In our last article we mentioned the fact that some major legislative changes are out for consultation with potential for adoption in early 2023. As promised, we will review the proposals and possible impacts below. 

The legislative landscape 

All too familiar building incidents have shown how devastating the impact of building defects are on property owners and occupiers. In response, the State Government’s Construct NSW reform agenda created major changes in the NSW building and construction sector, putting quality and consumers at the centre of policy. The agenda sought to ensure trustworthy buildings that can be relied upon to provide occupants with the best safety and amenities. The developers, designers and builders who create them would be the most capable, with buyers confident to own and occupy or rent.   NSW introduced significant reforms to hold developers, builders and designers to account for their work, with the initial focus on Class 2 (multi-unit, multi-storey residential) buildings. The Design and Building Practitioners Act 2019 (DBP Act) ensured that certain designs needed to be declared for compliance with the National Construction Code (NCC) and other relevant standards before building work could start, with declared designs needing to be lodged on the NSW Planning Portal. Builders must then construct according to those designs with registered Building Surveyors ensuring NCC compliance is achieved before occupancy can begin. Alongside the DBP Act, the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (RAB Act) provided a range of comprehensive investigation, rectification and enforcement powers to the Building Commissioner, and established a mandatory developer notification scheme for building work.  

The next step reforms

The proposed reforms in the Building Legislation Amendment (Building Classes) Regulation 2022 are part of the next wave of the reform agenda and will see the expansion of the Acts mentioned above, to other building classes with residential occupancy.  Under the DPB Act Building Legislation Amendment (Building Classes) Regulation 2022 which commences 3rd April 2023 and will change to include the following prescribed building classes; Class 2, Class 3, or Class 9c. This effectively means that any mixed-use developments comprising one or more of these building Classes will be subject to the requirements of the Act, taking the initial scope well beyond the original Class 2 dwellings. Similarly, a RAB Act amendment is proposed for the application of the Act to extend to buildings containing Class 3 and Class 9c parts.   Also under consideration is the new Building Compliance and Enforcement Bill 2022 (BCE Bill). It is intended to improve the regulatory framework for the building and construction industry and provide essential supporting compliance and enforcement powers and will eventually replace the RAB Act.  Further to these reforms, the new Building Bill 2022 has been proposed to create a start to finish accountability for building work in NSW, it will replace the Home Building Act 1989. This Bill seeks to consolidate and regulate several key elements of the building and construction industry, including: 

• what building work is intended to be regulated and who should be licensed to perform it  
• the approval process for building work  
• fire safety requirements for building work 
• key consumer protections that had been applied to residential building work 

The Bill provides an opportunity to extend some of the key features of regulation in NSW to all building work, including licensing tradespeople, building designers and professional engineers on all buildings. 

What does it mean for the construction industry?

According to NSW Government, the reforms are aimed at the following areas of change: 

• making the construction market fairer and easier  
• supplying safe for use building products 
• regulation of prefabricated and manufactured structures 
• strengthening building compliance and enforcement 
• licensing commercial and residential building work 
• upskilling the building and construction industry  
• securing prompt and fair payment for building work 

The building construction sector includes many organisations and individuals that work across the residential and commercial space, who are subject to different requirements depending on the work they are doing. Some may have been refused a licence in the residential building market but can freely operate in the commercial sector. The previous regulatory focus has been directed at improving outcomes for householders, but there is evidence pointing to issues throughout the broader building industry that presents an argument for regulatory intervention. Consumers in the commercial building industry range from highly sophisticated corporations to SME’s. The less sophisticated consumers in the commercial space can suffer from the same issues as a consumer in the residential space.    Under the RAB Act there is an established Expected Completion Notice (ECN) scheme that requires developers to notify the Department of Customer Service of the date they intend to apply for an OC for building work. Clause 9 of the BCE Bill looks to expand the ECN requirements to any ‘notifiable building’. These include Class 2 buildings and any building where the building work requires a building compliance declaration under the DBP Act. This means that the application of the ECN scheme is tied to the application of the DBP compliance declaration scheme. As the DBP Act expands to new classes of building in the future, the ECN scheme will automatically expand to those classes.    The proposed licensing scheme will undoubtedly mean more cost to business owners. As of 2021, there were nearly 138,000 construction businesses in NSW, with just over 80% of that total employing a maximum of 4 FTE’s.  Going by the existing number of licences issued by Fair Trading, it has been estimated that around 20,000 more licences will be required across the industry. In summary the compliance net and consequential cost burden will spread to commercial players who may have steered clear of residential developments in the past.