New South Wales leads the way with the introduction of new powers against developers in the residential apartment sector

The NSW Parliament has swiftly passed the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) (Act). The Act was assented to on 10 June 2020 and will commence on 1 September 2020. Significantly, the reforms in the Act will have retrospective effect, meaning they have potential application to existing residential apartment building work that has not been completed or has been completed within 10 years before the exercise of a function under the Act.

The Act is part of several reforms that the NSW Government is progressing in an attempt to improve the quality of construction and to improve consumer protections in the residential building space. The Act is principally aimed at equipping the NSW Building Commissioner with a suite of comprehensive powers to protect consumers against non-compliant developers and serious defects identified in residential buildings in New South Wales. For the purposes of the Act, a “developer” is defined broadly to include:

1. a person who contracted or arranged for, or facilitated or otherwise caused, the building work to be carried out;
2. the owner of land on which building work is being carried out at the time the building work is carried out;
3. the principal contractor for the building work within the meaning of the Environmental Planning and Assessment Act 1979 (NSW);
4. the developer of a strata scheme within the meaning of the Strata Schemes Management Act 2015 (NSW); and
5. any other person prescribed by the supporting regulations (not yet enacted at the time of writing).

The aims are sought to be achieved under the Act through the introduction of several key reforms to protect against serious defects identified in residential buildings, including:

• enabling the Secretary of the Department of Customer Service (Secretary) to make a “prohibition order” prohibiting the issue of an occupation certificate in relation to a residential apartment building and the registration of a strata plan in certain circumstances. This includes a failure to provide an expected completion notice or expected completion amendment notice within time (see below), if the Secretary is satisfied that a “serious defect”¹ exists in the building or if a building bond required under the Strata Schemes Management Act 2015 (NSW) has not been given to the Secretary;
• empowering the Secretary to issue an order to the developer to stop building work if the Secretary is of the opinion 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 relevant building or significant damage to property; and
• enabling the Secretary to make a “building work rectification order” to a developer, if the Secretary reasonably believes that building work was or is being carried out in a manner that could result in a “serious defect”. Such an order requires the developer to carry out building work or refrain from carrying out building work to eliminate, minimise or remediate the serious defect or potential serious defect. This is significant as these powers can be used up to 10 years after an occupation certificate is issued. If a developer fails to comply with a building product rectification order, the Secretary can do anything necessary or convenient to give effect to the terms of the order, and any expenses incurred and associated costs can be recovered by the Secretary as a debt due in an appropriate court against the developer.

To support the powers described above, the following complementary reforms have also been introduced by the Act:

• developers will be required to give the Secretary at least 6 months, but not more than 12 months, prior notice of a proposed application for an occupation certificate by way of an “expected completion notice” and if the date changes, notification of the new date via an “expected completion amendment notice”. This will allow for the Secretary to have early access and oversight of the relevant works and assist in the early detection and rectification of serious defects in a building;
• providing the Secretary and (by delegation) the NSW Building Commissioner and other authorised officers under Division 2 of Part 3 with broad investigation powers which can be exercised to determine whether building work is compliant and to detect whether serious defects exist in a particular building; and
• the creation of an offences regime in Part 6 of the Act for any contraventions of the Act (which includes personal liability offences).

Critically, the reforms in the Act apply to “building work”²  in respect of a class 2 building (being residential apartment buildings), and also mixed use buildings containing a class 2 component.

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