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Conflicts of interest for building certifiers in NSW – what happens when a transitional provision doesn’t last long enough?

11 May 2022

3 min read

#Construction, Infrastructure & Projects

Published by:

Simona Njaim

Conflicts of interest for building certifiers in NSW – what happens when a transitional provision doesn’t last long enough?

On 1 July 2020, the Building and Development Certifiers Regulation 2020 (Regulation) came into effect, expanding upon a number of elements of the reforms introduced by the Building and Development Certifiers Act 2018 (NSW) (Act).

The Regulation set out a more thorough codification of what constitutes a conflict of interest than that set out in the Act. Specifically, clause 24 of the Regulation provides that a certifier must not advise on performance-based solutions in their role as a building certifier (BCA) consultant and be appointed as the principal certifier (PCA). This is a sensible approach. Otherwise, a PCA is essentially signing off on their own departure from the deemed to satisfy the requirements of the BCA. According to section 28 of the Act, a breach of the conflict of interest carries a maximum penalty of 300 penalty units.

There are various exemptions to the conflict of interest, one being for work where the certifier was appointed before 1 July 2020 and the development is completed before 1 July 2022 (according to clause 71(1) of the Regulation). This ‘grandfathering’ of any previous commercial arrangements is typical (notwithstanding the sense of the new regime) as it avoids project participants incurring hardship as a result of legislative reform. At the time, 1 July 2022 sounded like a long time away.

What we are seeing in practice is that, due to delays to projects largely associated with the COVID-19 pandemic and extreme weather events, projects that parties in 2020 confidently believed would be complete by 30 June 2022 won’t be complete. This is creating a difficult situation for some PCAs who continued in their role with the genuine belief that they were complying with the new regime. Now due to matters entirely outside of their control come 1 July 2022, they have by definition breached the prohibition. Whilst there is no impact on their certifications already given, this seems incredibly unfair as there is no way to avoid it, noting that PCAs are entirely unable to influence the progress of a project.

PCAs not wanting to make matters worse are faced with no choice but to resign from their role. This is forcing principals to incur the cost of replacing a PCA in the final stages of their projects. A new PCA will not have had the benefit of familiarising themselves with the designs as a BCA consultant, increasing the time necessary to do the job. Further, in a profession already under strain brought on by a combination of reform (albeit necessary reform), the impacts of flammable building product claims and an otherwise tight insurance market, it is hard to find a PCA who is not very busy these days. Accordingly, the cost for the final certifications from a new PCA is high, if they can be obtained at all. Precisely, the sort of hardship the original transitional provision sought to avoid.

In reality, the expiry of the exemption to the BCA/PCA conflict of interest of 1 July 2022 does not take into account recent world events. The solution is a simple one – extend the 1 July 2022 deadline by at least six months. This avoids PCAs falling foul of the prohibition by default and may allow projects to come to a clean close without having to engage a new PCA so late in the game. Importantly, an extension allows the transitional provision to meet its original aim.

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Authors: Helena Golovanoff & Simona Njaim

The information in this article 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 article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Simona Njaim

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