The legislation is aimed at restoring the public’s confidence in residential apartment buildings in NSW after the Opal/Mascot Towers debacles.

This Bill was withdrawn in November 2019, however, a Report of the Legislative Council Public Accountability Committee into Regulation of Building Standards, Building Quality and Building Disputes, published on 30 April 2020 called for the reforms to the industry to be urgently implemented. The Bill was then raced through parliament and assented to on 3 June 2020 with effect from 11 June 2020. The implications of the Act will take some time to be absorbed as the Government still need to draft the Regulations which will set out the details of the schemes.

The types of Building Works to which the Act will apply

From the Second Reading Speech in Parliament the Minister has stated as follows:

….. the reforms are also proposed to apply to mixed‑use buildings with a class 2 component, such as a shopping centre or office block that has residential apartments located above the block, so that every part of class 2 building is appropriately regulated under the reforms.

The Minister foreshadowed that the operation of the Bill would be expanded when the Minister stated the following in the Second Reading Speech:

It is necessary to be clear on this point—some stakeholders have raised concerns that these reforms will only ever apply to class 2 buildings. While the obligations under the bill will initially apply to class 2 buildings, additional classes of buildings, such as hospitals, schools and other multistorey buildings are intended to be included in the new scheme as part of the regulations over time

The Regulations will from time to time expand the type of building works to which the Act will apply.

Further from the Second Reading Speech, the definition of what constitutes Building Work for purposes of the Act is as follows;

Building work includes the carrying out of the work, as well as the coordination or supervision of the work involved in the construction of a building, making of alterations or additions to a building, or any repairrenovation or protective treatment of a building. It is noted that building work may be expanded or limited through the regulations. To ensure that the legislation is consistent with the Home Building Act 1989, the regulations will be drafted to exclude work that is valued at less than $5,000.

Note that the Act is to apply to building works to the value of $5,000.00 and over. This is an extremely low threshold.

Summary of the Important Elements contained in the Act

Of immediate effect (as of 11 June 2020) is:

  1. A Statutory Duty of Care which is now owed by builders/electricians, designers/electrical engineers, manufacturers to owners and subsequent owners to protect them against economic loss caused by defects.
  2. The Statutory Duty of Care applies retrospectively for any loss for the last 10 years. This exposes affected parties for claims for defects on any buildings (at this stage it is foreshadowed for Class 2 Buildings) completed in the last 10 years.

The Act makes provision:

  1. to require design compliance declarations before any building work is carried out from registered design practitioners (note where applicable to NECA members below) and principal design practitioners who provide designs for certain regulated building work ie at the initial stage mixed‑use buildings with a class 2 component;
  2. to impose obligations on registered building practitioners (including electricians) who carry out applicable building work to provide building compliance declarations to the client;
  3. for registered building practitioners (including electricians) who carry out applicable building work to take all reasonable steps to ensure that the building work complies with the BCA;
  4. to require that the design was completed by a registered designer, and the building was built in accordance with that design before making an application for an occupation certificate;
  5. to ensure that the design and other relevant documents are provided to the Department of Customer Service within 90 days of receiving an occupation certificate;
  6. for the Regulations to establish a register of practitioners to the registered under the legislation;
  7. to ensure that practitioners are adequately insured.
  8. Failure to comply with the above could result in substantial fines of up to $330,000.00.

Important Key take-out points for NECA members

The Act has defined “Prescribed area of engineering” which include the following:

  1. fire safety engineering,
  2. electrical engineering,

Electrical engineers and Fire safety engineers (including the other prescribed engineers) must be registered and adequately insured from 1 July 2021. Importantly if you are not, you are not entitled to any payment and any monies paid to you can be recovered from you. In addition, there are substantial fines should you carry out any of the regulated work without being properly registered and/or insured.

The Act states that Professional engineering work is only to be carried out by professional engineers and that a person must not carry out professional engineering work in a “Prescribed area of engineering” (see definition above) unless:

  1. the person is a registered professional engineer and the person’s registration authorises the person to carry out the professional engineering work; or
  2. the person carries out the professional engineering work under the direct supervision of a person referred to in paragraph (a) above.

The relevant portion for NECA members is that The Act defines a design that is prepared for:

  1. the fire safety systems for a building within the meaning of the BCA; or
  2. those aspects of the mechanical, plumbing and electrical services for a building that are required to achieve compliance with the BCA

as a regulated design and only a design practitioner as defined by the Act may prepare regulated designs. If a NECA member is a design practitioner, then they must be registered and have adequate insurance (effective from 1 July 2021).

NECA members who are also ‘building practitioners’ (effective from 1 July 2021) must provide building compliance declarations and ensure that the building works comply with the BCA.

NECA members must note that the Act is to be applied to building works covered by the Act to the value of $5,000.00 and over.

Note the Act requires a higher level of Insurance than you may currently have however we waiting to see the specific requirements which will be set out in the Regulations.

Forward Planning Steps for NECA members to take into account

NECA Legal shall provide updated details to NECA members once the Regulations are released.

NECA members should commence forward planning by preparing their businesses for the full impact of this legislation and should look at the following:

  1. What impact will the new retrospective Statutory Duty of Care in respect of past and future claims for defective building work have on your business.
  2. Ensure that all your insurance policies cover these new risks.
  3. Make sure your business complies with registration and insurance requirements by 1 July 2021.
  4. Consider amending your procurement processes to take into account compliance issues required by the new legislation. Allowances should be made for the additional time required and the additional cost of compliance.
  5. Ensure your contracts are drafted in such a way as to provide your business maximum protection where possible.
  6. Note the substantial director’s duties and risk of penalties.
  7. Note that you must be prepared for investigations into your projects.
  8. Further note that stop-work orders can be issued by the authorities in relation to your projects.

For more information, contact CTI Lawyers on 1300 361 099 or email [email protected]

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