Certifier legislation has undergone reforms – but where is the check on quality?
This year has seen the introduction of various new legislative regimes addressed at restoring public confidence in the building industry in NSW. This comes following years of disastrous press about building defects and safety concerns, particularly for new residential strata builds.
Recent measures targeting residential strata buildings include the following:
The measures under the RAB Act and SSMA seek to introduce processes to identify early manifesting defects in residential strata schemes and to financially motivate their rectification by those responsible for them. The idea being that this reduces the risk of unrectified defects to potential purchasers and occupants, promoting greater confidence in the building industry.
However, the ability of the reforms in meeting this objective may be tempered by the fact that there are a number of missed opportunities.
Issue 1: Limited scope of the laws
Of particular concern from a consumer protection perspective, is that many of the reforms do not apply to single dwelling houses, terrace houses, town houses, boarding houses, hostels and the like.
Rather, the RAB Act only applies to apartment buildings, as well as mixed-use residential and commercial buildings (Class 2 buildings), and the SSMA impacts parties in the residential strata development sector only.
Similarly, while the regulations have not yet been released for the DBP Act, the Second Reading Speech suggests that the legislation (with the exception of Part 4 containing the statutory duty of care) will apply to Class 2 buildings, with the intention for additional classes of buildings such as hospitals, schools and other multistorey buildings to be included over time. Of note, Part 4 defines ‘building’ by reference to the definition under the Environmental Planning and Assessment Act 1979, making the reach of the new duty of care potentially very broad, although on an alternate reading it applies currently only to residential building work. This remains to be tested and may well be clarified when the Regulation is released.
In focusing on Class 2 buildings, the SSMA and RAB Act reforms seem to suggest that residential apartments are the main problem. Any benefits which may flow from the commencement of these new legislative regimes will not improve standards across the sector, including the construction of single residential dwellings, office towers, nursing homes or hospitals.
The issues the public has witnessed over recent years are not isolated to new high-rise apartment buildings.
Issue 2: Addressing the quality of building work
The reforms arguably also have little practical effect of solving the issue of poor quality builds in NSW, and may be seen as closing the gate after the horse has bolted.
This is because the reforms arguably just add more ‘checklist’ items to the certification process, rather than implementing checks and balances for the inspection of the quality of construction work at critical stages of the process.
In this light, the various reforms can hardly be seen as a cure to the issue of poor construction practices – only a treatment that addresses the symptoms of the underlying problem.
Over the past 30 years, the NSW Government has commissioned a number of reports into the problems within the building and construction sector, each of which has made recommendations to do with building certification processes. However, as discussed in the November 2019 Public Accountability Committee Report,[1] Government has failed to implement a number of key recommendations from these reports.
In 2002, a Joint Select Committee on the Quality of Buildings released a report (Campbell Report) on the regulation of the building and construction industry, including certification and licensing processes. This included recommendations that a Building Compliance Commission be created, the building license regime be reformed and that certification and planning processes be expanded. The majority of those recommendations have not been adopted.
In his October 2015 “Independent Review of the Building Professionals Act 2005 – Final Report” (Lambert Report) Michael Lambert made around 150 recommendations for change within the industry, 100 of which he labelled as “critical”. Overall, he recommended extensive reform, including a fully prescribed professional system of certification for every branch of a project. The NSW government responded to the Lambert Report in 2016, supporting 72 of the 150 recommendations in full or in part. Some of these have since been incorporated into the RAB Act and the DBP Act, however in 2019, Mr Lambert described the government’s response to the recommendations in his report as “limited and piecemeal”, and stated that the DBP Act did not significantly implement his report.
The 2018 Shergold-Weir Report looked into the systemic failures in building regulation and enforcement across Australia, and made 24 recommendations. The NSW Government responded to the Shergold-Weir Report in February 2019, supporting the majority of the recommendations. However, there is a discrepancy between the Government’s assessment of its implementation of the Shergold-Weir reforms and the assessment of the report’s authors who, on assessment in July 2019, stated that the Government had only partially met some of the recommendations. This Report was positioned as a key basis for the introduction of the DBP Act, which subsequently addressed three recommendations in full and five recommendations in part.
The consequences
The cost burden of defect rectification in NSW is significant and is often worn by owners.
A report by Engineers Australia stated that the NSW insurance industry reported a post-completion additional cost in rectifying defects of 27 per cent, which seems significantly greater than the 2 per cent which is set aside under the defects bond under the SSMA. [2] Also, the report estimated that while proper quality controls would raise building cost by around 5 per cent, the savings in defect rectification would be significantly greater.[3]
The NSW Government is attempting reform the building and construction industry which is an undoubtedly noble goal. However, it is clear that certain key opportunities to meaningfully and practically address the problem of quality have not been taken up.
The most obvious of these would be to realign the certification system with the public perception of it, that is, for it to be a true confirmation of build quality.
Authors: Christine Jones, Peter Holt, Georgia Appleby & Rebecca Weakley
[1] Legislative Council Public Accountability Committee, Parliament of New South Wales, Regulation of building standards, building quality and building disputes: First Report (Report, November 2019).
[2] Engineers Australia Multi-Disciplinary Committee, Defect-Free Construction: How it can be achieved, June 2013.
[3] Ibid.
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Bankruptcy Act 1966 (Cth), ss.43, 47(1), 47(1A), 52(1), 156A
Civil Procedure Act 2005 (NSW), ss.4(1), 73, 90(1), Schedule 1
District Court Act 1973 (NSW), s.81
Federal Circuit Court (Bankruptcy) Rules 2016 (Cth), rr.4.02(1), 4.02(2), 4.04(1)(a)(ii), 4.04(1)(b), 4.05, 4.06(3), 4.06(4)
Federal Circuit Court of Australia Act 1999 (Cth), s.5
Home Building Act 1989 (NSW), ss.18B, 94(1A)
Supreme Court Act 1970 (NSW), s.63
Uniform Civil Procedure Rules 2005 (NSW), r.13.3
Suecha Pty Ltd v VSD Glass & Timber Pty Ltd [2020] NSWCATAP 170
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Home Building Act (NSW) 1989
Slaven v Bryant [2020] NSWCATAP 168
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Cappello v Hammond & Simonds NSW Pty Ltd [2020] NSWSC 1021
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Chang v Azari [2020] NSWCATAP 154
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CONSUMER LAW---Assessment of loss for non-compliance with statutory guarantees in respect of the supply of services----Not limited by contract price or extent of services the subject of the contract---Error of law.
Australian Consumer Law (NSW);,Civil and Administrative Tribunal Act 2013 (NSW); Fair Trading Act 1987 (NSW)
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Environmental Planning Instruments
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