Snapshot
- The Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 imposes greater obligations on developers and introduces significant investigative and enforcement powers for the NSW Government.
- Developers are now obliged to notify the Secretary of the Department of Customer Service of the expected completion date of building work.
- NSW Government has greater power to investigate building work and developers, as well as the power to issue prohibition orders, stop work orders and rectification orders.
The Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (‘the Act’) is the second of a two-punch combination by the NSW Government to address the much-reported NSW building crisis. The purpose of the Act, which follows the Design and Building Practitioners Act 2020, is to prevent developers from carrying out building work that may result in serious defects, or result in significant harm or loss to the public or current or future occupiers of residential apartment buildings. That is, the Act is largely directed at developers and applies to residential apartment buildings (as well as mixed use developments with a residential component).
The Act comes into force on 1 September 2020 and currently applies to both incomplete developments and developments completed within the previous 10 years.
The Act will likely have a significant impact not only on developers and residential apartment owners, but also on third parties such as certifiers.
The definition of developer in the Act is wide ranging and includes, for example, any person who arranges for, facilitates or otherwise causes (directly or indirectly) residential apartment building work to be carried out. It also includes owners of the land on which the building work occurs and principal contractors as defined in the Environmental Planning and Assessment Act 1979 (NSW).
Completion of residential apartment building work
The Act establishes a notification scheme (‘the Scheme’) which requires developers to notify the Secretary of the NSW Department of Customer Service (formally the NSW Department of Finance, Services and Innovation) (‘the Secretary’) as to when building work will be completed. The Scheme is the first of its kind in Australia.
Section 7 of the Act requires developers to notify the Secretary at least six months, but no more than 12 months, before an application for an occupation certificate is made (‘Expected Completion Notice’).
For projects that are expected to be completed within six months, the developer must provide the Secretary with an Expected Completion Notice within 30 days of the commencement of the building work.
Some flexibility has been provided under s 8 which allows for the amendment of the expected date provided to the Secretary should the circumstances of the building work change. That is, a developer is permitted to amend the expected date as long as an ‘Expected Completion Amendment Notice’ is provided to the Secretary within seven days of the developer becoming aware of the change in circumstances that affect the original expected date. A developer may provide the Secretary with more than one Expected Completion Amendment Notice.
Section 8 does not apply if the new expected date is within 60 days of the original expected date specified in the Expected Completion Notice.
Pursuant to s 9 of the Act, the Secretary may prohibit the issue of an occupation certificate in relation to a residential apartment building (‘Prohibition Order’) and, if relevant, the registration of a strata plan in relation to a residential apartment building if:
- the Expected Completion Notice, or the Expected Completion Amendment Notice, was not given or was given less than six months before the application for the occupation certificate was made;
- the Secretary is satisfied that a serious defect in the building exists; or
- any applicable building bond required under s 207 of the Strata Schemes Management Act 2015 has not been provided to the Secretary.
Prohibition Orders will not only affect developers but will also prevent certifiers from issuing occupation certificates in relation to building work the subject of a Prohibition Order. Any occupation certificate issued in contravention of a Prohibition Order is invalid.
In short, developers will be forced to ensure building work is free of serious defects before an occupation certificate is issued.
Under the Act a serious defect is defined as:
‘(a) a defect in a building element that is attributable to a failure to comply with the performance requirements of the Building Code of Australia, the relevant Australian Standards or the relevant approved plans, or
(b) a defect in a building product or building element that is attributable to defective design, defective or faulty workmanship or defective materials, and causes or is likely to cause –
- the inability to inhabit or use the building (or part of the building) for its intended purpose, or
- the destruction of the building or any part of the building, or
- a threat of collapse of the building or any part of the building, or
(c) the use of a building product (within the meaning of the Building Products (Safety) Act 2017) in contravention of that Act.’
Investigations
Under Part 3 of the Act, authorised officers (including the NSW Building Commissioner) have been granted far reaching powers to investigate potential non-compliances for authorised purposes. Authorised purposes are defined as:
(a) investigating, monitoring and enforcing compliance with the following in carrying out building work –
(i) the Act and the regulations,
(ii) the performance requirements of the Building Code of Australia,
(iii) the relevant Australian Standards,
(iv) the relevant approved plans,
(b) investigating whether buildings have serious defects,
(c) obtaining information or records for purposes connected with the administration of the Act, and enforcing, administering or executing the Act.
These powers include the power to:
- obtain information or records (or both) from a person;
- require a person to answer questions;
- enter any premises (although if the premises are used only for residential purposes, permission of the occupier or the authority of a search warrant will be required). Further, while at those premises, the authorised officer has a very broad range of powers as to what he or she can do;
- apply for the issue of a search warrant; and
- take possession of records to be used as evidence.
Pursuant to ss 26 and 27 of the Act, those who obstruct, hinder or interfere with an authorised officer or fail to comply with the direction of an authorised officer may be liable to significant penalties.
Remedial Actions
Another key reform introduced under the Act is the ability of the Secretary to issue stop work orders. Pursuant to s 29 of the Act, the Secretary may order the developer to ensure that the building work stops if the Secretary is of the view that the building work is, or is likely to be, carried out in a manner that could result in significant harm or loss to the public or occupiers or potential occupiers of the building to which the work relates or significant damage to property.
A stop work order can be unconditional or subject to conditions and takes effect on the day of issue or on a later date if such date is specified by the order. The order remains in force until it is revoked by the Secretary, the term of the order ends, or 12 months from the day the order took effect.
Under s 30 of the Act, a developer may appeal a stop work order to the Land and Environment Court within thirty 30 days of a notice of the order being given unless the Court grants leave for it to be made after that time.
Rectification of serious defects
Under s 33 of the Act, if the Secretary has a reasonable belief that building work was or is being carried out in a manner that could result in a serious defect, the Secretary may give an order to a developer in relation to such building work (‘Building Work Rectification Order’) which aims to eliminate, minimise or remediate a serious defect or potential serious defect by compelling the developer to carry out building work or to refrain from such work.
Building Work Rectification Orders can be conditional or unconditional. The Secretary has the power under s 38 to modify such an order, once issued.
The developer does not require consent or approval under the Environmental Planning and Assessment Act 1979 to carry out work in compliance with a requirement of a building work rectification order.
Pursuant to s 42 of the Act, if the Secretary gives a building work rectification order, the Secretary may do anything necessary or convenient to give effect to the terms of the order (including the carrying out of any work required by the order) if the developer to whom the order was given fails to comply with the terms of the order. Further, any expenses incurred by the Secretary may be recovered in any court of competent jurisdiction as a debt due to the Secretary by the person required to comply with the order.
Offences
Section 58 provides that if a body corporate contravenes, whether by act or omission, a provision of the Act or the regulations, each person who is a director of the body corporate, or who is concerned in the management of the body corporate, is taken to have contravened the same provision if the person knowingly authorised or permitted the contravention. Further, such a person may be proceeded against and convicted whether or not the body corporate has been proceeded against or convicted under that provision.
It should also be noted that there are very significant penalties for failing to comply with various provisions of the Act.
Conclusion
The NSW Government has established six specialised work streams, or ‘Pillars’ to reform the building industry in NSW.
The Act and the Design and Building Practitioners Act 2020 are to form part of a better regulatory framework which is the first pillar (or specialised work stream) in the Six Reform Pillars. The other five pillars are the building ratings system, building skills and capabilities, building better procurement methods, building a digital future and building the reputation for quality research.
Each of the pillars will be underpinned by its own working group, made up of professionals with lived knowledge and experience in the subject before them. These Six Reform Pillars will be led by the NSW Building Commissioner to regain public confidence in ‘a new, customer-facing industry by 2025’.
In the context of such obviously ambitious goals, the Act is a good start. The question is, will it be enough? Only time will tell.
To find out more, please see https://lsj.com.au/articles/nsw-government-sets-residential-developers-in-its-sights/