Over the past few months there has been a rise in the demand for off-the-plan properties.
Recent research by Domain shows searches for off-the-plan properties have increased by substantial amounts, partially driven by various government concessions designed to entice first homebuyers back into the sector. For example; Riverstone searches have risen by 340%, North Ryde by 282%, Macquarie Park 261% and Castle Hill 184%.*
As a result, many of the property contracts we see are for off the plan strata units or newly built houses. At the time of purchase or at the completion of the build, the finishes are new and there is still a lingering new paint smell. However, when the gloss wears off and the cracks start to appear, the one question inevitably asked is: who is liable to the new owners to pay for the repairs?
BUILDING DESIGN REFORMS
The Design and Building Practitioners Act 2020 (“DBP Act”) applies to all parties in NSW involved in the construction of residential or mixed-use developments.
Prior to its commencement, Kevin Anderson MLA, Minister for Better Regulation and Innovation, said that:
“Modern buildings are no longer four walls and a roof. Construction is complex, integrated and evolving. Future occupants of buildings deserve to know they are buying a quality design and expert construction that is protected by strong and modernised building laws. They also deserve to have an avenue of recourse available in the event of a defect during a building’s life…”
WHAT IS THE DESIGN & BUILDING PRACTITIONERS ACT 2020 (DBP Act)?
In our May article we looked at how the DBP Act brings a more structured and disciplined approach to the design and construction of multi-storey and multi-unit residential buildings, and mixed-use buildings that include a residential apartment component.
The DBP Act introduced numerous statutory obligations on the various parties involved throughout the life of a building. Click here to read more about these regulations.
In line with the recommendations of the Shergold-Weir Report released in April 2018, the DBP Act aims to ensure quality design documentation, compliant with the Building Code of Australia (BCA). It also deems that all ‘building practitioners’ owe a duty of care at common law to subsequent owners of the property, in addition to the statutory warranties under the Home Building Act.
Subsequent to the DBP information released in May, there are several obligations under the DBP Act that have come into effect from the 1st of July 2021.
As at the 1st of July 2021, the following statutory obligations also apply:
- Registration requirements for designers, engineers and builders.
- Compulsory design compliance declarations. From registered designers for regulated designs, including whether or not their regulated design complies with the BCA.
- Building compliance declarations. From builders including whether or not their building work complies with the BCA, if a registered design practitioner prepared a regulated design, and whether the building work was built in accordance with the design.
- Adequate reporting of variations. Builders must take reasonable steps to obtain a varied design by a registered design practitioner and a design compliance declaration in respect of variations to building work, or record variations to building work as set out by the regulations.
- Occupation and other building certificates. Cannot be issued unless compliance declarations and/or regulated designs have been provided to the issuer of the certificate.
- Stop work orders. The Act provides for stop work orders to be issued by the Secretary of the Department of Customer Service in certain circumstances, including where the work is, or is likely to be, carried out in contravention of the Act.
- Indemnification and Insurance. Registered practitioners must be adequately insured with respect to a declaration and work of the practitioner. The regulations may impose insurance requirements under the Act.
REGULATED DESIGNS DECLARATION
Regulated designs are designs prepared for building work that is considered a critical element in the safety and quality of a building or is classified as a performance solution under the Building Code of Australia (BCA) e.g. fire safety, waterproofing and structural elements.
As of 1 July 2021, designers need to provide a declaration that the design complies with the BCA. Additionally, builders will need to fulfill a raft of statutory obligations such as:
- Ensuring no building work is carried out unless a design compliance declaration is received from the designer.
- Providing a declaration to the principal that confirms the construction work complies with the BCA, a registered designer did the design, and the building was constructed in accordance with that design before making an application for an occupation certificate.
- Taking all reasonable steps to ensure building work complies with the BCA.
Plus, both designers and builders will need to be registered with the Department of Customer Service and have adequate insurance.
The DBP Act also aims to ensure that each step of construction is well documented and compliant. These administrative demands have the potential to slow down building work progress however they provide assurance and security that regulated design elements have been undertaken properly.
The DBP Act imposes stricter regulations on engineers and those carrying out specialist work. Professional engineers and other parties involved in carrying out specialist work are now required to be registered. Failure to do so could result in financial penalties, and in the case of professional engineering work, will disentitle the engineer to payment for its services (regardless of any contract or arrangement).
HAS THE DESIGN & BUILDING PRACTITIONERS ACT ACHIEVED ITS GOALS?
There is no doubt that the DBP Act is a significant reform for the construction industry and throws a wider net of liability over individuals involved in all stages of the building process.
In fact, at this point in time, NSW courts have already seen an update of cases under the DBP Act and the joining process. Unfortunately, this also allows litigants to use a ‘scatter gun’ approach, enabling them to join and sue parties that would otherwise have not been possible. Such actions have the potential to become long, complex and expensive for all parties involved.
At this stage, it is difficult to determine what the final outcome of the re-defined relationship between practitioners and property owners will look like, and how these new obligations will impact each party and fair over the long-term.