Obligations of designers, builders and engineers in NSW are now confirmed under new Regulation

The Regulation

Broadly, the objectives of the Regulation are to set and maintain professional standards for builders, designers and engineers who are involved in the design and construction of class 2 buildings or buildings containing a class 2 part (including residential or mixed used retail and apartment buildings (higher than 1 level)).

The Regulation prescribes (amongst other things):

• a procedure for registration of practitioners;
• the form and content of compliance declarations;
• insurances required to be held by registered practitioners;
• matters required to be included on a register;
• the classes of registration for practitioners and the qualifications, knowledge and skills required for registration in a class of practitioner;
• continuing professional development requirements for registered practitioners;
• a code of practice for registered practitioners;
• requirements to keep records; and
• offences for which penalty notices may be issued.

Below, we discuss some of the key reforms and the implications for designers, builders and engineers on existing and future projects.

Click here for a flow chart outlining, broadly, the registration and insurance requirements for practitioners under the Act and Regulation, and a timeline for the compliance declaration lodgements.

What “building work” does the Act and Regulation apply to?

The Regulations provide that for the purposes of section 4(1) of the Act, the type of building which will fall under the definition of “building work” is a class 2 building (essentially residential units) or a building which has a class 2 part. This would include mixed use residential and commercial buildings (for example, high rise residential apartments with retail spaces included within the building). A class 2 building does not include single dwelling houses, terraces, duplexes, guest houses or hostels (with a floor area less than 300m2) such that the requirements of the Regulation and the Act (save for the duty of care provisions – see below) including training, registration, insurance and compliance declaration requirements do not apply to these less risky developments.

For the purpose of the statutory duty of care regime in Part 4 of the Act, “building work” has a different definition in s36(1): “Building work includes residential building work within the meaning of the Home Building Act 1989”. As a result, the duty of care provisions in Part 4 extend beyond class 2 buildings to also apply to single dwelling homes and other residential building work under the Home Building Act. This more expansive definition is limited to Part 4 of the Act; the more onerous requirements in other parts of the Act and the Regulation (training, registration, insurance, compliance declaration requirements and the like) will not apply to residential buildings which are not class 2, such as a single dwelling home. The Regulation does not prescribe any further categories of “construction work” for the purpose of s36(5) of the Act to which the duty of care extends, nor does it exclude any categories. The use of different definitions of “building work” in s4(1) and s36(1) of the Act and the use of the word “includes” in s36(1) leave room for uncertainty about the application of the statutory duty of care and whether it could extend to purely commercial buildings with no residential component (which are not subject to the remainder of the Act and Regulation).

The compliance declaration scheme

The Regulation provides further detail on the lodgement requirements for regulated designs and compliance declarations which must be lodged by the building practitioner (or the principal design practitioner authorised on its behalf) at four specific stages of a project before an occupation certificate can be issued.

The four lodgement points are:

• Lodgement point 1 – a building practitioner must provide a complete set of construction issued regulated designs and design compliance declarations before building work is commenced;
• Lodgement point 2 – for each variation to a regulated design, the registered building practitioner must lodge varied regulated designs and design compliance declarations no later than one day after the variation is commenced;
• Lodgement point 3 – the building practitioner must lodge a building compliance declaration, contractor document, variation statements and other required documents with the owner and on the NSW planning portal before applying for an occupancy certificate; and
• Lodgement point 4 – the building practitioner must within 90 days after the occupancy certificate is issued lodge each regulated design for which a design compliance declaration has been provided that reflects the building work that was carried out and any other documents (including designs) that relate to the building work.

The “lodgement point 2” requirements will not apply in relation to minor variations that do not impact any building elements or performance solutions (and therefore do not vary a regulated design). However, building practitioners must still ensure that details of other variations are recorded in accordance with the requirements set out in the Regulation, which include explaining how the variation meets the requirements of the Building Code of Australia (BCA).

The above documentation can only be provided to the Secretary by a registered design practitioner, registered principal design practitioner or registered building practitioner. The registration requirements are discussed next.

Registration requirements

The registration requirements are provided under 2 registration schemes:

• the registration of design practitioners, principal design practitioners and building practitioners to provide compliance declarations; and
• the registration of professional engineers to perform professional engineering work.

The Regulation sets out the classes of registration for each type of practitioner and professional engineer, the type of work that is authorised for each class of registration, and the required qualifications, experience, knowledge and skills for each class of registration. For example, in the class of “building practitioner – general”, the practitioner must be the holder of an endorsed contractor licence authorising the holder to carry out general building work under the Home Building Act 1989 (NSW), must have 5 years recent relevant practical experience, and must have certain knowledge and skills including an understanding of the Act and the Regulation and requirements of the BCA.

The Secretary has discretion under clause 33 of the Regulation to refuse to register a person seeking registration based on a number of grounds including, for example, that:

• the person is not a fit and proper person to carry out the work; or
• the applicant has failed to provide the requested information (within a reasonable time) to the Secretary which is necessary to determine the application.

Given the limited periods of registration (1, 3 or 5 years), the Regulation sets out requirements for the “restoration of registration” which must be applied for within 3 months after the expiry of the registration, or within a further period determined by the Secretary on the application of the person seeking restoration of the registration.

Some professions will not need registration, because they do not typically prepare regulated designs for class 2 buildings (for example, landscape architects, land surveyors and environmental engineers).

Notably, the Regulation now specifically excludes body corporates from being a registered professional engineer; this is a new addition from the draft Regulation circulated for public consultation. Body corporates in the design practitioner, principal design practitioner and building practitioner classes of registration have their own specific classes of registration under the Regulation; body corporates who carry out design practitioner work will need body corporate registration and their individual employees who carry out the work requiring registration (for example preparing regulated designs or providing compliance declarations) will also need to be registered. Body corporates who carry out building practitioner work will need body corporate registration and will also need to have a registered nominee.

The Regulation provides for a transitional period from 1 July 2021 to 31 December 2021 during which applicants can apply for a “deemed registration” which will not go through the normal assessment process, but which can be cancelled by the Secretary.

Insurance requirements

• Insurance for designers and engineers – From 1 July 2023, registered design practitioners, principal design practitioners and professional engineers will be required to be indemnified under a professional indemnity insurance policy (or in the case of professional engineers they may instead be part of certain approved arrangements). The policy must, in the reasonable opinion of the practitioner or engineer, provide for an adequate level of indemnity for liability that could be incurred in the course of their work. This leaves the practitioner or engineer to determine the appropriate level of insurance, although they are required to take into account specified matters when forming their opinion. In practice, practitioners and engineers will need to take out sufficient cover to comply with requirements specified in their consultancy agreements. The insurance policies must extend retrospectively to all liability incurred at any time since the practitioner or engineer first became a design practitioner, principal design practitioner or engineer.
• Insurance for building practitioners – From 1 July 2023, registered building practitioners will also be required to be indemnified under an insurance policy that, in the reasonable opinion of the practitioner, provides for an adequate level of indemnity for liability that could be incurred in the course of their work. As with designers and engineers, this leaves the builder to determine the appropriate level of insurance, but the builder is required to take into account specified matters, and the insurance requirements in construction contracts will also impact the amount of cover.

Other points of interest in the Regulation

• Types of engineering impacted by the reforms – The Regulation prescribes geotechnical engineering as an additional area of engineering to which the registration and insurance requirements for professional engineering work in the Act will apply. This is in addition to other engineering disciplines already identified in the Act (structural engineering, civil engineering, mechanical engineering, fire safety engineering, and electrical engineering). However, the Regulation also provides that engineering work is not “professional engineering work” for the purpose of the Act unless it is carried out for the purpose of designing or constructing a class 2 building or a building that contains a class 2 part. Therefore geotechnical engineering work involving, for example, a trench or a retaining wall not part of a Class 2 building will not be subject to the requirements of the Act or the Regulation.
• Additional notification requirements for building practitioners – The Regulation provides additional notification and documentation requirements for building practitioners in Part 3, Division 3 – including an obligation to give 14 days prior notice to the principal design practitioner of the proposed building work commencement date and 14 days prior notice before making a building compliance declaration.
• Continuing professional development (CPD) – The Regulation requires practitioners and engineers to satisfy certain CPD requirements annually.
• Code of practice – The Regulation includes a code of practice (at Schedule 4) which practitioners and engineers will be required to comply with.
• Penalty offences - The Regulation sets out penalty notice offences to enable enforcement of offence provisions in the Act by the issue of penalty notices.

When does the new regime take effect?

1 July 2021 is the critical date. Schedule 6 of the Regulation provides amendments to the transitional provisions in Schedule 1 of the Act.

In relation to regulated building work already commenced but not completed by 1 July 2021:

• the compliance declarations and registration requirements under the Act and Regulation will not apply;
• however the building practitioner is still required to provide copies of all designs relied on to carry out the regulated building work to the Secretary in the approved way and before an application is made for an occupation certificate.

In relation to regulated building work commencing after 30 June 2021 and before 1 July 2022:

• where the design was prepared before 1 July 2021; and
• the person who prepared the design is not eligible to be registered after 30 June 2021 in a class that would permit the person to provide a design compliance declaration for the design,

then the design is taken to be a regulated design for which a design compliance declaration has been given if a registered design practitioner (a) assesses whether or not the design complies with the requirements of the Building Code of Australia, and (b) issues a certificate in an approved form that the design does comply with the requirements.

This update is not intended to cover all aspects of the Regulation. For further information please contact our team below.

Link to the Regulation

Link to the Act

Link to our previous update on the statutory duty of care in the construction industry