NSW residential building sector reforms commence on 1 July 2021: Are you ready?

Imposes statutory duty of care

• Imposes statutory duty of care on every person who carries out construction work to exercise reasonable care to avoid economic loss caused by defects (1) in or related to a building for which work is done, and (2) arising from construction work;
• The statutory duty is owed to each owner of the land in relation to which the construction work is conducted (including all subsequent owners);
• Statutory duty of care applies retrospectively where the economic loss suffered first became apparent within the 10 years prior to 10 June 2020.

Establishes regulatory framework

• Most provisions commence on 1 July 2021 (except the duty of care which commenced on 10 June 2020);
• Imposes requirement for Practitioners to be registered;
• Imposes a declaration scheme (1) for submission of regulated designs by registered designers, and (2) in respect of building work by registered builders, prior to applying for an occupation certificate (Declaration Scheme);
• Imposes requirements for Practitioners to be "adequately insured"; and
• Provides investigation and enforcement powers to authorised officers and the Secretary of the Department of Customer Service (including the power to issue stop work orders). 

Commencement and application

• Commences on 1 July 2021 and applies to building and design work for which a construction certificate or complying development certificate is issued on or after 1 July 2021;
• Applies to Practitioners who work on class 2 buildings and buildings that have a class 2 component. In the case of mixed-use buildings with at least one class 2 component, the legislative framework applies to all parts of the building;
• Imposes obligations on Practitioners to comply with a detailed registration process, a comprehensive code of practice and to undertake continuing professional development.
• Outlines penalty notice offences.

Building work

• Clause 13 of the Regulation prescribes that certain types of work are excluded from constituting "building work" for the purposes of the legislation. Exempted works include (1) works relating to maintenance or protective treatment of fire safety systems, (2) works on a building to the extent that it involves mechanical, plumbing or electrical maintenance services, and (3) work that is excluded from being residential building work under the Home Building Act (NSW) 1989;
• Following the Industry Consultation the Regulation was amended to confirm that waterproofing works carried out by individual owners within their lots (including works to bathrooms, kitchens, laundries or toilets) will not be captured. The Regulation will however capture waterproofing works performed by developers across multiple lots, either before or after occupation (even if aspects of the works are performed in individual lots).

Classes of registration of design practitioners

• Schedule 1 lists the classes of registration of design practitioners;
• A number of classes of registration that appeared in the draft Regulation have been amended to reflect the Industry Consultation. This includes the inclusion of two new classes of design practitioners: "Body Corporate" and "Vertical Transportation", the removal of Class "Electrical Design (Restricted)" and some amendments to other classes.

Registration of design practitioners

• Practitioners can register as design practitioners if they have at least 5 years' recent relevant practical experience in the last 10 years in their area of practice. If at least 2 years' recent relevant experience has not been completed in Australia, a minimum of 10 years' recent relevant practical experience must be demonstrated as well as completion of a competency assessment documented by the Secretary or a person approved by the Secretary;
• Relevant experience includes preparing designs, carrying out building work or performing professional engineering work (as applicable) in the practitioner's practice area on any class 2, 3, 9a or 9c buildings;
• To enable highly skilled and experienced practitioners who do not otherwise satisfy the registration requirements to continue working, the Regulation offers a competency pathway. The requirements of the pathway are described in detail in the Regulation and it is available to building designers, fire system designers and vertical transportation designers;
• Imposes obligations for registration of principal design practitioners. Principal design practitioners are not required for every building but may be useful in co-ordinating designs for more complex developments.

Registration of building practitioners

• Three classes of building practitioners are established under the Regulation: "Body Corporate" (which was included following the Industry Consultation), "Body Corporate Nominee" and "General". The requirements for these classes are outlined in the Regulation.
• In some cases developers will also need to be registered if they are principally contracted to do or co-ordinate the building work.

Registration of professional engineers

• Prescribes registration of the various subject matter areas specified under the DBP Act, including geotechnical engineering, structural, civil, mechanical, fire safety and electrical;
• Specifies that only individuals can register;
• Prescribes 3 possible pathways for registration (Pathways to Registration), with minimum requirements for education, skills, expertise and experience set out in the Regulation. Each Pathway to Registration also has its own requirements for ongoing regulation, insurances and continuing professional development;
• An alternative pathway is available to enable engineers with extensive experience in their field, who do not meet all the required requirements for registration under the Pathways to Registration, to continue working. The Regulation outlines 2 options for registering under this "competency pathway".

Declaration Scheme

Industry Consultation identified that the requirements outlined in the draft Regulation in relation lodgement of designs and the declaration obligations may add significant additional time to the building process. However, given that the purpose of the legislation is to raise standards of design and construction, the NSW Government felt that those requirements should remain. It was recognised that this will require a significant shift from current practices. Therefore, the following Declaration Scheme has been incorporated into the legislation, which imposes strict requirements for lodging documentation on the NSW Planning Portal:

Stage 1: Before building work commences, building practitioners must lodge:

• copies of the construction issued regulated designs for the building;
• copies of design compliance declarations for each design; and
• where a principal design practitioner is appointed, a principal compliance declaration for the design.

Those documents must also be provided to the certifier at this point.

Stage 2: As variations arise after building work commences, a building practitioner must lodge, by no later than 1 day after commencing a variation to building work:

• each design compliance declaration for varied regulated design;
• the varied regulated design;
• each design compliance declaration for a new building element or performance solution; and
• the regulated design for the new building element or performance solution.

These lodgement provisions apply to variations requiring work to a building element and to performance solution variations. Other variations to building work, which do not relate to a building element or performance solution, only require the building practitioner to record the details of the variation in a document known as a variation statement, which is submitted at Stage 3. The NSW Government clarified this distinction in response to concerns raised in submissions regarding the variation process.

Stage 3: Before applying for an occupation certificate, a building practitioner must lodge:

• where a principal design practitioner is appointed for building work, the building compliance declaration;
• contractor document (which includes a range of documentation such as the construction contract);
• copy of each variation statement required for building work;
• copy of each regulated design that contains additional details not reflected in the construction issued regulated design (but only if the details do not cause the building work to which the design relates to be varied); and
• other required documents.

Stage 4: Within 90 days after an occupation certificate has been issued, a building practitioner must lodge:

• each regulated design that reflects the building work carried out; and
• re-lodge the documents required for lodgement under stage 3, if they have changed since their previous lodgement.

Insurance

• Registered Practitioners must carry adequate insurances and must be indemnified under a professional indemnity policy which covers all relevant work and indemnifies against 'all liability' incurred by them at any time since they became a Practitioner;
• The Industry Consultation identified concerns relating to the availability of such broad insurance coverage. To give Practitioners an opportunity to make relevant arrangements and to enable the insurance market to meet this insurance demand, the Regulation exempts all design practitioners who register under Pathway to Registration 1 from having to comply with insurance obligations prescribed under the Regulation until 30 June 2023. Design practitioners who register under Pathways to Registration 2 and 3 will need to comply with the insurance requirements imposed by the relevant professional engineering body who has a scheme approved by Fair Trading or the Professional Standards Scheme (as the case may be); and
• Practitioners must keep records (for at least 5 years) about the adequacy of insurance coverage.

Record-keeping

Part 7 of the Regulation imposes obligations on Practitioners for record-keeping.

Codes of practice and continuing professional development (CPD)

• Establishes a code of practice for Practitioners (other than professional engineers) and a separate code of practice applicable to professional engineers. Compliance with these codes of practice is required to maintain registration.
• Specifies requirements for CPD. Practitioners will need to complete at least 3 hours of CPD activities approved by the Secretary and the Regulation clarifies how multiple classes of registration should operate. Professional engineers who register under Pathway to Registration 1 will need to complete at least 50 hours of relevant education and training (including a minimum number of hours of prescribed subject matters), outlined by the Secretary.

Penalty notice offences

Prescribes offences and penalty notices for breaches. This includes lodgement of documents by persons who are not registered Practitioners.