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Residential building reform: Design and Building Practitioners Act 2020 (NSW)

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This article was written by Isolde Daniell, Lucinda Ower, Chris Seaman and Jock Hamilton.

The Design and Building Practitioners Act 2020 (NSW)

As foreshadowed in our previous update on building reforms in NSW, on 11 June 2020 the NSW Parliament enacted one of its key reforms in its ongoing pursuit of improved regulation of the domestic building industry by passing the Design and Building Practitioners Act 2020 (NSW) (the Act).

The Act will have far-reaching consequences for a range of parties in the residential building industry, particularly by requiring registration of design and building practitioners and imposing a new statutory duty of care owed by designers and builders to owners (and subsequent owners).

Building reform

Building regulation has been a vexed issue in NSW for decades but has been in the public spotlight more recently following the defects observed in Opal Tower and Mascot Towers. The NSW government referred the regulation of building standards, building quality and building disputes to a Parliamentary Inquiry, which recommended the government make a raft of changes to building regulation to provide broader protections for building owners and strata corporations. The Design and Building Practitioners Act 2020 is one of the reforms recommended. The Act is now partly in force, although some provisions are not set to take effect until 1 July 2021.

Key updates

Statutory duty of care

Perhaps the most striking change arising from the Act is the creation of a statutory duty to exercise reasonable care to avoid economic loss caused by defects, owed by builders, designers, manufacturers and project managers – effective immediately.

The duty is imposed on building practitioners retrospectively (for loss that became apparent within the 10 years immediately prior to 11 June 2020), meaning designers and builders on completed projects will now be subject to this duty of care.

The duty is owed to the owner of the land and subsequent owner of the land (including owners corporations). This is a substantial departure from the status quo legal position; that a builder does not necessarily owe a subsequent owner a duty of care to avoid economic loss.

This consumer protection was implemented to clarify that owners corporations, who are often the entities responsible for rectifying the defects, are owed a duty of care. The duty will ride with the statutory warranties already found in the Home Building Act 1989 (NSW), although claims under this duty will be able to be brought after the statutory warranty limitation periods under the Home Building Act have expired.

Regulated designs and building work

The Act also introduces "regulated designs", which are designs prepared for a building element (fire, waterproofing, structural elements and services) or a design prepared for a performance solution under the Building Code of Australia (BCA). These changes will come into effect on 1 July 2021.

Designers will need to provide a declaration that the design complies with the BCA and be adequately insured.

Builders will need to (amongst other things):

  • ensure that no building work is carried out unless the builder has obtained a design compliance declaration from its designer which states that that design complies with the requirements of the BCA;
  • provide a declaration to the principal that, the construction work complies with the BCA, the design was completed by a registered designer and the building was constructed in accordance with that design before making an application for an occupation certificate;
  • provide the design and other relevant documents to the Department of Customer Service within 90 days of receiving an occupation certificate;
  • take all reasonable steps to ensure that its building work complies with the Building Code of Australia; and
  • be adequately insured.

Designers and builders will also need to be registered with the Department of Customer Service as a practitioner and there can be a variety of restrictions placed on practitioners, as well as the ability of the Department to cancel or suspend the registration.

Engineering work and specialist work

The Act will also impose stricter regulations on engineers and those carrying out specialist work (a term which is broadly defined to cover works relating to fire safety systems, waterproofing work, works relating to load bearing components of a building and services works).  The changes for engineers will come into effect on 1 July 2021 and the changes for those carrying out specialist work will come into effect on a date to be appointed.

Both professional engineers and those carrying out specialist work will be required to be registered. Failure to do so could result in a financial penalty being imposed, and in the case of professional engineering work, will disentitle the engineer to payment for its services (regardless of any contract or arrangement).

Investigation and enforcement

Commencing from 1 July 2021, the Department of Customer Service will have broad powers to:

  • take disciplinary action against a registered practitioner (cautions, penalties, registration cancellation/suspension);
  • investigate compliance with the Act;
  • authorise the publication of a warning notice in respect of a registered practitioner;
  • direct insurers to provide information about those policies to the Department; and
  • issue a "stop work order".

This legislation will be welcomed by owners corporations and consumers. The provisions will inevitably be the subject of litigation in the coming years given the spate of recent defective residential projects.

There are various other reforms being introduced by the NSW government and we will be providing updates in upcoming alerts.

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