Over the last twelve-months there’s been a great deal of comment on how important a part confidence plays in the residential property market. It’s a topic that demands constant vigilance.

How confidence impacts the market is a complex topic however, there’s no doubt that at a time of some instability, both buyers and sellers are flustered, and 2019 has delivered an entire set of issues that have at best undermined confidence.

And just as we were seeing-off the impact of the banking royal commission, a mix of State and Federal elections and tighter home-loan lending criteria, markets are dealing with building quality issues alongside the already vexing issue of potential multi-million dollars costs associated with faulty building cladding which, are problems not only confined to Australia. Naturally these problems have led to diminishing public confidence.

There’s no wonder buyers and existing owners are anxious and it’s very obvious they are, and as such there’s going to be the need for a solid industry-wide and whole of government solution.

Even though hundreds of projects have been developed and tens of thousands of individual apartments have been built with no problems, a few high-profile cases have the potential to further erode market confidence.

NSW a Countdown to a Solution

The site of owners leaving their building with a few suitcases of personal belongings soon promoted the NSW Government to offer accommodation assistance to residents of the Mascot Towers temporarily unsafe to occupy. 

The Government (23 June, 2019) will help pay for alternative accommodation costs for up to three months while apartments are unsafe to occupy. Depending on the size of the apartment you occupied, assistance ranges between $220 and $400 per night. The conditional assistance package is available to both tenants and owner occupiers who reside at Mascot Towers.

Beyond this urgent and immediate assistance, the Government is continuing to progress reforms to the building and construction sector and have released (26 June, 2019) a discussion paper, Building Stronger Foundations.

The discussion paper is the first steps in implementing the State Government’s response to Professor Peter Shergold and Ms. Bronwyn Weir’s Building Confidence: for the building and construction industry across Australia report. The NSW Government is now seeking feedback on the scope of the reforms however, there’s already robust planning underway.

Some of the key reforms include, requiring registered ‘building designers’ to declare plans and performance solutions are compliant with the Building Code of Australia, a new registration scheme for ‘building designers’; ensuring an industry-wide duty of care is owed to subsequent home owners, including strata body corporates and appointing a Building Commissioner for building in NSW.

Extensive Government Response

According to the responsible NSW Minister, people deserve to feel safe in their homes and be confident that they are buying a quality building, and to rightfully expect that if there are defects the law will protect them.

Despite the regulations that already exist to protect homeowners, there is growing evidence that some building practitioners continue to do the wrong thing and so a major series are reforms are being considered.

The Building Confidence report confirms the bad experience of too many homeowners in NSW, and indeed around Australia and the world with serious compliance failures in recently constructed buildings.

The Government has set out a strong plan for the future of building laws. Under the plan, building plans will need to accurately record a building’s as-constructed design.

Registered designers will need to declare that the plans will meet building standards. There will be insurance requirements and building practitioners will have a duty of care to homeowners. And a major move is that NSW will have a Building Commissioner to provide extensive industry oversight.

Today, an apartment owner has no meaningful way to assess the risk that a new building has major defects, yet they suffer the consequences if it does.  This plan will ensure that those who control the risks – building practitioners – are held responsible for them. It is an ambitious plan and the biggest overhaul of NSW building laws in the State’s history. 

Summary

The review was commissioned by the Building Ministers’ Forum in 2017 and has produced 24 recommendations to improve the national best practice model for effectively implementing building regulation including new robust regulation that ensures the safety, amenity and sustainability of the built environment and protects consumers.

The Government has already made strides in this area by strengthening certifier laws by enacting the Building and Development Certifiers Act 2018 and creating a simpler, modern planning system under the Environmental Planning and Assessment Act 1979.

The need for reform

The Report follows a series of reports and compliance issues in the construction industry at state, national and international levels which, identify the prevalence of serious compliance failures in recently constructed buildings.

Buyers may not readily appreciate that contractual arrangements for multi-storey projects differ, but commonly developers engage a builder to undertake a design-and-construct project. This means the builder is responsible both for the development of the design and the construction of the building.

One result currently can be that although building approvals are required, the nature of a design-and-construct project means that many aspects of the design change after the initial approval is obtained. Many [certifiers] approve, allow, or are not aware of, variations that have been made. The result is that changes to approved design occur frequently, at the discretion of the builder, project manager and/or contractors and without independent certification.

Moving forward – the NSW Government plan

The Government supports the vast majority of the Report’s recommendations, and will implement the following major reforms across the construction industry:

  • Appoint a Building Commissioner who will administer all building laws that are or will be in the Minister for Innovation and Better Regulation’s portfolio.
  • Overhaul compliance reporting.
  • Builders will also have to declare that their buildings are constructed in accordance with approved plans, and the Building Commissioner will not need to sign off on building plans.
  • Require building practitioners with reporting obligations to be registered and they will be subject to disciplinary action for professional misconduct.
  • Ensure that there is an industry-wide duty of care to homeowners, so that homeowners will have a right to pursue compensation when they suffer damage because of a building practitioner’s negligence.

The Government is now conducting further consultation with industry and community stakeholders to ensure that these reforms are developed and implemented effectively.

An overhaul compliance reporting

Building practitioners in NSW are generally required to comply with the BCA, alongside other planning, home building, certifier, building product and consumer laws.

The Report recommends that appropriately qualified practitioners prepare building plans and specifications which accurately depict buildings as they are constructed, including identifying performance solutions. A fact that most buyers would perhaps already assume apply. The documentation also demonstrates how any aspects of the building involving a performance solution comply with the BCA.

New regulations will require building designers, architects, engineers and other building practitioners who provide final designs and/or specifications of elements of buildings to declare that the building plans specify a building which will comply with building regulations, including the BCA.

The Government will also require builders to declare that buildings are constructed in accordance with the building plans, substantial penalties will be imposed on practitioners who do not comply with these obligations. It will be an offence to dishonestly or recklessly declare inaccurate plans or fail to lodge prescribed documents with the Building Commissioner on time.

Building practitioners with reporting obligations to be registered

To ensure the documents are completed accurately, the Report recommends that practitioners be registered before they may lawfully make declarations.

The majority of building professions are licenced or accredited in NSW, including certifiers, architects and tradespeople who complete residential building work valued at more than $5,000. Engineers, draftsmen and builders and tradespeople who engage in commercial building work are not currently subject to registration schemes.

To ensure that those registered maintain professional standards, the Building Commissioner will be able to investigate and take disciplinary action against non-compliant practitioners. While a registration schemes for currently unregistered designers and commercial builders who intend to make declarations will be introduced. Only authorised practitioners will be entitled to declare plans.

Broadly The Building Commissioner will lead and oversee building regulation and administration in NSW, including:

  • licensing and authorisation of building practitioners
  • residential building investigations
  • building plan regulation and audit
  • residential building inspections and dispute resolution
  • plumbing regulation
  • electrical and gas safety regulation
  • strata building bond scheme
  • building product safety
  • building and construction security of payment scheme and
  • engagement and strategic collaboration with local government.

Strong investigative powers conferred on the Building Commissioner will allow the Commissioner to monitor and scrutinise suspected incidents of wrongdoing in the industry. Local Councils and private certifiers will retain their existing powers and functions.

Industry-wide duty of care to homeowners

Currently building owners have some protections for damage suffered as a result of non-compliant construction. They have contractual rights against developers and residential building owners have statutory warranties from builders as to building quality.

However, as a result of a High Court case, builders and engineers did not owe duty of care to owners’ corporations or to subsequent purchasers of commercial property respectively.

The Court came to this view on the basis that parties could contractually transfer their risk. These decisions have shed doubt on whether builders and designers owe a common law duty of care to residential owners’ corporations or purchasers for defects.

A position that has become a major concern for apartment buyers, as The Report identifies the vulnerability of purchasers of new residential developments.

They must rely on the regulatory controls and competence of practitioners to deliver a compliant, safe building. The Report also found that practitioners should hold insurance which presupposes a risk of liability which can be insured against.

The Government supports the view that homeowners should be able to expect their building to be built in accordance with applicable laws. The plan is that the new rules will ensure that building practitioners owe a common law duty of care to owners’ corporations and subsequent residential homeowners, as well as development clients.

In future, practitioners will be liable for damages arising from a failure to take reasonable steps to prevent reasonably foreseeable risks of damage as a result of defects in the building.

Given recent problems associated with a very small number of buildings and the big move towards more apartment living, the changes being discussed look essential to boosting buyer and industry confidence.