NSW Building Legislation Amendment: Key reforms and impacts

3 minute read 22.11.2023 Carrie Metcalfe, Heidi Knights, Ersen Ahmet

On 21 November 2023, the NSW Government continued its reform agenda by passing the Building Legislation Amendment Bill 2023 into law.

Key takeouts

All people in the chain of responsibility for building products should be aware of their duties under the new law.

Builders, developers and financiers of class 1 buildings (houses) should familiarise themselves with the new requirements (which are similar to the RAB Act) and take steps to modify their procurement processes accordingly.

Developers of class 2 buildings (apartments) should consider whether a decennial liability insurance policy should be obtained, and watch this space for further developments next year.

On 21 November 2023, the NSW Government passed the Building Legislation Amendment Bill 2023, the next step in its commitment to transformational building reforms in NSW.

The Bill covers a broad variety of topics. In this article, we give you a quick guide to the key outcomes.

Who is impacted?

All building industry participants in NSW. In particular:

Designers/manufacturers/suppliers/subcontractors/contractors/developers of all building classes – are now subject to broader obligations and penalties in relation to building product safety under the chain of responsibility provisions in the Building Products (Safety) Act 2017 (NSW).
Builders/developers/financiers of class 1 buildings (houses) – are now subject to the powers of the Office of the Building Commissioner (soon to be called the Building Commission).
Developers of class 2 buildings (apartments) – should be aware of the changes to the strata bond scheme and decennial liability insurance, and should watch this space as this scheme further develops next year.

What Acts have been amended?

The Acts that are now amended include:

Building and Development Certifiers Act 2018 (NSW)
Building Products (Safety) Act 2017 (NSW)
Design and Building Practitioners Act 2020 (NSW)
Home Building Act 1989 (NSW)
Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW)
Strata Schemes Management Act 2015 (NSW)
Strata Scheme Management Regulation 2016 (NSW)

Three key changes in these latest reforms

Building product safety

The following people will have duties under the chain of responsibility for a building product:

a person who designs or deals with the product, and knows, or ought reasonably to know, the product will, or is likely to, be used in a building;
a person who prepares a building design that incorporates or recommends the use of the product in the building (e.g. designers, engineers and architects);
a person who uses the product in a building (e.g. a person who installs, or coordinates or supervises the installation of, the product in a building during construction);
a person specified in the regulations as a person in the chain of responsibility.

People in the chain of responsibility need to understand their duties, which include a duty to give notice to the Department if a safety risk exists in relation to an intended use of a building product. Failing to give such notice can result in a significant penalty.

Executive liability offences mean that directors and management can also be held liable.

Building industry participants should keep watch for any building product warnings, recalls, bans or other notices issued by the Department.

Class 1 buildings now covered by reforms

The investigative and enforcement powers of the Department are expanded, specifically to class 1 buildings. The amendments sit in the Home Building Act, but are similar to the RAB Act requirements currently applying to class 2 buildings. A key feature of the expanded powers is that the Department aims to operate proactively, identifying issues early so that defective work can be rectified before building occupation.

If you are a financier, builder or developer of Class 1 buildings, you should consider the impact on your internal governance mechanisms and procurement processes, including amendments to contracts.

You can read our overview of the RAB Act.

Decennial liability insurance

The current building bond scheme, under the Strata Schemes Management Act 2015 (NSW), requires developers to provide a security amounting to 2% of the contract price before applying for an occupation certificate.

A decennial liability insurance (DLI) policy is intended to replace the building bond, and provide cover for up to the full construction value of rectifying serious defects in common property for a period of 10 years.

It is anticipated that for the next five years, both the building bond and DLI will coexist, with developers having the option to choose between the two.

After this transitional period it is proposed that DLI could become mandatory.

The new Bill stipulates some requirements for DLI policies, but does not yet make them mandatory.

We recommend that all building industry participants familiarise themselves with the changes, and watch this space for further updates and legislative reforms in 2024.

Please contact our Building Regulations Team if you require specific advice.