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New duty of care in force for residential construction in NSW

02 July 2020
On 11 June 2020, the New South Wales Government enacted the Design and Building Practitioners Act 2020 (NSW) (“the Act”), introducing new obligations on persons performing residential building work (as defined by the Home Building Act 1989 (NSW) ("Home Building Act") and other related building work in New South Wales to raise compliance and accountability in the construction sector. 

The Act is a step towards the New South Wales Government achieving its mandate to instil confidence in the construction sector through meaningful regulatory reform after a number of high profile defective residential developments (including the Opal and Mascot Towers, and more recently the Aya Eliza apartments in Auburn). The reforms were telegraphed in the 'Building Stronger Foundations Discussion Paper' which outlined key measures to address the Shergold Weir Building Confidence Report.

Key things to note now - Duty of Care

Commencement: the duty of care provisions (Part 4 of the Act) commenced on 11 June 2020, with the regulated building design and building work, registration, investigative and enforcement regimes (Part 2, Part 3 Division 1, Parts 5-9 and clauses 2-4 of Schedule 1) commencing on 1 July 2021.

  • Duty of care: a person who carries out construction work has a duty of care to exercise reasonable care to avoid economic loss caused by defects to current and subsequent owners. The duty of care is non-delegable and cannot be contracted out of.
  • Operates retrospectively: the duty of care applies to economic loss caused by a breach of the duty of care in circumstances where the loss first became apparent within the 10 years immediately before 11 June 2020 or the loss first becomes apparent on or after 11 June 2020.

Snapshot of other key updates

Regulated designs and building work

The Act introduces obligations to provide compliance declarations for design and building compliance with relevant industry standards. Various offences are created under the Act, including failing to provide a declaration in accordance with the Act or a person providing a declaration under the Act when unregistered.
 
Registration of practitioners

The Act requires persons to be registered and insured in accordance with the Act. The Secretary may require an applicant to provide information or produce records, grant or refuse registration applications, and determine an applicant is not a suitable for registration. It is an offence for a person to represent themselves as a registered practitioner or allow themselves to be represented as registered for the purposes of the Act.

Duty of care

The Act imposes a duty of care (to present and subsequent owners of the land) on a person who carries out construction work to exercise reasonable care to avoid economic loss caused by defects in or related to a building for which the work is done and arising from the work. These provisions will be subject to the Civil Liability Act 2002 (NSW). The duty of care is non-delegable, cannot be contracted out of and operates retrospectively where the loss first became apparent within the 10 years immediately before 11 June 2020.

Disciplinary action against practitioners 

The Act provides for a broad range of disciplinary action for contraventions of the Act including stop work orders, fines and in some circumstances imprisonment. For example, a person must not make a design compliance declaration that the person knows to be false or misleading in a material particular (Maximum penalty - 2,000 penalty units or imprisonment or both).

Investigative powers 

The Act provides for broad investigative powers for the Secretary to monitor and enforce compliance with the Act through obtaining information or records for administration purposes and enforcing or administering the Act.

Action by you

Industry participants should familiarise themselves with the requirements of the Act so they are in a position to comply with the requirements, in particular:

  • Owners should consider the application of the duty of care and whether it might apply to a claim for defective works;
  • Designers, engineers, builders and other industry participants should:
    • consider their obligations under the Act and incorporate relevant safe guards for compliance (where they do not already exist), including obtaining advice on the adequacy of their insurances; and
    • familiarise themselves with the broader registration and certification requirements (including the penalties for non-compliance). 

 
If you require further information or have any queries in relation to this legal update, please contact a member of our Construction team.

Further Reading

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