Posted on June 17, 2020 by James Fan and Carlo Zoppo

New laws to prevent serious defects in residential apartment buildings

The Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 passed both houses of the NSW Parliament last week.

The Act applies to building works to a residential apartment building that  are authorised to commence in accordance with a construction certificate or a complying development certificate issued under the Environmental Planning and Assessment Act 1979 (EPA Act) or building works that are completed within 10 years before any action is taken under the Act.

In the days preceding the introduction of the bill, the Minister for Better Regulation, said that these measures were being put in place to give confidence to the construction and property sector following high profile cases of serious building defects.

The legislation will come into force on 1 September 2020.

We summarise the key aspects of the legislation below.

Notification

The new legislation brings in a system of notification to the Secretary of the Department of Customer Service (Secretary) by developers.

A developer is required to lodge an “expected completion notice” to the Secretary between 6 and 12 months prior to applying for an Occupation Certificate (OC).  The expected completion notice is required to set out the date which the developer expects to make an application for an OC.

An application cannot be made for the OC unless such a notification has been made. A person who does so commits an offence.

The Secretary of the Department may make an order prohibiting the issue of an OC for a residential apartment building if:

  • the developer has not lodged an expected completion notice or has given such a notice less than 6 months before an application for OC;
  • the Secretary is satisfied that a serious defect in the building exists;
  • the developer has not paid a bond for rectifying defective building work under s 207 of the Strata Schemes Management Act 2015.

An OC issued contrary to a prohibition order is invalid. A private certifier who issues an OC contrary to a prohibition order commits an offence.

New enforcement powers

The investigation powers provided by the Act replicate those in Division 9.2 of the EPA Act. This includes the power to issue notices requiring information and records.

While an authorised officer is empowered to enter land in certain circumstances, that power does not extend to premises that are only used for residential purposes.  An authorised officer may however enter common property of a strata scheme without permission or a search warrant.

An authorised officer can open up, cut open or demolish building work, if the authorised officer has reasonable grounds for believing that it is necessary to do so because it is connected with an offence against the Act or the regulations, or  a serious defect in a building

An owner or occupier of premises may be required  to provide reasonable assistance to an authorised officer in the exercise of duties under the Act.

An authorised officer has the power to direct a developer, where building works are being carried out to:

  • carry out building work at a specified time or in a specified manner to enable the authorised officer to exercise a further function under the Act for an authorised purpose,
  • carry out specified building work only after giving the authorised officer notice in advance (as specified in the direction).

Failure to comply with a direction of, or obstructing, an authorised officer exercising a function under the new legislation is a criminal offence.

The Secretary may also issue a stop work order if building works are carried out in a way that could result in significant harm or loss to the public or occupiers or potential occupiers.

Rectification

The principal aspect of the new legislation is a power to issue a “building work rectification order” to “eliminate, minimise or remediate a serious defect or a potentially serious defect” if the Secretary has a “reasonable belief that building work was or is being carried out in a manner than could result in a serious defect“.

The definition of “serious defect” includes:

  • a defect attributable to a failure to comply with requirements of the Building Code of Australia;
  • a defect likely to deny habitability or use of the building (or part of the building) for its intended purpose;
  • a defect in a building that will cause or be likely to cause:
    • 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,
  • the use of banned building products.

As noted in the introduction, the power to take action may occur 10 years after works were completed.

An appeal lies to the Land and Environment Court against the issue of prohibition, stop work and building work rectification orders

Role for councils

Authorised officers are appointed by the Secretary. They may be drawn from employees of the Department, investigators under the Fair Trading Act 1987 or council investigation officers.

Council officers have, in the majority of cases, a limited role in investigating building defects unless there is a breach of the EPA Act.

Therefore, council officers appointed as authorised officers, particularly building surveyors and compliance officers, are likely to be given limited responsibilities in addition to their existing roles.

Further, given that the power to issue prohibition, stop work and building rectification orders rests with the Secretary, it is likely that the primary responsibility to investigate potential building defects rests with the Department and its employees.

The obligations set out in section 7 relate to the making or permitting of making an application for an OC by the developer of a residential apartment.  It would be prudent for Council, when acting as the principal certifying authority, to seek confirmation that a notification as required under the Act has been made prior to considering any such application.

The Act can be found here.

If you wish to discuss the topics raised in this article, please contact Carlo Zoppo, Partner on 8235 9705, or James Fan, Senior Associate on 8235 9706.