Risky business

By - , Build 182

Recent New South Wales (NSW) legislation attempts to cure common problems in the private building certifier system. New Zealand legislators are likely to follow the effectiveness of these changes with interest and may import successful changes.

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IN AUGUST 2020 , NSW passed the Building and Development Certifiers Act 2018. This replaces the previous scheme and is a drastic overhaul of the entire registration and certification scheme for those carrying out and certifying building works.

Building works certification in NSW changes

The new Act is another step to strengthen and tighten the regulation of the NSW building industry in response to several recent failures across Australia and the world.

These include the Opal Tower disaster and the Mascot Towers incident in Sydney and the Grenfell Tower fire in London, which largely resulted from poor design, failed cost-engineering and substandard construction.

Most work for private certifiers in NSW

Unlike New Zealand, where councils regulate and certify building works, in NSW, private certifiers carry out the bulk of the certification process. Some Australian commentators argue that allowing private certifiers to operate in the market is a significant gateway for low-standard building works.

Many of the changes are to combat known issues in the construction industry that cause poor workmanship. These include inadequate supervision, conflicts of interest in the certification space and lack of qualifications, experience and up-to-date knowledge.

The Act attempts to counter these issues, including by requiring any company registered for a specific class of work to have a director registered in that class who will supervise the works and requiring ongoing learning annually (CPD).

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Registration required

The Act sets up a registration scheme for those carrying out certification works and an accreditation scheme for people carrying out other regulated works.

To be registered, people must satisfy minimum requirements for both qualifications and experience. Once registered, they must comply with specific standards and methodologies.

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New code of conduct

There is also now a revised code of conduct, with an increased focus on technical and legal knowledge. While principal certifiers must follow the Certifier Practice Guide, the provisions that deal with public interest and conflicts of interest apply to all certifiers.

Other changes include mandatory written construction contracts. All contracts must include a declaration from the developer or owner confirming they have read and understood the contract and understand their role and relationship with the certifier and that they freely chose to engage the certifier.

 

We have tried this in the past

While all these changes are well intentioned, the question is whether this form of regulation will practically make a difference in the market. In New Zealand, we have seen both certification schemes at work.

Before the Building Act 1991 overhaul, the consenting process was a highly complex patchwork of laws and regulations and was difficult to understand and negotiate. The government responded to this by enacting the Building Act 1991, which simplified the process and allowed private certifiers into the market. This resulted in the proliferation of shoddily built dwellings and thousands of leaky build- ings. As the crisis became evident, insurers withdrew insurance for private certifiers and, in doing so, confirmed the collapse of the private certifier system.

The Building Act 2004 allocated responsibility to councils as the sole certifiers. This had the effect of forcing councils to manage a larger portion of the risk, leading to consenting being a slow and drawn-out process.

Risk-based consenting possible in NZ

A possible risk management tool is risk-based consenting. In March 2012, the Building Amendment Act 2012 was signed into law, with certain sections of the Act coming into force immediately and others withheld pending an Order in Council.

One of the portions withheld provides for risk-based consenting. The scheme for risk-based consenting provides for four distinct consent categories – low risk, simple residential, standard and commercial. The aim is to move the responsibility and risk away from the councils as building consent authorities and on to owners and others involved in the project.

The scheme is a positive move for those seeking consents – hopefully to speed up the process – and for taxpayers generally as it avoids costly future litigation, but there are risks.

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Concern for commercial buildings

The main area of concern is the commercial building consent category. In order to apply for a building consent for commercial buildings, the owner or developer must first:

  • determine the risk profile of the building work and gain confirmation from the council that the risk profile is an appropriate assessment of the risk that the building work will not comply with the Building Code and any consequences of non-compliance
  • develop an approved quality assurance (QA) system to manage those risks which must provide for adequate supervision, testing, inspection and third-party review.

If these documents have been provided in the approved form, the council will then issue the building consent. If the council believes that the QA process has been followed, it will then issue a consent compliance certificate at the conclusion of the build.

There is no requirement for the council to review the substantive documentation or undertake regular inspections. Instead, the initial review of the designs for compliance with the Building Code and all regular inspections and tasks related to ensuring compliance with the plans are entrusted to the private market. In doing so, the construction process for some of the most complex buildings lies in the hands of the open market.

In effect, this is a very similar scheme to that of the 1991 legislation, which allowed for private certifiers.

Will we follow NSW?

Many in the industry believe that the only way to secure robust and independent oversight of compliance with New Zealand building standards is through council controls. The independence of councils is simply something that cannot be legislated into the private market – this is why the risk-based consenting amendments are so questionable.

A simple Order in Council would enliven the risk-based consenting regime, and within a handful of years, New Zealand could see the very scenario that led to the type of building disasters experienced across the world.

Fortunately, the government has so far held off on bringing the changes into force, presumably to ensure there was sufficient knowledge of the Building Code and skill in the industry and to implement mechanisms to ensure compliance.

At this stage, the Act’s provisions are not yet in force. With the above changes in NSW, legislators in New Zealand will be watching keenly to see how the changes operate in the market and whether any of these regulatory changes should be applied in the New Zealand market.

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Note

For specific legal advice on this or any other construction legal queries, contact your legal advisor or Dentons Kensington Swan.

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Articles are correct at the time of publication but may have since become outdated.

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