Building contractors face reforms in New South Wales

The proposals have been put forward at a time when Sydney's newspapers are filled with tales of woe on apartment construction projects like the Opal Tower and Mascot Towers. They also follow a scathing 2018 reportwhich found that there was poor clarity on the accountabilities of contractors in construction projects in NSW, inconsistent licensing and accreditation requirements, and inadequate controls on the accuracy of building documentation – all of which have contributed to the pressure on the NSW government to act.

In response, the NSW government has released the 'Building Stronger Foundations' discussion paper for consultation, which calls for four areas of reform: 

Statutory declaration of regulatory compliance from building designers

Under the proposed reforms, building designers would be required to declare that:

• their building plans, specifications and performance solutions comply with the Building Code of Australia (BCA) and other relevant building regulations; and
• the buildings are built according to the declared plans

New registration scheme for designers

The NSW government is proposing that building designers will only be allowed to sign-off plans and declare compliance with the BCA if they are registered under a new scheme. Building designers would be subject to new checks to confirm that they:

• have the necessary skills, qualifications, knowledge or experience
• are 'fit and proper' to carry out designing work
• are paying a registration fee and any other regulatory charges
• have appropriate insurance to protect themselves and their customers where a loss results from negligence or a breach of duty

The NSW government is also considering whether currently unregulated professionals such as commercial designers should be subject to the registration scheme.

Statutory duty of care owed by building practitioners

The reforms include a proposal to impose on building practitioners a statutory duty of care that will be owed to homeowners, owners' corporations, subsequent titleholders, small businesses and unsophisticated development clients. Damages for a breach of this duty would be calculated according to the legislation.

By introducing a duty of care, claimants such as homeowners would no longer need to prove that the building practitioner owed a duty of care to them, as this would be automatically imposed by the new law. The reforms could well increase the risk of a building practitioner and its insurer as the proposed legislation makes it easier for subsequent property owners and other vulnerable parties to pursue legal action for defect claims.

Appointment of a Building Commissioner to regulate the NSW construction industry

If passed into law, a Building Commissioner would act as the consolidated regulator for the construction industry, with compliance powers including the right to investigate and enforce disciplinary action against building practitioners. Disciplinary action could include the suspension or cancellation of a building designer's registration. The overarching goal of the proposed reforms is to ensure that each building practitioner is accountable for their portion of work.

The third and fourth proposed reforms would apply to the broader category of 'building practitioners', which captures building designers as well as professionals involved in the construction and maintenance of buildings.

While the issues these reforms are trying to address are very important, it remains to be seen whether the legislation will strike the right balance between compliance and the impact on productivity and pricing in a sector that is already experiencing strong inflationary pressures. 

The NSW government is accepting feedback until 24 July 2019 and will introduce legislation by the end of the year to implement the proposed reforms.

Adam Perl is an infrastructure and construction law expert at Pinsent Masons, the law firm behind Out-Law.