New NSW building legislation: here’s the start of a new deal

There’s a great deal of anguish still to play out with people forced out of their homes because of faulty and dangerous building practices, but according to the NSW Building Commissioner David Chandler, a new bill just presented to the NSW government is a good step forward.

CONSTRUCTION QUALITY: I was privileged to be in the NSW Legislative Chamber on Wednesday to hear the minister for better regulation and innovation, Kevin Anderson, give a second reading speech for the Design and Building Practitioner’s Bill 2019. Anderson’s speech was detailed and passionate.

If the people of NSW were in any doubt about the government’s resolve to restore residential customers’ confidence in the industry, then this was a speech everyone should read. Anderson also made it clear that there was much more to be done, while emphasising that the new legislation was a necessary first step.

The past nine weeks have been an exceptionally busy time. There were over 150 submissions to the minister’s Building Strong Foundations discussion paper and over 80 final submissions in response to the draft legislation. There has been wide consultation and the bill reflects this.

I have personally met with over 50 stakeholders, including owner representatives, lawyers, industry associations, developers, financiers, ratings agencies, educators, councils, insurers, regulators, media, builders, materials suppliers and tech companies. The mood for industry transformation is at an all-time high point, and goodwill to achieve this is unprecedented.

Scepticism is reasonable

It is early days and there are sceptics. Turning an industry around is not an overnight task. And one piece of legislation will not achieve the transformation that is needed. The Design and Building Practitioner’s Bill sends a strong signal about the way our industry will need to operate in the future.

In all of the discussions I have held with key stakeholders they have been challenged to imagine a quantifiable future state in 2023 and later in 2025.

Unless an industry knows where it is going and charts a course to get there then it does not matter much about actions today. They would be directionless. That is not the case this time. Our goal to position NSW as the state of construction in Australia by 2025 has not gone unnoticed. There have been a number of cross jurisdiction visitors with strong interest.

The sceptics are right to remind us of the legacy issues and the residents who have many complex issues still to be resolved. But views differ here as well. Owners Corporation Network executive officer Karen Stiles said the package improved “responsibility of builders” and “accountability to apartment purchasers”.

David Bannerman, a principal of Bannerman Lawyers, said the fact the most recent reforms would only apply to buildings yet to be built meant they provided “zero” help to owners of existing faulty units.

Lawyer Banjo Stanton, who specialises in construction and strata disputes, believed the bill would “eventually” improve the position of consumers but needed to be complemented by further reforms.

He said the system should be more transparent so that if industry workers knew if there were defects, “the strata plan will know who they are, what work they did and will have rights against them”.

New industry model

There are a number of important elements to the new bill. The need for developers to properly engage accredited designers and for those designers to have a duty of care in declaring that their designs are compliant with development consents and the Building Code of Australia, repositions designers in the engagement bargain.

Those that fail to embrace this reset of this compass will not only miss a great opportunity, they will be left behind by those who do. And the requirement that head contractors will have a duty of care to declare that completed projects have been performed in accordance with the declared designs and the Building Code of Australia is a powerful win for future customers.

Both the declared designs and as-built drawings will be available in an easy to access electronic platform

Both the declared designs and as-built drawings will be available in an easy to access electronic platform. The way the NSW legislation has been drafted and will be implemented is a game changer.

Increased duties of care will be placed on building certifiers. Their duties are already high as they are technically public officers who are obliged to put public interest first.

The obligation on contractors to build projects in accordance with the law and Building Code of Australia also exist. The new overlay will be easier redress by clients when these obligations are not met.

For those who may think nothing has changed, think again. Designers, certifiers and building practitioners will now enter an unprecedented phasing-in period where new digital technology will be applied to following their involvement with projects in the past and from now on.

Call this the creation of digital twins for every player in the construction industry who needs to be licensed to perform work. This twin will follow them for the rest of their career.

These new tools will be applied across many fronts, so it is time to think about how you may conduct your professional career from this point. These tools exist in other industries. The construction industry will rapidly catch up. From 2021, they will be visible.

Industry collaboration – at last

One of the most exciting initiatives that will complement new tools to track the critical players is currently being shaped by an industry collaboration. The initiative will establish a ratings system for these players individually, for projects and for the companies in which they work.

The collaboration is being driven by a pre-competitive endeavour involving ratings agencies, financiers, insurers, consumers, developers, lawyers, regulatory representatives and industry professionals. They are all keen to break away from systems that make the differentiation between the most-risky and the better performers opaque.   An industry led ratings system will enable individual risk and pricing to be player specific.                                  

The priority players are likely to include:

• Developers
• Builders (especially builders who are part of developer organisations)
• Certifiers.

It is hoped this ratings system will be operating by mid 2021. This system will not require legislation and will be private-sector owned and operated. There will need to be some public governance oversight, once a more detailed proposal is brought forward. The system will look back. For those with a track record of shoddy performance or phoenixing, a trail of past behaviour will become a powerful new means of accountability and behaviour modification.

Over the past two months, the Building Commissioner’s office has been developing a number of initiatives. The first will involve a collaboration with NSW TAFE. This initiative will try to identify the missing priority skill gaps and to advance a broad range of open-source learning packages that will be available to other institutions. This initiative responds to the need to build new modern construction industry learning content and to identify smart effective ways to get this to the workface as fast as possible.

Concurrently, discussions have commenced with CSIRO’s Data61 to explore how modern digital technologies can be deployed to achieve high levels of construction-input trustworthiness. These technologies already exist in industries such as food, aviation, medicine, mining and soon, in the Australian Stock Exchange.

These are here and now opportunities to apply technology to point to the compliance integrity of future buildings. There are many allied opportunities that can help position NSW as a leader in this area.

We have started to review the opportunity to deploy more of our regulatory and compliance resources towards the front end of the project formation process. Much of the effort has been deployed at the back end of projects when the problem makers have moved on.

This approach will call for much closer collaboration across agencies, within our own teams and with local government. We will need to find a way to make resourcing this focus possible. We have started a very promising collaboration with Fire and Rescue NSW. We have already visited one project and another four are planned. Some serious issues have arisen that demonstrate shortcomings across all the players, especially certifiers.

Past behaviour

Past behaviour is often a good indicator of future behaviour. It is important that new housing supplies and the state’s economy are not harmed by unnecessarily stopping the market. Dealing with quality developers and builders that have established track records like Frasers, Meriton, Lend Lease, Mirvac, Stockland and many others should be no impediment to confident off-the-plan purchasers. These providers all value their brand and customers.

Those that do not have this track record should be approached more cautiously. In the current market, this is a great opportunity for buyers and their lawyers to exercise the power that goes with a deposit. Without presales (deposits), most developers cannot get development finance. So, this is the time when prospective buyers should ask questions about who is designing, building and certifying a building they are interested in. These are material issues when buying an off-the-plan apartment. Good developers won’t hesitate to provide this information in their sale contracts. It seems to me that this is a more effective time for lawyers to add value.

Similarly, the pre-settlement inspection process needs to become a much bigger deal.   There are a number of companies who can offer non-conflicted services here. They will have the technical skills to evaluate if a building has been properly completed and if the certifications seem reliable or not.

Thorough inspections are important, starting in the basement, through the apartment and all the way to the roof. Evidence should be available that engineering inspections have been properly performed for structural and fire system elements. The nominated builder should be able to attest that the project has been completed in accordance with the Building Code of Australia. Caution before settling until this information is sighted is prudent and must align with some buyer-beware action.

I will be discussing these actions with industry in the next few weeks. Initial soundings indicate that the proven quality players see this as an opportunity to reinforce the distinction between their brand and those who seem less concerned about theirs. Chasing the more-risky players out of the industry will take a massive collective effort.

Building a new level of confidence in NSW residential construction is the centrepiece of the new legislation. Yes, new legislation will take a year or so to work its way into the industry.

But the Design and Building Practitioner’s Bill 2019 is an important indicator of a new set of rules to operate in the NSW industry.

Developers should immediately turn their attention to better design team engagement, and including specific clauses into contracts to require testimonies that all new projects have been performed in accordance with the Building Code of Australia from now on will mean those projects that lack this assurance struggle if they are unable to demonstrate a new higher-level resolve to get buildings built right.

I will be looking for these actions in the coming visits that we plan to make across projects in NSW. I will be looking to see that Australian Standards are available on site and are being used. The days of making construction up on the job site must end.

I will be looking for financiers and insurers to step up as well. The quality of buildings is an essential element in the underlying value and risk they take on. Financiers should be taking greater interest in who developers are using to construct buildings and the substance of financial drawdowns that pay for work that should be lawfully performed. Insurers should be taking greater interest in asset condition reporting and annual fire safety checking certificates.

And industry associations will need to take a closer look at their ethical standards and member conduct. Sharing the challenge of turning our industry around is a reasonable proposition. There will be no shirking of this challenge on my part. But a challenge shared is a challenge lightened. This is a unique opportunity we must not miss.

Comments can be made below or sent to buildingcommissioner@customerservice.nsw.gov.au

David Chandler OAM is the NSW Building Commissioner and has extensive experience across construction in Australia and the Asia Pacific region.

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