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Residential Focus

12 August 2020

#Property & Real Estate

Published by:

Georgia Appleby, Rebecca Weakley

Residential Focus

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:

  • Strata Schemes Management Act 2015 (NSW) (SSMA), containing the strata building bond and inspection scheme which commenced on 1 January 2018, introducing a 2 per cent bond at the risk of the developer, where its release is subject to two inspections at 12-24 months after the expiry of the initial period (see our detailed discussion here)
  • Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) (RAB Act) commencing on 1 September 2020, making the issue of an occupation certificate (OC) subject to an inspection for serious defects (see our detailed discussion here)
  • Design and Building Practitioners Act 2020 (NSW) (DBP Act) which introduced, among other things, a new registration regime for designers, engineers and all people who contract to do building work. It also created a 10-year statutory duty of care owed to landowners by people carrying out construction work to avoid economic loss caused by defects (see our detailed discussion here). The duty of care provisions are currently in force as of 11 June 2020, with the remainder of the Act commencing in 2021.

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.

In the media

Registration for engineers: national status update
In the last few years, a lot of progress has been made towards introducing mandatory registration schemes for engineers. Here is an update on the most active jurisdictions and how it affects you (06 August 2020).  More...

HIA: Housing Finance National Release June 2020
Housing finance figures released show that home buyers were tentatively returning to the market in June in response to the initial easing of COVID-19 related restrictions and the announcement of the HomeBuilder program,” commented HIA Senior Economist, Geordan Murray (05 August 2020).  More...

Home Building Approval Downturn Exacerbated by Lockdown
Residential building approvals fell by a further 4.9 per cent in June as the impact of COVID-19 restriction scontinued to weigh on the sector,” stated HIA Senior Economist Geordan Murray. “The cumulative decline in new home approvals over the last two years is significant (30 July 2020).  More...

GBCA: draft Green Star for Homes
The Green Building Council of Australia have released a draft Green Star for Homes Standard which will certify that homes which designed and constructed to the standard are healthy, resilient and energy efficient. The Standard represents a key tool to drive the transformation of the residential sector and create a market for more sustainable, better performing homes (31 July 2020).  More...

Funding flows to local roads and community infrastructure
The Australian Government has delivered the first payment toward crucial small-scale local road and community infrastructure projects nationwide under a $500 million local government support initiative (31 July 2020).  More...

NSW

NSW Fair Trading: Infinity electrical cable safety recall overview
Infinity cables, imported by Infinity Cable Co Pty Ltd (now in liquidation), were recalled nationally after they failed electrical safety standards due to poor quality plastic insulation coating (05 August 2020).  More...

New research triggers crane compliance blitz in NSW
Minister for Better Regulation, Kevin Anderson, said inspectors will be on site checking safe slinging and load movements and issuing on-the-spot fines to anyone operating a crane without a valid high-risk work licence (30 July 2020).  More...

Big boost for first home buyers and construction industry as stamp duty slashed
First home buyers and the construction industry will be the big winners under a targeted boost, which will eliminate stamp duty on newly-built homes below $800,000 and slash thousands of dollars for properties up to $1 million (27 July 2020).  More...

Published – articles, papers, reports

Australian Bureau of Statistics
30/07/2020 Building Approvals, Australia, Jun 2020 (cat no. 8731.0)

Practice and courts

ABCB: Proposal to include minimum accessibility standards for housing in the NCC
Consultation RIS open for public consultation, closing 31 August 2020. It examines regulatory options that are based on the Livable Housing Design Guidelines (LHDG) Silver-level and Gold-level specifications, as well as a ‘Gold-plus’ specification developed through stakeholder consultation. The ABCB has also released a project overview and RIS explainer document that explain the project, its timelines and the RIS process. (06 August 2020).  More...

GBCA: draft Green Star Homes Standard for consultation
Part of the Green Building Council of Australia’s Future Homes Strategy, the Standard is a key tool to help drive transformation in the residential sector to create a market for healthier, more resilient, energy efficient homes. Consultation on the draft standard will run until 30 October 2020 (29 July 2020).  More...

RICS: Australian Building Certifiers - become a Chartered Surveyor
If you are a level 1 or 2 licensed Australian building certifier, you may be eligible for direct entry into the profession. The only ‘qualifications’ recognised by RICS in Australia for direct entry of building certifiers are statutory licenses. The table below shows what professional qualification is attainable against each license level. Note that alternative routes of entry are available if you don’t meet the minimum requirements (28 July 2020).  More...

AIBS Professional Development Audit Program – Member Consultation
As part of our ongoing development of professional standards for the professional of building across the country, AIBS has developed a Professional Audit Program for Building Surveyors and is now seeking your feedback on the program (July 2020).  More...

Build Australia discussion paper: Draft National Registration Framework for Building Practitioners
A discussion paper on a draft National Registration Framework (NRF) for Building Practitioners has been developed in response to BCR recommendations 1 and 2. The discussion paper seeks stakeholder feedback on the draft NRF outlined in the consultation form, until 23 August 2020. Only comments submitted using the online form will be considered.  More...

2020 National Housing Research Program commences
Research is underway for the suite of projects funded by AHURI as part of the 2020 National Housing Research Program (NHRP). The research will be undertaken by collaborative teams from AHURI’s eight national university research partners. For more details of the 2020 NHRP projects please click here.  More...

AIBS: NSW/ACT Member Update - Legislative Changes and Code Updates
1 July 2020 - Please find information below concerning the adoption of new legislation and amendments for the low rise medium density housing code.  More...

NSW Revenue: HomeBuilder program
HomeBuilder will provide eligible owner-occupiers (including first home buyers) with a grant of $25,000 to build a new home or substantially renovate an existing home where the contract is signed between 4 June 2020 and 31 December 2020. Construction must commence within three months of the contract date.  More...

Cases

Master Builders Australia Ltd; Housing Industry Association Limited; Australian Industry Group [2020] FWCFB 4126
Application re the Building and Construction General On-Site Award 2010, the Joinery and Building Trades Award 2010 and the Mobile Crane Hiring Award 2010 – temporary variations – current circumstances of the COVID-19 outbreak – provisional views – matter stood overs. There was very little evidence about the effect of the pandemic on the conduct of work in the residential sector. Mr Temby gave evidence that “ home building work in the pipeline has been permitted to continue in the COVID-19 environment but with restrictions on safe distancing and hygiene that have lowered productivity”, but he did not explain the basis for this proposition 

BASELINE CONSTRUCTIONS PTY LTD v CHEN [2020] FCCA 2080
BANKRUPTCY – Application for sequestration order based on act of bankruptcy arising out of failure of respondent to comply with the requirements of a bankruptcy notice – at time of issue of bankruptcy notice the District Court of New South Wales made two orders, one that there be judgment for the applicant for $150,000 (first judgment debt), and one that there be judgment for the applicant for $150,000, but subject to a temporary stay (second judgment debt) – applicant issued bankruptcy notice demanding payment of the first judgment debt – the respondent paid $100,000 of the first judgment debt after the day by which the bankruptcy notice required payment of the first judgment debt – creditor’s petition claimed the applicant relied on a judgment debt of $300,000 being the sum of the first and second judgment debts, noting that the respondent had paid $100,000 – the respondent later paid the outstanding $50,000 of the first judgment debt – whether in those circumstances the District Court had given only one judgment for $150,000 with the consequence that by paying the $150,000 the respondent discharged the judgment and the applicant was not a creditor of the respondent – held District Court made one order that created two judgment debts – whether the stay in relation to the second judgment debt had lifted – stay lifted – whether respondent has offsetting claim exceeding the amount of the second judgment debt – no arguable case of an offsetting claim that was equal to or in excess of the second judgment debt – matter to be listed for the making of a sequestration order to give respondent opportunity to come to terms with the applicant.
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
CONTRACT – parties to unwritten home building contract – quantum meruit claim- proof of reasonable value- relevance of contract prices- lack of proof of reasonable value for part of the works. Civil and Administrative Tribunal Act (NSW) (2013)
Home Building Act (NSW) 1989

Slaven v Bryant [2020] NSWCATAP 168
Appeal dismissed APPEALS – from findings of fact – credibility of witnesses – limitation on appeal where findings of fact based on demeanour of witnesses – procedural fairness – bias or apprehension of bias – prior professional association as members of the same chambers – insufficient of its own – requirements to be satisfied BUILDING AND CONSTRUCTION – Home Building Act 1989 (NSW) – definition of dwelling - for use as a residence or for use in conjunction with a dwelling – time for assessment – quantum meruit – benefit when not the owner of the land. Home Building Act 1989 (NSW), Sch 1 cl 3 

Cappello v Hammond & Simonds NSW Pty Ltd [2020] NSWSC 1021
BUILDING AND CONSTRUCTION – Where damages for work done but not invoiced sought to be proved on a quantum meruit basis – Damages for delay – Where loss not established – Where loss too remote – Breach of statutory warranties in the Home Building Act 1989 (NSW), s 18B. CONTRACT – Whether contract validly terminated – Where liquidated damages clause provides for nominal amount – Whether provision relating to liquidated damages provided an exclusive remedy for delay and, if it did, whether it was rendered void by the Home Building Act 1989 (NSW), s 18G.  

Taylor Construction Group Pty Ltd v The Owners - Strata Plan No 92888 [2020] NSWCATAP 163
BUILDING AND CONSTRUCTION — Home Building Act 1989 (NSW) — Statutory warranty — In accordance with the law - Building Code of Australia – Whether issue of interim occupation certificate creates an irrebuttable presumption that the building is BCA compliant – Whether attachment of “Biowood” to the exterior walls constituted an “undue risk of fire spread via the façade of the building” – Words and phrases – “undue risk”

Chang v Azari [2020] NSWCATAP 154
(1) Allow the appeal. (2) Remit part of the proceedings to the Tribunal at first instance for re-determination, without further evidence, of the question whether, in addition to the amount of $5,323.40 the Tribunal, on 25 February 2020, ordered the respondent to pay the appellant, the respondent is to pay additional damages to the Appellant pursuant to s267 (4) of the Australian Consumer Law (NSW) in respect of the cost of new floorboards, new underlay and glue.
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)

Legislation

NSW

Environmental Planning Instruments

State Environmental Planning Policy (Housing for Seniors or People with a Disability) Amendment (Metropolitan Rural Areas Exemption) 2020
(2020-441) — published LW 29 July 2020

Bills introduced- Government – 29 July 2020

State Revenue Legislation Amendment (COVID-19 Housing Response) Bill 2020

Bills passed by both Houses of Parliament – 07 August 2020

State Revenue Legislation Amendment (COVID-19 Housing Response) Bill 2020

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Georgia Appleby, Rebecca Weakley

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