Tranche II Building Reform Proposals

The NSW Government has tabled proposed amendments to key construction laws, including the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) and the Design and Building Practitioners Act 2020 (NSW) (DBPA), which it refers to as the Tranche II building reforms.

On Wednesday 23 February 2022, a roundtable discussion between the NSW Government and key construction industry stakeholders provided an opportunity to discuss the proposed changes before the proposals are submitted for public consultation in Q2 2022.

We summarise the potential changes below.

Security of Payment Act

• The proposed amendments to SOPA include:
  • amending the form of payment claims to include additional information to increase clarity of the consequences for non-payment. The content of the form will either be:
    • a standardised payment claimant form on the Fair Trading website; or
    • a claimant’s own form provided it contains the relevant particulars;
  • allowing claimants or respondents to apply for a review of adjudication determinations;
  • reducing the project value threshold for the requirement of head contractors to hold retention moneys in trust for subcontractors from $20 million to $10 million; and
  • providing adjudicators with the power of entry to complete visual verification of work/goods where disputes involve construction work, supply of related goods or services completed or supplied.

Design and Building Practitioners Act

The proposed amendments to the DBPA include expanding the definitions of Classes 3 and 9c as follows:

• Class 3:
  • Residential building other than a Class 1 or 2 building;
  • Dormitory style accommodation;
  • Workers’ quarters for shearers or fruit pickers; and
  • Care-type facilities which are not Class 9 buildings.
• Class 9c:
  • Residential care buildings- where 10 % or more who reside there need physical assistance; and
  • Aged care building where residents provided with personal care services.

Note, this would apply to the entire building where Class 3 or 9c are present.

Building Products (Safety) Act 2017

The proposed amendments include:

• establishing the concept of non-conforming building products (modelling the Queensland Building and Construction Commission Act 1991 (Qld)) to include:
  • products not complying with NCC requirements or standards;
  • products that do not perform or possess characteristics as represented and are unsafe or unsuitable for intended use;
• imposing duties on persons in the chain of responsibility to ensure building products supplied and used in NSW are safe and fit. Persons in the chain of responsibility include:
  • product designers;
  • importers;
  • manufacturers;
  • suppliers;
  • designers (including architects and engineers); and
  • installers including any person who supervises and engages a person to install the product; and
• increasing the powers to the Secretary to issue building product warnings, reclass and supply bans and impose penalties for breaches of duties.

Strata Schemes Management Act 2015

The proposed amendments include:

• expanding the application of the building bond (i.e. 2% of the contract sum) so it can be used to rectify defects identified in the final inspection (carried out up to 24 months post construction) rather than just those identified in the interim report (written at 15-18 months post construction);
• enabling building inspectors to be paid before releasing inspection reports;
• creating greater transparency around the appointment and regulation of building inspectors; and
• amending the transitional arrangement so that developers who have been issued construction certificates before 1 January 2023 are subject to the strata building bonds and inspection scheme even if the building contract was entered into before 1 January 2018.

We will provide a further update and commentary once the public consultation opens in the next couple of months.

Article by Brett Vincent (Partner) and William Barrington (Senior Associate)