Implications of the new Building and Development Certifiers Regulation 2020 (NSW)

The Building and Development Certifiers Regulation 2020 (NSW) (Regulation) was published in the first week of March 2020 and will come into effect on 1 July 2020. The proposed regulation (which we outlined in a previous edition here) was released for public consultation in late 2019, and the Government indicated that it aimed to publish the regulation in December 2019 to give all stakeholders six months to understand what the changes will mean for them. As it was, the Regulation was published on 4 March 2020, leaving certifiers, builders and other stakeholders affected by the Act and Regulation with only four months to prepare for the changes.

Updates to proposed regulations

There have been a small number of changes from the public consultation draft of the Regulation that was exhibited late last year.

The most substantial change is the introduction of four additional provisions. These provisions are summarised below:

  • under section 61 of the Building and Development Certifiers Act 2018 (NSW) (Act), the Secretary must adopt guidelines relating to the approval of bodies corporate as accreditation authorities. Clause 32 of the Regulation contains additional matters which these guidelines may make provision for, including complaint handling, how the Secretary is to exercise its functions and publication of information about an accreditation scheme
  • Clause 33 prescribes additional grounds for refusing an applicant approval to exercise the functions of an accreditation authority
  • Clause 65 provides that certain regulated work may be carried out if no accredited person is available if in the case of the exercise of the function of an accredited practitioner (fire safety) under the Planning Regulation, the relevant registered certifier or principal certifier certifies in writing that the person is competent, or if the relevant building owner certifies in writing that the person is competent
  • Clause 70 contains an additional savings and transitional clause, relating to exemptions for certain existing conflicts of interest

Key provisions

The Regulation makes provision for (among other things) certifier registration, professional indemnity insurance requirements, conflicts of interest relating to registered certifiers, contracts required for certification work, accreditation authorities, record keeping, the classes of registration for certifiers and the qualifications, experience, skills and knowledge required for registration in a class, a code of conduct for certifiers, continuing professional development for certifiers and offences for which penalty notices may be issued. A handful of these requirements are discussed in further detail below.

A number of the Schedules relate to registration for certifiers. Schedule 2 prescribes the minimum qualifications and experience required to be met by any person seeking a certificate as a registered certifier. Schedule 3 sets out the knowledge and skills requirements for assessing the competence of an individual to carry out the functions of a registered certifier. Schedule 4 prescribes continuing professional development requirements for registered certifiers.

Registered certifiers are required to be indemnified under a professional indemnity insurance policy, with all certification work carried out by the individual being indemnified under a professional indemnity policy complying with the Regulation.

A Code of Conduct for certifiers is included in Schedule 5 of the Regulation, setting the standard of conduct and professionalism exceed from registered certifiers when performing certification functions. A failure to comply with the Code of Conduct carries a maximum penalty of $11,000 for an individual and $22,000 for a body corporate.

Clause 24 of the Regulation provides specific scenarios which would be considered to create a conflict of interest, with clause 25 providing specific scenarios that are exempt from the conflict of interest provision. The scenarios under clause 24 are in addition to conflicts of interest provided for under section 29 of the Act.

Impacts for certifiers

The Regulation will have the biggest impact upon private certifiers.

Private certifiers (as distinct from certifiers who work for councils) are responsible for the lion’s share of the certification work in New South Wales.

The publicly available register lists 1,928 currently registered certifiers. The vast majority of those are individuals in private practice. In the context of the NSW planning system complying development accounts for about one third of all planning approvals. Private certifiers issue about 87 per cent of all complying development certificates. In 2017-18 there were 53,749 construction certificates issued. The majority of those, 32,937, by private certifiers. Similarly, with occupation certificate of the 59,160, some 40,094 were issued by private certifiers.

Since the introduction of private certification in 1998, private certifiers have long been the target of government regulation, driven by a desire to better regulate their conduct. The Regulation is only one of a number of legislative initiatives in recent times designed to do this.

Perhaps the most significant change for private certifiers will be the effect of the new conflict of interest provisions. The new provisions providing the conflict of interest scenarios effectively preclude certifiers from both providing professional services for design of the development or in respect of the development application and acting as the principal certifier.

Providing input into the design and acting as the principal certifier is commonplace in the industry, with certifiers claiming that provision of design advice as part of an application assists them to be sufficiently knowledgeable in respect of the project to then provide the principal certifier service.

Further, while both the Act and Regulation have attempted to address conflicts of interest and accountability, they fail to address the commercial interest issue which arises out of an owner paying directly for regulating their construction work, and developers and builders forming business relationships with private certifiers.

While existing provisions in the Planning Act would already seek to prevent contactors and others who will carry out the building work from appointing the principal certifier, one method of further reducing the potential for conflict might be to remove the right for contractors and developers to select their own certifiers in the context of other appointments.

Impacts for project and building owners

Private certifiers will not have had time to properly factor in what these changes will have on both the price and the scope of the certification services that they are now allowed to offer. It is likely that the changes will lead to a constraint on supply of services, which will likely lead to delays and an increase in costs for private certifier service and potential exposure under existing building contracts for delays in certification not due to the builder’s conduct.

In terms of protecting the interests of building owners, the Act and Regulation intend to ensure (along with other legislative requirements in the Planning Act) that the process for assessment, approval, inspection and certification of buildings in NSW promotes and achieves structural and fire safety requirements, among other things. However, in what appears to be a lost opportunity, there has been no consideration of the need for more critical stage inspections which are currently regulated by the Planning Act.

Impact for builders

The most significant impact for builders, at least initially, is likely to be delays arising from the implementation of the changes in such a short period and any arising constraint on the availability of certifiers. Contractors ought to consider how this is addressed in any contracts they enter into.

Conclusion

Four months will not be long enough for private certifiers to adjust to the new regime, in terms of familiarising themselves with their new obligations and coming to terms with new restrictions on being involved in both the design and as the principal certifiers.

The introduction of the Act and Regulation from 1 July 2020, combined with the commencement of the new Part 6 (building and subdivision certification provisions) in the Planning Act which took effect from 1 December 2019.

Those changes combined with the uncertainty caused by the stalling of the proposed Design and Building Practitioners Bill 2019 in the Legislative Council, a further crackdown on private certifiers by Fair Trading and continuing difficulties obtaining professional indemnity insurance all mean that the construction industry is likely to see further disruption in the supply of private certification services until everyone has had an opportunity to adjust to the new normal.

Authors: Helena Golovanoff, Peter Holt & Rebecca Weakley

In the media

Builders call for coronavirus action Australian Construction Industry Forum (ACIF) says efforts are needed to ensure that the threat to building projects is mitigated to the greatest possible extent (05 March 2020). More...

Housing downturn weighs on growth in GDP Confirming expectations, figures released by the ABS show that declines in residential building detracted 0.2 percentage points from overall GDP growth. New home building activity fell by 4.1 per cent in the final quarter of 2019 while home renovation activity declined by 2.2 per cent (04 March 2020). More...

Australia’s Construction Sector Must Restore Trust As 2020 begins, the general lack of confidence in the building and construction sector lingers from previous years. That there is a persistent crisis of confidence in the sector is not in dispute but what has been hotly debated is the reason why and what to do about it (02 March 2020). More...

RICS: New governance to deliver confidence for the future A new Governing Council is announced, and RICS welcomes the new professionals who have been elected with record turnout across 12 regions globally. The governance modernisation has also established a new Standards and Regulation Board, with its Chair and the majority of its members being independent from the profession to provider greater confidence in our assurance regime (02 March 2020). More...

Construction work falls in December Construction work done across Australia fell by three per cent in the December quarter, underlining a weak end to a shaky year for the sector as bushfires raged. Westpac senior economist Andrew Hanlan said it was a sharper fall than expected after consensus for a one per cent drop (28 February 2020). More...

Proposal to set minimum prices on welding equipment raises competition concerns The ACCC plans to revoke a resale price maintenance (RPM) notification lodged by welding equipment manufacturer Weldclass, which wanted to prevent retailers from selling welding and plasma cutting machines at a discounted price (28 February 2020). More...

Coronavirus to weigh on Q1 construction activity, despite recent pick-up International construction activity picked-up in the last quarter of 2019, according to the latest findings of RICS’ series of international Infrastructure and Construction Surveys. However, rising costs remain a drag on the sector, and the impact of the Coronavirus could hamper short-term output (26 February 2020). More...

NSW builders' comp review targets insurers A special review of the New South Wales Home Building Compensation Fund has included in its final terms of reference an investigation into insurers' participation in the loss-making scheme (02 March 2020). More...

City of Sydney grant funding for better performing buildings The City of Sydney has opened applications for the first round of environmental performance grants. For sectors where they are not mandatory, the City has funded ratings and certifications such as NABERS, Green Star Performance and EarthCheck Certification (26 February 2020). More...

Supporting the tradies of the future Premier Gladys Berejiklian has announced a Review of the system to be led by Mr David Gonski AC and Professor Peter Shergold AC. The Review will report to the NSW Government by July 2020 (25 February 2020). More...

Council raids home owners piggy bank Home owners money paid to fund local infrastructure should not be used as a slush fund by local government, says the Housing Industry Association. News that levies applied to new home buyers in the Lake Macquarie Council area have been used to ‘prop-up’ other local government spending is extremely concerning (21 February 2020). More...

Published - articles, papers, reports

Australia Bureau of Statistics 03/03/2020 Building Approvals, Australia, Jan 2020 (cat no. 8731.0)

Practice and courts

MBA: Registration is open for the 2020 NCC Seminars Registrations for the 2020 NCC Seminars are now open. A webcast of the seminar will be available from May 2020. More...

ABCC e-alert: Australian Government releases Building Code discussion paper The Australian Government released the Code Discussion Paper for the Code for the Tendering and Performance of Building Works 2016. The Attorney-General’s Department is inviting written submissions on the Code’s operation and potential areas where it could be strengthened to ensure it remains fit for purpose. Submissions can be made to the Attorney-General’s Department. The closing date for submissions is 3 April 2020. More...

New NatHERS certificate to be rolled out by 30 April 2020 A new NatHERS certificate will soon come into use as software tools transition to Chenath Engine version 3.21. The new NatHERS certificate has been developed after significant consultation with industry users and will replace the previous “universal certificate” for all new assessments from 1 May 2020. More...

Green Building Council of Australia (GBCA) draft credits GBCA have introduced eight categories to more accessibly define a building’s sustainability. Within these categories there are a number of draft credits that all buildings seeking a Green Star rating are expected to comply with: these are proposed as new Minimum Expectations for every Green Star rated building. More...

RICS UN backed global standard RICS is chairing the development of the International Fire Safety Standard and it follows previous RICS work to bring consistency to the standards people can expect globally across property, construction and valuation. The International Fire Safety Standards will be open for global consultation until 23 March with the final international standard to be published later in 2020.

RICS Building Confidence Conference 2020 The Building Confidence Conference is RICS' flagship event that puts a spotlight on the role of Chartered Surveyors, engineers, architects and contractors in the built environment, will be held in Sydney, August 2020. More...

ABCB: Registration is open for the 2020 NCC Seminars! During March and April the ABCB will be presenting in a capital city near you (2020). More...

NABERS Reminder: Auditors, Supervisors, and Trainers Panel Announced Congratulations to the new Panel Selection for NABERS Auditors, Supervisors, and Trainers, for October 2019-October 2022. Find the full list here.

Cases

Merrick v Zhu & Ye [2020] NSWCATAP 35APPEALS---notice of hearing – procedural fairness Mr Merrick, the appellant, who is involved in the building industry, appeals from a decision made in his absence on 13 August 2019 ordering him to pay $10,000.00 to the respondents.

Hunter Prestige Childcare Pty Ltd v Ball [2020] NSWCATAP 33BUILDING AND CONSTRUCTION – contract – breach - consent orders – non-compliance with consent orders – assessment of damages. Civil and Administrative Tribunal Act 2013 (NSW), s 80(2)(b), Sch 4 cl 8(1) and (2).

Omaya Investments Pty Limited v Dean Street Holdings Pty Limited (No 5) [2020] NSWLEC 9ENVIRONMENT AND PLANNING – construction of development consents and construction certificates – development without development consent – scope and purpose of statutory regime – over excavation of subject site – validity of construction certificates – whether construction certificate was validly modified – whether development was carried out otherwise than in accordance with the construction certificate – development without consent – public notification of voluntary planning agreement – occupation certificates – discretion and relief.

Roude v Helwani(1) The appeal is dismissed. APPEAL – Local Court Act s 39 – Defendant carried out plumbing and electrical works on plaintiffs’ property under oral contract – Defendant successful in Local Court claim in quantum meruit – Whether there was no evidence of the fair and reasonable cost of the works – Where the builder’s invoices were the only evidence of the cost of the works – Appeal dismissed Evidence Act 1995 (NSW), s 138; Home Building Act 1989 (NSW), s 3.

Mistrina Pty Ltd v Australian Consulting Engineers Pty Ltd [2020] NSWSC 130CONSUMER LAW – Trade Practices Act 1974 (Cth) – ss 51(1), 82(1) – misleading and deceptive conduct – defendant structural engineer issued a certificate as to structural soundness of a proposed building which certificate was misleading or deceptive or likely to mislead or deceive – plaintiffs claim damages said to have been caused by this conduct because, after the project was delayed to remedy faulty construction undertaken by the builder in reliance on the certificate, a bank, which had lent them money, appointed receivers and sold their land – necessity for plaintiffs to prove, on the balance of probabilities, that the conduct complained of caused them loss – necessity for the plaintiff to prove that the conduct complained of was a material part of the bank’s motivation – plaintiffs fail to bring evidence of the bank’s motivation – plaintiffs failed to establish that the conduct complained of played any, or any sufficient, role in causing the bank to act – HELD: proceedings dismissed.

Sleiman t/as Perfect Kitchens v Dempsey [2020] NSWCATAP 26(1) Appeal allowed. BUILDING AND CONSTRUCTION – Contract – damages for breach of contract Civil and Administrative Tribunal Act 2013 (NSW); Civil and Administrative Tribunal Rules 2014 (NSW) Home Building Act 1989 (NSW).

Williams v Blacktown City Council [2020] NSWLEC 1080BUILDING INFORMATION CERTIFICATE – conciliation conference – agreement between the parties – orders

Legislation

Proclamations commencing Acts Building and Development Certifiers Act 2018 No 63 (2020-77) — published LW 4 March 2020

Regulations and other miscellaneous instruments Building and Development Certifiers Regulation 2020 (2020-78) — published LW 4 March 2020 Environmental Planning and Assessment Amendment (Planning for Bush Fire Protection) Regulation 2020 (2020-64) — published LW 28 February 2020

Bills introduced Government – 04 March 2020 Better Regulation and Customer Service Legislation Amendment (Bushfire Relief) Bill 2020 Better Regulation Legislation Amendment Bill 2020

Proclamations commencing Acts - Reminder Better Regulation Legislation Amendment Act 2019 No 23 (2019-623) — published LW 16 December 2019 Schedule 1 amends the following Acts—(a)Building and Construction Industry Security of Payment Act 1999 No 46,(b)Building and Development Certifiers Act 2018 No 63,(c)Building Professionals Act 2005 No 115, Reminder: Proclamation, appoint 23 March 2020 as the day on which Schedule 1.8[3] and [4] to that Act commence. Regulations and other miscellaneous instruments