Building Reforms in NSW

Posted 10-05-2021
Written by admin 101

In light of the recent Opal Tower and Mascot Tower disasters, it comes as no surprise that public confidence in the NSW building and construction industries is at an all-time low.  But change is coming, as the RMB Lawyers Building and Construction division explains.

The State Government has introduced a set of sweeping law reforms designed to put the public at ease.

The Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) is just one of the instruments introduced in this large-scale reform.

The Act came into force on 1 September 2020, but there’s a catch.

To address growing fears about existing buildings, the State Government has vested the Act with retrospective operation, meaning that the Act imposes new obligations in relation to “building work” which was authorised under the Environmental Planning and Assessment Act 1979 (NSW) and completed within the last 10 years.

This 10-year defects window is taken to commence on and from completion. See Bandelle Pty Ltd v Sydney Capitol Hotels Pty Ltd [2020] NSWCA 303 which considered the running time of “long stop” limitation periods in the construction context, similar to those within the Act.       

Similarly, if the “building work” in question remained incomplete as of 1 September 2020, the Act applies to it.  

The operation of the Act is confined to “building work” carried out in the course of “residential apartment building”.

Critically, “building work” means “any physical activity involved in the erection of a building” and in that regard includes “work involved in, or involved in coordinating or supervising… the construction of a building … [and/or] the making of alterations or additions to a building… [and/or] the repair, renovation or protective treatment of a building”.

A “residential apartment building” includes all buildings which comprise a Class 2 (BCA) component. 

So, this means that the Act applies to pretty much all works carried out in connection with the construction, alteration, or renovation of a building in NSW which is comprised (at least in part) of one or more residential apartments, including mixed use developments.

The Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) is just one of the instruments introduced in the government’s large-scale reform.

The Act gives the Secretary of the Department of Customer Service and its delegates invasive new powers to investigate defects in residential apartment buildings (both during construction and post completion) and to issue binding orders to “developers” requiring rectification and/or remediation works to be carried out. 

So, who is a “developer”? The answer might surprise you.

The Government has taken a “scatter gun” approach to the definition of this critical term in an effort to ensure that there is no escape.

Section 4 of the Act states that a “developer” means any of the following: the person or persons who contracted or arranged for, or facilitated or otherwise caused, (whether directly or indirectly) building works to be carried out; the owner of the land on which the works are carried out at the time that they are/were carried out;  the person nominated as the “principal contractor” for the building works; the “developer” of a strata scheme as defined within the Strata Schemes Management Act 2015 (NSW) if the work is being carried out as a strata scheme; and any other person prescribed by the regulations for the purposes of this definition. 

So, the definition of a “developer” under the Act is far wider than under previous laws and serves to make traditional developers, landowners, builders, contractors, and even sub-contractors alike, liable for defective works.

That means if you are a contractor (or sub-contractor) appointed as the person responsible for the co-ordination and control of building work under, for example, a construction or development management arrangement or even a standard construction contract, then you will find yourself liable under the Act.

If you are a person or entity that owned the land upon which defective building works were carried out, but you have since sold that land, liability does not run with the title to the land in question and so you are still on the hook!

Last but not least, the Act empowers the Secretary and delegates to impose sanctions against multiple people in respect of the same building work.

The Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) is just one of the instruments introduced in the government’s large-scale reform.

The Act gives the Secretary of the Department of Customer Service and its delegates invasive new powers to investigate defects in residential apartment buildings (both during construction and post completion) and to issue binding orders to “developers” requiring rectification and/or remediation works to be carried out. 

This week, we talk about these new powers, the orders to look out for, and rights of appeal.

The Secretary’s delegate can now enter any building site in NSW without notice, and without the need for a warrant, at any reasonable time of day.

If the defective building works in question relate to a completed building which is the subject of residential occupation at the time that the Secretary wishes to gain access, the powers of entry without the need for prior notice, consent, or a warrant are limited to common areas.  If the defects relate to privately owned residential apartments within the subject building, the Secretary must first obtain the consent of each relevant apartment owner or otherwise execute a search warrant under the Act. 

If the Secretary is satisfied that sanctions must be imposed under the Act in order to remedy defects, the Secretary’s delegate may make the following orders as against a “developer”:

  1. a stop work order, if the continuation of building works could result in significant harm and/or loss to occupiers, potential occupiers or members of the public;
  2. a prohibition order, which will operate so as to prevent an occupation certificate being issued and/or to prevent the registration of the relevant strata plan; and
  3. a building work rectification order, which will operate to compel a “developer” to carry out remediation or rectification works which in the opinion of the Secretary or delegate are necessary in order to eliminate, minimise, rectify or otherwise remediate a serious defect or a potentially serious defect in the building.

The Secretary’s delegate may also seize and copy a “developer’s” records on site, seize anything which it considers to be evidence of a serious defect, take, and remove samples from site and demolish work which is burdened by a serious defect.

If a “developer” or their agent fails to comply with a direction given by the Secretary’s delegate without reasonable excuse, the “developer” will be taken to have committed an offence under the Act and will be exposed to prosecution for penalties of $110,000 for each offence. 

The Act does not define the phrase “reasonable excuse” and stipulates that the burden of proof for failing to comply with an order given under the Act rests with the “developer” charged. This approach imposes a high bar for all “developers” to overcome when resisting a prosecution under the Act and, critically, reverses the usual principle of innocent until proven guilty!

So, what about natural justice and rights of appeal?

Under the Act, “developers” are permitted to lodge an appeal against each of the orders described above. However, an appeal must be filed with the Land and NSW’ Environment Court within 30 days; and an appeal does not have the effect of “staying” an order which has been made under the Act. This means that the order remains in effect until the appeal is finalised.

Critically, there are uncertainties surrounding when the relevant appeal period starts to run.

This confusion stems from the fact that if either a stop work order or a prohibition order is made against a “developer” then an appeal must be filed by that “developer” within 30 days of notice of the order being given. However, if a building work rectification order is made against a “developer” then an appeal must be filed by that “developer” within 30 days of the order being given. 

The position is complicated further in some respects because the Act imposes “natural justice requirements” when it comes to building work rectification orders which require the Secretary to provide “developers” with prior written notice of its intention to make a building work rectification order before making that order, and consider (bona fide) any written submissions made by or on behalf of that “developer” before making the orders.

On our reading of the Act, the same “natural justice requirements” do not seem to apply with regard to stop work orders or prohibition orders. However, the fact that the appeal period for orders of this kind is deemed to commence on the date notice of the order is given means that this issue is sure to become the topic of a dispute in the years to come.

However, until that time, the natural reading of the Act suggests that an appeal must be filed within 30 days of the date on which an order (regardless of the kind) is actually made.

Does this act effect you? If yes, your first step should be to contact our office to arrange a free consultation. You can contact us by by phone or our 'Ask a Question' tool on our website.