NSW building owners might soon be issued with rectification orders to redress the risks posed by combustible cladding and other external finishes, with the NSW Government considering a ban on them. If you are the owner of a potentially affected property you should consider making a submission by 23 April 2018.

New powers to regulate unsafe building products

The Building Products (Safety) Act 2017 (NSW) came into effect on 18 December 2017 and has, as its aim, the elimination of unsafe building products in the construction industry. It authorises the NSW Commissioner of Fair Trading to issue bans in respect of certain products (a "building products use ban") if the Commissioner is satisfied "on reasonable grounds" that the use of that product is "unsafe".

Enforcement authorities are given extensive powers to investigate, assess and order the rectification of buildings in which banned products are present. In addition, heavy penalties of up to $1.1m apply to any person or corporation who uses banned products in a building or represents that such products are suitable for use.

The building products and uses which might now be banned

Before issuing a "building products use ban" the Commissioner may call for public submissions as to whether a particular product ought to be the subject of a ban. This has now occurred, with the Commissioner seeking submissions by 23 April 2018 as to whether a "building product use ban" is warranted on the use of:

  • aluminium composite panels (in particular panels containing a polyethylene core);
  • polystyrene products; and/or
  • other similar substances,

in "any external cladding, external wall, external insulation, façade or rendered finish on a building of 2 or more storeys" and, if warranted, what the "terms" of the ban should be.

In particular, submissions are sought as to whether a ban should:

  • apply to all uses of aluminium composite panels containing a polyethylene core, and/or polystyrene products, and/or other similar substances in a building or only to specific uses (and, if so, what uses);
  • apply to all buildings or only to specified classes of buildings (and, if so, what classes);
  • apply to use by all people or permit use by specified persons or classes of persons (and, if so, what persons or classes);
  • apply subject to specified exceptions (and, if so, what exceptions ‒ for example, an exception that permits use of the building product only after a specified test or tests have been conducted and a test report or reports provided to the Commissioner); or
  • be subject to conditions (and, if so, what conditions).

How this will affect building owners in NSW

If you are the owner of a building of two or more storeys in NSW and a product the subject of a "building product use ban" is present in that building, you will be at risk of being issued with a "building product rectification order", which would require you to do such things as are necessary to:

  • eliminate or minimise the safety risk posed by the banned product; and/or
  • remediate or restore the building after eliminating or minimising the safety risk.

Importantly, the bans will have retrospective effect; the Building Products (Safety) Act stipulates that it is irrelevant whether a proscribed building product was used in a building before the relevant ban came into force.

The financial and legal implications to owners of buildings the subject of a building products use ban cannot be overstated. In addition to potentially material rectification and remediation costs, the presence of a banned product would invariably be problematic in an insurance context, in particular in respect of strata insurance. Undisclosed banned products could lead to the cancellation of policies or coverage being denied, while disclosure could result in the imposition of higher premiums, excesses and more onerous policy exclusions.

What should you do?

Submissions must be made by 23 April 2018 to NCBP@finance.nsw.gov.au. If you are the owner of a potentially affected property you could consider tendering appropriate submissions.

You should otherwise be preparing for the possibility of a product ban, including by referring to the recommendations to owners and strata managers on the NSW Fair Trading website.