The D&BP Bill and RAB Bill form one part of the NSW Government’s six part reform agenda to lift standards and accountability in the building sector.
The Minister for Better Regulation, Kevin Anderson, has stated that the new laws are intended to 'mark the start of a new era in the design and construction of buildings in NSW'.
All participants in the property and development industry will be impacted by the new laws.
The D&BP Bill
The D&BP Bill passed through the upper house with the inclusion of amendments from across the political spectrum and provides:
- a new duty of care for the benefit of owners of land; and
- a new system for regulating design and building work, including registration of designers, engineers, builders and other specialist practitioners.
What is the new duty of care?
A new duty of care has been introduced for the benefit of owners of land. A person who carries out construction work has a duty to exercise reasonable care to avoid economic loss caused by defects:
- in or related to a building for which the work is done; and
- arising from the construction work.
The duty of care is owed to each owner of the land in relation to which the construction work is carried out, including all subsequent owners.
Where the duty has been breached, owners can claim damages for breach of the duty as if it were a common law duty, irrespective of whether the owner was a party to the contract for the construction work.
This duty provides a new avenue for owners to seek compensation for defective building work.
The duty is owed by any person who carries out construction work, including head contractors, subcontractors, manufacturers, suppliers and consultants. Parties cannot contract out of the duty.
What type of work and buildings does the duty of care apply to?
The duty of care applies to persons carrying out 'construction work', which includes:
- construction of a building;
- making alterations or additions to a building;
- repair, renovation or protective treatment of a building;
- preparation of designs for building work;
- manufacture or supply of building products; and
- supervising, co-ordinating, project managing or otherwise substantively controlling the carrying out of any of the above.
The classes of buildings to be covered by the duty of care are to be prescribed in the forthcoming Regulations, but as a minimum will include residential buildings.
Which 'owners' benefit from the duty of care?
An 'owner of land' for the purposes of the duty of care is any of the following:
- a person who is entitled to the land for an estate of freehold;
- the owner of a strata lot;
- a proprietor of a lot under the Community Land Management Act 1989 (NSW);
- a person who receives, or is entitled to receive, rent and profits of the land; and
- an owners corporation constituted for a strata scheme, as well as other associations for neighbourhood and community schemes.
Further categories of 'owner' may be prescribed by the Regulations.
Does the new duty of care apply to existing buildings and construction work?
Yes, the duty of care applies retrospectively, even where a common law duty of care has already been pleaded by a claimant.
Buildings less than 10 years old will be covered by the duty of care.
This means that once the Act commences, if you are already involved in proceedings, the claimant may have an additional cause of action and be entitled to amend its claim to plead a breach of the duty.
How does the new duty of care relate to the statutory warranties under the Home Building Act?
The new duty of care is in addition to the rights and obligations proposed under the Home Building Act, other legislation and common law. The new duty of care does not limit any of those rights or obligations.
What is the new system for regulating design and building work?
The D&BP Bill provides a comprehensive system for:
- the declaration of regulated designs by registered designers;
- the declaration of building work by registered builders (prior to application for an occupation certificate);
- insurance requirements for designers, engineers and builders (to be further detailed in the forthcoming Regulations);
- registration of designers, engineers, builders and other specialist practitioners (including those performing maintenance); and
- investigation and enforcement including issuing stop work orders.
The system drives compliance with the Building Code of Australia, among other things.
The RAB Bill
The RAB Bill introduces:
- a requirement for developers to give advance notice before applying for an occupation certificate; and
- the power for the Department to:
- prevent issue of an occupation certificate or registration of a strata plan (eg. if there is a 'serious defect', or the building bond required under the Strata Schemes Management Act 2015 has not been lodged);
- investigate building work (eg. to investigate serious defects and compliance with the Building Code of Australia and Australian Standards);
- issue to developers stop work orders and building rectification orders; and
- require developers to pay for the Department's compliance costs in respect of building rectification orders.
- A 'developer' is defined broadly under the Bill. The Bill applies retrospectively with a 10 year limit, subject to transitional arrangements.
What is the timing? When will the Regulations be enacted?
The RAB Act commences on 1 September 2020.
The sections of the D&BP Act regarding the new system commence on 1 July 2021.
Indications are that the Regulations setting out further detail and operational aspects of the two Acts will be introduced later this year.
If you would like to know more about how the new laws affect you, and to prepare your business for compliance, please feel free to contact us.