What’s next in NSW building reform? Key messages of the Final Report on regulation of building standards, building quality and building disputes

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By Scott Higgins, Partner, Kashi Mogensen, Lawyer, and Simon Bedak, Paralegal

On 30 April 2020, the Public Accountability Committee of the NSW Legislative Council tabled its Final Report for the inquiry into regulation of building standards, building quality and building disputes.

The Final Report expands on the more general recommendations contained in the Committee’s First Report (tabled in November 2019), urging the Government to adopt a range of specific policy solutions to issues addressed in nearly 600 public submissions and questionnaire responses, and 6 public hearings.

Of the Report’s 22 recommendations, the most notable address the following key policy objectives:

  1. Effectively managing and reducing flammable cladding;
  2. Assessing the adequacy of private certification and considering whether local governments should take over;
  3. Establishing the Building Commissioner’s powers; and
  4. Addressing the financial and administrative difficulties faced by strata homeowners and strata committees in rectifying defects in common property.

It remains to be seen whether any of the recommendations will be taken up by the Government, but the report nonetheless signals where political energies will be focused in 2020 with respect to building reform in NSW.

1. Effectively managing and reducing flammable cladding

While the First Report simply called for a ‘more centralised approach to the issue of flammable cladding’, the Final Report lays down a comprehensive framework for facilitating prompt and pragmatic rectification of flammable cladding and promoting transparency in the property market.

Among the 9 recommendations dedicated to this issue, the Report advises the Government to:

  • provide a substantial funding package for cladding rectification works, and channel further resources to Fire and Rescue NSW to improve the response to cladding emergencies;
  • prioritise remediation of buildings designed for public use (such as hospitals, hotels, shopping centres, and hospitals);
  • publish specific criteria to guide classification of the level of risk attendant on a building’s cladding, and urgently establish an expert panel, modelled on the Victorian system, to provide free advice to homeowners on assessing risk and devising rectification plans; and
  • require owners, landlords and real estate agents to disclose to prospective buyers and tenants the existence of flammable cladding and status of rectification measures.

2. Assessing the adequacy of private certification and considering whether local governments should take over

Based on its conclusion that self-regulation of the industry is clearly not working, the Committee both presents a series of ‘fixes’ to the current system and considers whether local governments should once against assume responsibility for certification.

Two key changes proposed in the Report involve amending the Environmental Planning and Assessment Act 1979 by:

  • expanding the number and scope of inspections required to be undertaken by accredited certifiers under the Act’s mandatory critical stage inspection regime; and
  • inserting a requirement for a further inspection 2 years after development consent is granted to verify that the building has been constructed in accordance with approved plans.

The question of whether building certification should revert to local councils will be examined in detail in a targeted inquiry into public control of certification in late 2020.

3. Establishing the Building Commissioner’s powers

Following the First Report’s call for the Building Commissioner to finalise his ‘work plan’ to inform the conferral of powers and resources on his office, the Final Report advises the Government to introduce and debate a ‘powers Bill’ when it next convenes to put the Building Commissioner to work.

In the Report the Committee expresses dissatisfaction with the proposed provisions of the Design and Building Practitioners Bill 2019, being the more general reform vehicle within which the Report recommends the Building Commissioner’s ‘powers Bill’ be packaged.

The Design and Building Practitioner’s Bill 2019 remains in limbo after being declared urgent in November only to be interrupted and delayed until the resumption of Parliament in 2020.[1]

In considering the structure of the Building Commissioner’s role, the Committee urges the Government to implement the First Report’s recommendation that a fully resourced, independent Building Commission be established to oversee regulation of the industry.

As to the scope of the Building Commissioner’s powers, the Final Report recommends tasking the Building Commissioner with:

  • overseeing all licensing inspections conducted in the Building Commission (once created), and hiring more specialised inspectors;
  • leading the response to flammable cladding, with the assistance of a proposed cladding division within the Commission; and
  • devising and implementing strategies to strengthen industry ties with the Government, supported by a proposed statutory advisory committee within the Commission.

It is worth noting the introduction of the Residential Apartment Buildings (Compliance and Enforcement Powers) Bill 2020 into Parliament at the end of February by Minister Anderson.

This new Bill, the text of which is not publicly available, is simply described as “An Act with respect to compliance with, and the enforcement of, certain building and construction legislation and codes; and for other purposes”.

It may indeed be that the drafters of this new Bill are presently considering some of the Final Report’s recommendations and will look to use the Bill as an alternative vehicle for confirming the powers of the Building Commissioner.

4. Addressing the financial and administrative difficulties faced by strata homeowners and strata committees in rectifying defects in common property

In addition to determining the Building Commissioner’s powers and support structure within the proposed Building Commission, the Report recommends the appointment of a Strata Commissioner, also to sit within the Commission. The broad purpose of the Strata Commissioner would be to assist strata committees affected by building defects, disputes and flammable cladding.

Drawing on recent cases such as the high-profile cracking debacles of Mascot Towers and Opal Tower, the Report maps out a series of preliminary steps to increase support for strata committees and homeowners who are typically ‘left in the lurch’ in difficult circumstances.

In summary, the Report recommends that the Government:

  • direct the Strata Commissioner, on appointment, to prepare a proposal on the responsibilities of the office, which may include the provision of training to strata committees (to rectify building issues and handle disputes) and the appointment of the initial strata manager of a building;
  • initiate a review of the NCAT dispute resolution process in respect of strata building disputes to ascertain whether it has sufficiently robust enforcement powers; and
  • explore financial assistance options for homeowners experiencing the ‘extreme financial cost … [and] emotional toll’ of rectifying major building defects but who are ineligible for relief under statutory schemes.

Both the First and Final Reports and other inquiry documents (such as written submissions and hearing transcripts) are available at the Committee’s website: www.parliament.nsw.gov.au/publicaccountability.

It remains to be seen how the Government will respond, however, it is clear that the Design and Building Practitioners Bill 2019 won’t go far enough and political and public pressures are likely to mount for more substantial reform, as are calls for the introduction of a well-resourced and powerful building regulator.

[1] For a discussion on the Design and Building Practitioners Bill 2019 see our previous article here: https://www.millsoakley.com.au/thinking/the-release-of-the-draft-design-and-building-practitioners-bill-2019-parliament-to-pass-new-laws-on-building-design-by-november-2019/

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