It’s been over a year since NSW Building Commissioner David Chandler (“the Commissioner”) obtained a slew of new powers under the Design and building Practitioners Act 2020 and Residential Apartment Buildings Act 2020 with the objective of ensuring compliance with building standards and regulations in NSW.
The Commissioner promised to hold developers and builders accountable, stating he would be targeting developers who have a poor track record with SafeWork NSW and who are using ‘risky certifiers’. The Commissioner also said he’d be taking a special interest in ‘opaque’ developers who don’t have an established brand identity and who don’t readily supply information to the public.
Since late last year the Commissioner has been active in his roles, conducting and issuing 56 audits, including 45 that took place before occupation certificates were issued. In the same amount of time the Commissioner has issued one stop-work order, 8 prohibition orders and 9 rectification orders.
DBP Act in Action
Stop Work Order: The Acre, Bellevue Hill
In July the Commissioner issued the developer, Maryland Developments, a stop-work order due to ‘serious defects’ found throughout the complex. The issues included problems with fire-safety systems, waterproofing and a load bearing component of the complex. Inspectors from the department of Customer Services also found concrete slabs with ‘insufficient concrete cover’ in the basement. The Commissioner issued a stop work order as a result of these serious defects and a lack of documentation to support the construction work, stating the project demonstrated “almost every systematic failure.”
The Commissioner confirmed the order was necessary to prevent any unsupervised work whilst a replacement builder formulated a plan on how to fix the issues and determine a scope of works. The Commissioner stated that all bathrooms would have to be ripped out and replaced along with inadequate waterproofing on balconies being fixed as part of the rectification works. In order for the stop work order to be lifted the developer would also be required to set aside security if defects emerged after the complex was deemed fit for residents.
Prohibition Order: The Imperial Complex, Parramatta
In June the Commissioner issued the developer, Hassall developments (part of the Merhis Group), a prohibition order after ‘serious defects’ were discovered at the site. These included similar issues to those found at The Acre, such as defective waterproofing and internal load-bearing components. Inspectors also found draining and ventilation issues associated with the cladding at the base of the walls and openings of doors and windows, the fire safety system that had been installed was furthermore non-compliant with resistance tests.
The prohibition order prevented the developer from obtaining an occupation certificate or from registering a strata plan until the terms of the prohibition order were complied with.
Three weeks after the order was issued NSW Fair Trading removed the prohibition order in respect of the registration of the strata scheme, allowing the developers to call for settlement despite the lack of an occupation certificate. Owners have expressed concerns that this change will prevent them from exiting their contracts and reclaiming their deposits after a sunset clause that expires on August 30th. As of yet NSW Fair trading has offered no explanation for the change to the prohibition order, other than to say the developer may be required to undertake a financial guarantee against latent defects arising.
Prohibition Order: Skyview Towers, Castle Hill
Toplace, the developer of the Skyview Towers, had a prohibition order placed on two of five towers inside the development complex after inspectors found signs of cracking in the basement car park.
The prohibition order has subsequently been lifted after independent engineers concluded that rectification works and ongoing monitoring and maintenance meant that the cracks would not affect the integrity and overall performance of the building. In order to have the prohibition order lifted Toplace provided an ongoing inspection and maintenance program backed by $11 million in financial guarantees along with owners receiving a 20 year structural guarantee and 10 year commitment to rectify and pay for defects.
Can there be improvements to DBP?
Problems for Off-the-Plan Buyers
Some critics have raised questions about whether the amendments provide the Commissioner with adequate powers to protect consumers from non-complying developers, particularly in cases where buyers are locked into off-the-plan contracts for property with serious defects.
As an example, last year an off-the-plan apartment which was subject of the Commissioner’s inspection was unfortunately discovered with major defects. Despite this, the purchasers were told that they must settle on their purchase as the building had already been issued an occupation certificate by a private certifier. There was no other protection or remedies available to these purchasers under the DBP Act and they had to look to resolve the issue under the contract that they have signed with the developer.
Reputation of Building
There have also been concerns that imposing prohibition and stop work orders on developments publicly would ultimately have negative impacts on the value of the properties being built. There is real likelihood that the reputational impact and stigma placed on these developments would ultimately cause financial loss for the purchasers who are locked into contract for these developments. This could then inadvertently lead to loss of confidence in off the plan residential developments in NSW.
The Commissioner’s powers have been effective in targeting developers who fail to comply with building standards, however these powers have yet to address the vulnerability of purchasers who are locked into off-the-plan contracts for property with major defects.
It is clear the Commissioner is prepared to exercise the full extent of his powers under the amended act and he has been proactive in ensuring regulatory compliance throughout NSW. These incidents serve as a reminder to developers and builders to ensure they establish efficient internal project management processes, monitoring and maintaining compliance with regulatory and administrative requirements throughout the construction process. It’s also becoming readily apparent that developers who are subject to any kind of orders will often have to provide a guarantee against future defects as well as rectifying the existing problems.
Keystone Lawyers can assist with advising developers and builders of their legal obligations and offering guidance on developing regulations and requirements in relation to construction projects.