The NSW Government has been urged to implement its proposed new regulatory regime targeting the state’s property development industry to avoid the repeats of the Opal and Mascot Tower debacles and improve building standards. The Local Government NSW noted that without strong building laws in place the speed to fast-track developments and construction responding to COVID-19’s economic influences may result in real risks, compromising building safety and quality. The proposed new regime and the impacts for developers, builders, purchasers, and financiers are considered below.
The Proposed New Regulations
This proposed Design and Building Practitioners Bill 2019 (Bill) will apply to building and development in NSW. The regulations will also deal with a large number of operational matters and includes, but not limited to as following:
Regulated Designs: Introduces the concept of ‘regulated designs’ and contains the designs for a building element or a performance solution for building work.
Compliance Declaration: Requires the design practitioners and building practitioners comply with the Building Code of Australia.
Variations to Declared Designs: Requires that variations to declared designs are prepared and declared by a design practitioner or that they are documented by the building practitioner.
Registration of Compliance Declaration Makers: For design, principal design and building practitioners who make compliance declarations should register under a new registration scheme.
Duty of care owed to the landowner: Requires that owners of the land are owed a duty of care by the person who carries out construction work to exercise reasonable care to avoid economic loss caused by defects
Potential Prohibitions: Potential prohibitions on the issue of Building Certificates and Occupation Certificates without relevant compliance declarations having been provided to the relevant authorities and certifier. (Source: NSW Fair Trading)
In addition to the Bill, the other matters included in the proposed regime are:
- The Secretary of NSW Department of Customer Service has the power to issue the Stop Order to a building practitioner or the owner of the land when “the building work is, or is likely to be, carried out in contravention of the Act” and publish warning notices to persons of particular risks involved.
- The quality rating system for developers, builders, and certifiers would be adopted to assess the project and NSW Building Commissioner may have the power to block the issue of the occupation certificate when the project was regarded to be unsafe.
The Impacts of The Proposed Regulations
Developers and builders: The proposed regulations would potentially lift the building standard and quality but imposed additional costs and compliance risks. However, these proposed changes may bring uncertainty in relation to the timing and nature of a series of changes that may result in additional pressures on developers. Building practitioners, designers, and developers will not receive the required quality rating if they fail to meet the new requirement set out in the new regime, impacting their business reputation.
Financiers: Are likely to limit the funding to projects where building practitioners, developers, and designers with reputations, who are fully compliant with the proposed regime. The increased competition for loans from developers in compliance with new regulations could result in the consolidation in the development sector and the non-banking lending sector focused on building finance. This may also affect the higher-risk projects that financiers are prepared to finance. Thus, the financiers will carefully review the due diligence process and assess the borrowers’ credit criteria, accreditation and standard documents.
Purchasers: Are able to track the records of developers, designers, and building practitioners reducing their risks to substandard service providers and developers. However, the potential prohibitions on occupation certificate and stop order may lead to delays in completing the purchase and impact the buyers. These new changes could also increase the difficulty for purchasers applying for finance in certain developments due to the financiers’ concern.
In summary, should this Bill pass through parliament, all design service practitioners (i.e. architects, project managers etc.), certifiers, builders and developers would be well advised to review the potential risk to operations and respond accordingly.
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Disclaimer and Qualifications: This information is general in nature is understood to be from reliable sources and is not to be construed as property investment or property development advice. Expert investigation and independent due diligence should be undertaken by all parties prior to any agreement to purchase. develop or dispose of property