New Obligations and Penalties Imposed on Developers Undertaking Residential Building Work

Construction

In June 2020, the NSW Government passed the Building Legislation Amendment Act 2021 (Amending Act), which amended various legislation relating to residential building work. This included the Design and Building Practitioners Act 2020 (NSW) (DBP Act) and the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) (RAB Act).

The Amending Act is designed to encourage compliance with regulations in the building and construction industry, and has implemented the following reforms:

  • Expansion of the powers of NSW Fair Trading and the NSW Building Commissioner; and
  • Introduction of a levy on developers to assist with the administration of the DPB Act.

These amendments have been in force since 1 July 2021. As such, it is essential that developers are aware of the new obligations and penalties imposed on them by the Amending Act.

Levy on Developers

The Amending Act has introduced a requirement for developers to pay a levy into the Home Building Administration Fund. This will be used to administer the DPB Act by covering costs involved in ensuring compliance, such as:

  • Conducting risk audits on designs and building work; and
  • Administering the new practitioner registration scheme.

Despite imposing an additional cost on the developer at the beginning of the design and building process, the levy aims to support the regulator’s new schemes and reduce costs relating to defects and rectification that often arise throughout the course of a project.

A higher levy will be imposed on larger projects and a lower levy on smaller projects, who may also apply for an exemption.

Additional Grounds for Prohibition Order

The Amending Act has also introduced additional grounds for issuing a prohibition order. A prohibition order prevents strata plan registrations and the issuing of occupation certificates.

A prohibition order may now be issued where a developer has failed to:

  • Comply with a direction to provide additional information and records (this may include design plans, or records of workers onsite); and/or
  • Answer questions regarding matters which they are suspected (on reasonable grounds) to have knowledge of.

Requirement to Notify for Developers

The Amending Act also introduces daily penalties for developer in addition to existing penalties under the RAB Act. The new daily penalties apply for each day that a developer fails to notify the Secretary of the Department of Customer Service of the following information:

Max penalty for body corporateMax penalty for other entities
Intended completion date of a project$11,000 per day$2,200 per day
Change of intended completion date of a project$5,500 per day$1,100 per day
Failure to comply with a direction from authorised officer$110,000 per day$22,000 per day

These penalties aim to ensure that the correct information is provided to the regulator, allowing it to better plan and execute audits.

Court Orders

The Amending Act has also broadened the regulator’s powers to enforce orders and notices by providing for the issuing of court orders. Where a Court convicts a person of failing to comply with an order or direction under the RAB Act, the Court may issue a court order requiring the person to comply. The following penalties will apply:

Max penalty for body corporateMax penalty for other entities
Failure to comply with court order$330,000$110,000
Each day the offence continuesAn additional $33,000An additional $11,000

Keystone Lawyers may advise developers on their obligations and any applicable penalties under the recent reforms.

 

 

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