most recent Stop Work Order issued on 8 April 2022 in respect of a mixed-used building in Merrylands (Merrylands Order).

It is expected that the NSW Building Commissioner will continue to exercise these enforcement powers to emphasise the importance of compliance with the Acts, and to facilitate the Acts' aim to limit defects and safety concerns in residential apartment buildings.

The Merrlyands Order sheds some useful insight on the NSW Building Commissioner's considerations in issuing a Stop Work Order and highlights the particular focus on the importance of the compliance declarations in preventing unsafe, defective or non-compliant apartment buildings.

Legislative power to issue Stop Work Orders

Under section 29(1) of the RAB Act, the Secretary may issue a Stop Work Order if the Secretary is of the opinion that the building work is, or is likely to be, carried out in a manner that could result in:

significant harm or loss to the public or occupiers or potential occupiers of the building; or
significant damage to property.

Under section 89(2) of the DBP Act, the Secretary may issue a Stop Work Order, if the Secretary forms the opinion that:

work is, or is likely to be, carried out in contravention of the DBP Act; and
the contravention could result in:
- significant harm or loss to the public or occupiers or potential occupiers of the building to which the work relates; or
- significant damage to property.

A Stop Work Order remains in force for 12 months (unless revoked earlier by the Secretary). Failure to comply with a Stop Work Order can result in significant penalties including:

3,000 penalty units ($330,000) for body corporates, and in addition, for every day the offence continues, 300 penalty units ($33,000); and
1,000 penalty units ($110,000) for individuals, and in addition, for every day the offence continues, 100 penalty units ($11,000).

Directors (or any person who is concerned in the management of the body corporate) can also be held personally liable under the RAB Act and DBP Act if they knowingly authorised or permitted a contravention of an Act. The Secretary also has disciplinary oversight to suspend or cancel a builder's registration.

Interesting insights from the Merrylands Order

The Merrylands Order sheds light on the NSW Building Commissioner's considerations in issuing a Stop Work Order and the importance of complying with the requirements pertaining to the lodgement of regulated designs and design compliance declarations under the DBP Act.

It is important to understand that:

failure to lodge regulated designs and design compliance declarations will constitute grounds for issuing a Stop Work Order, as:
- designs, especially those in relation to fire safety systems, are critical to the safety and integrity of the building; and
- therefore a failure to lodge the appropriate design documentation presents a risk of significant harm or damage to future occupants;
failure to provide designs with sufficient detail to achieve compliance with the Building Code of Australia will also constitute grounds for issuing a Stop Work Order as it presents a risk of significant harm or damage to future occupants; and
developers bear the onus of complying with the requirements of the DBP Act and the NSW Building Commissioner will not refrain from issuing a Stop Work Order despite a developer's consultants (including its design practitioners) or the Principal Certifier, not informing the developer of the requirements to lodge certain documentation.

Implications for developers and financiers

If issued, Stop Work Orders can have significant financial implications for developers and their financiers. Although the Merrylands Order indicates that the NSW Building Commissioner may take into account the financial consequences of a Stop Work Order on the developer, the financial consequences will be balanced against (and may be outweighed by) the interests of and potential harm to future occupants of the building.

In light of the Merrylands Order, and having regard to the increased focus of the NSW Building Commissioner on enforcing regulatory compliance and safety, it is important that developers are across the requirements of the DBP Act and RAB Act, and are proactive in ensuring they and their builders and consultants submit the appropriate documentation at the times provided for by the legislation.

Developers who fail to comply with these requirements could see delays in the completion of their projects if the relevant orders are issued to stop work until the non-compliances are rectified. Depending on the extent of the non-compliances, these delays may be significant and may cause a delay in sales contracts settling and could potentially lead to defaults under the lending arrangements between financiers and developers.

It is also important for financiers to ensure that their governance and compliance monitoring processes are sufficient when financing residential developments. Enhanced monitoring (including in relation to reporting on the submission of notices and declarations under the DBP Act and RAB Act) should be undertaken to ensure the requirements of the Acts are met by the developer, to prevent delays to or the prohibition of the issue of an occupation certificate.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.