Residential Focus: Part 1 - Recent and proposed changes to NSW building legislation

Wait, there's more: Recent and proposed changes to NSW building legislation

In this edition we review some new and proposed changes to building legislation in NSW, including:

• the Building, Development and Strata Legislation Amendment Regulation 2024, which was passed on 21 June 2024
• the Better Regulation Legislation Amendment (Miscellaneous) Bill 2024, which has been adjourned for further debate after its second reading on 20 June 2024.

While the changes are small, a number of them are particularly significant in terms of the deferral of requirements or the restriction of rights.

Building, Development and Strata Legislation Amendment Regulation 2024 (BDSA Reg)

The BDSA Reg amends the Building and Development Certifiers Regulation 2020 and the Strata Schemes Management Regulation 2016.

Building and Development Certifiers Regulation 2020 (BDC Reg)

The BDC Reg allows exclusions to be made in professional indemnity polices so that indemnity may not be provided for cladding that does not comply with the requirements of the Building Code of Australia, Australian Standards or other Commonwealth laws, or that does not comply with the manufacturer's conditions of use in the cladding.

This had been limited to policies providing indemnity for a period not exceeding 12 months and commencing on or before 30 June 2024.

The BDSA Reg has extended this for another year to apply to policies commencing on or before 30 June 2025. This is a further example of the deferral of the full impact of insurance reforms in the building space so that the market can catch up.

Strata Schemes Management Regulation 2016 (SSMR)

The Strata Schemes Management Act 2015 (SSMA) and the SSMR require the developer of a residential strata scheme to provide a 'building bond' for building work comprising the strata development equal to:

• 2 per cent of the contract price given before 1 July 2024
• 3 per cent of the contract price given after 1 July 2024.

The BDSA Reg has now extended these dates from 1 July 2024 to 2 November 2024.

This four-month extension has been welcomed by developers in difficult market conditions and is consistent with the Government's focus on increasing housing supply.

Better Regulation Legislation Amendment (Miscellaneous) Bill 2024 (BRLA Bill)

The BRLA Bill proposes amendments to, relevantly, the Building and Construction Industry Security of Payment Act 1999, the Home Building Act 1989 (HBA) and the SSMA.

Building and Construction Industry Security of Payment Act 1999 (SOPA)

SOPA establishes a right to progress payments for a person who, under a construction contract, has undertaken to carry out construction work or has supplied related goods and services.

The BLRA Bill proposes to restrict this right if the construction contract does not comply with section 4 (unlicensed contracting) of the HBA or involves construction work that is residential building work done in contravention of section 92 of the HBA (the requirement of a policy of insurance under the Home Building Compensation Fund).

This aims to ensure that the powerful rights under SOPA (and their consequences for residential principals) are limited to building work which is carried out lawfully.

HBA

The BLRA Bill proposes to amend the competencies in the construction, plumbing and services training package from install medical gas pipeline systems to install and test, and to remove references to a Certificate IV in gas fitting which is not a valid qualification in NSW.

SSMA

The BLRA Bill proposes to extend the scope of section 191 of the SSMA to include, in building work for which a building bond is required, parts of a building that are not within the strata scheme, but which the strata scheme is required to service, maintain or repair. This recognises the growth in and complexity of mixed-use buildings.

The proposal will amend section 191 of the SSMA to provide:

"(1) This part applies to the following building work –

1. residential building work carried out on a building or part of a building that is part of the parcel of a strata scheme,
2. building work carried out on a building or part of a building that is –
   1. part of the parcel of a strata scheme, and
   2. used or proposed to be used for mixed use purposes that include residential purposes,
3. building work that –
   1. is carried out on a building or part of a building that is not part of the parcel of a strata scheme, and
   2. the owners corporation is liable to pay for under a strata management statement or a building management statement registered under the Conveyancing Act 1919, Part 23, Division 3B.

(1A) Building work specified in subsection (1)(c) is taken to be carried out on a building in a part of the parcel of a strata scheme for the purposes of this part."

Vale BIG Corp

The Home Building Amendment (Compensation Reform) Act 2017 had already, among other things, closed the Building Insurers' Guarantee Corporation (BIG Corp) to any new or reactivated claims and prohibited the lodging of new claims or revival of former claims.

The BLRA Bill proposes amendments to a variety of legislation to omit reference to BIG Corp, its claims administration functions and the Building Insurers' Guarantee Fund.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.