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New law banning unsafe building products in NSW started on 18 December 2017

New far reaching laws for the construction, property and insurance industry have been introduced by the Building Products (Safety) Act 2017 (“the Act”) which commenced in NSW on 18 December 2017.

The Act forms part of the NSW Government’s 10 point plan for fire safety following the Grenfell Tower fire in London in June 2017 which resulted in the deaths of at least 70 people.

It is believed that the external cladding to the Grenfell Tower may have accelerated the spread of the fire in the building.

The purpose of the Act is to ban the unsafe use of building products (such as external cladding) if there is a safety risk posed by the use of the building product including a safety risk that arises in the event of fire and to provide for the rectification of affected buildings.

Heavy penalties apply under the Act for non compliance with the provisions of the Act including imprisonment.

The Act also modifies other legislation and will have wide implications for owners, owners corporations, councils, builders, developers and insurers.

Act is part of wider Reforms in NSW

The Act forms part of a wider reform package which includes the commencement of the Environmental Planning and Assessment Amendment (Fire Safety and Building Certification) Regulation 2017 on 1 October 2017.1 which introduced new requirements affecting fire safety and building certification.

Objectives of the Act

The key objectives of the Act are to:

  1. prevent the unsafe use of building products,
  2. identify buildings in which building products have been used in a way that is prohibited,
  3. require the rectification of buildings affected by the past use of unsafe building product.

According to the Second Reading Speech (the Act):

“closes the legislative gaps that exist as a result of the incomplete coverage of the Australian Consumer Law [ACL] and other legislation when it comes to building products used in commercial, residential and industrial site.”

Key Concepts

The Act contains a number of key concepts including:

  • that the use of a building product in a building is unsafe if there is a safety risk posed by the use of a building product in the building.
  • a safety risk is posed by the use of a building product in a building if any occupants of the building are or will likely be at risk of death or serious injury arising from the use of the building product in the building or of other events such as fire.
  • a building product means any product, material or other thing that is, or could be, used in a building, except asbestos or asbestos product or anything that the regulations declare is not a building product.
  • a building includes a part of a building and to include temporary structure
  • a building product is used in a building if it is incorporated into, connected to, or otherwise installed in a building by means of building work.
  • building work means any work involved in, or involved in co-ordinating or supervising any work involved in the construction of a building, the making of alterations or additions to a building or the repairing, renovation, decoration or protective treatment of a building.

Building product use bans (Part 3)

Where NSW Fair Trading is satisfied that the use of a specified building product is unsafe; NSW Fair Trading:

  • may ban the use of the building product in a building (“product use ban”)
  • may publish the product use ban by written notice on the internet
  • must specify the reasons for imposing a building product use ban
  • may, call for public submissions on the question of whether a building product use ban is warranted and the terms or proposed terms of the ban.
  • may issue rectification notices to owners which may trigger relevant authorities (likely to be councils) to issue rectification orders.
  • may Impose penalties for contraventions to the Act including daily fines and possible imprisonment.
  • may give notice of a building product use ban to the manufacturer of the building product, before the ban is published, if practicable

Affected building notice (Part 4)

Where a building product the subject of a building product use ban has been used in a building (“an affected building”); NSW Fair Trading: may issue an affected building notice to the building owner; occupier, council relevant enforcement authority, owners corporation and Commissioner of Fire and Rescue (if safety risk relates to a risk of fire).

The affected building notice must identify the location of the affected building, particulars of the building product use ban and safety risk posed by the use of the building product.

NSW Fair Trading may issue a general building safety notice if a class of buildings may be affected buildings.

It does not matter that the building product was used in the building before the ban had effect.

Building Product Rectification Order

An enforcement authority2 (most likely council) may issue a building product rectification order whether or not it has received an affected building notice or general safety notice.

The building product rectification order will require the owner of an affected building to:

  1. eliminate or minimise a safety risk posed by the use in the building of a building product to which a building product use ban applies, and to then
  2. remediate or restore the building

Building Product Undertakings (Part 5)

A person may submit a written undertaking where they have contravened or are likely to contravene a building product use ban.

If the undertaking is accepted; NSW Fair Trading will be unable to commence proceedings for the contravention of the Act.

Investigation and assessment of building products (Part 6)

The Act gives extensive investigation powers to NSW Fair Trading to identify unsafe building products and affected buildings.

The powers include right of entry, inspection and search of premises, recording of interviews, taking of samples and photographs and compelling the production of documents from builders, suppliers, manufacturers and importers.

The National Construction Code

The Act prevails over the National Construction Code (NCC), meaning that a building product may be banned even though the product or certain uses of the product complies with the requirements of the NCC.

The fact that a building product or its use is compliant with the NCC is not an excuse for contravention of a ban imposed under the Act.

Offences – Part 8

Under the Act, it is an offence to cause a building product to be used in a building in contravention of a building product use ban with:

  • a maximum penalty of $1.1 million for corporations and
  • $220,000 or two years’ imprisonment, or both, for individuals.

A further $110,000 fine will be imposed on corporations for each day the offence continues, or $44,000 per day in the case of individuals.

Directors can be personally liable for contravening a building product use ban, representing the suitability of a banned product and contravening a building product undertaking.

Directors can face a maximum personal fine of $22,000.

This liability extends also to individuals involved in the management of a company who are in a position to influence the conduct of the company in relation to the commission of those offences.

Prosecution for an offence under the Act can be commenced up to two years after evidence of the offence comes to light in an investigation, with proceedings to be conducted in the Local Court or the District Court in its summary jurisdiction

AMENDMENTS TO OTHER ACTS AND REGULATIONS

The Act makes a series of reforms to other Acts and Regulations.

Some of those include:

Home Building Act 1989

The Home Building Act 1989 is amended to expand the definition of “major defect” section 18E to include the use of banned building product.

This means that a banned product will be the subject of the 6 year statutory warranty period for major defects instead of the 2 year statutory warranty period which would have otherwise applied.

A holder of a contractor licence or a holder of a supervisor or tradesperson certificate who contravenes a requirement imposed by the Act will now be guilty of improper conduct under s 51 of the Home Building Act 1989 (NSW)

Conveyancing (Sale of Land) Regulation 2017

The Act amends the Conveyancing (Sale of Land) Regulation 2017 by adding to the list of prescribed warranties the following:

  • A building product rectification order that has not been fully complied with;
  • An affected building notice that is in force.

A failure to disclose such an order or notice in a contract for sale of land will breach the warranty implied into the contract by s52A of the Conveyancing Act 1919.

Purchasers may have a right to rescind or claim compensation if such matters are not disclosed.

Strata Schemes Management Regulation 2016

The Strata Schemes Management Regulation 2016 is also amended to require Owners Corporations to disclose particulars of outstanding building product rectification orders to an owner, mortgagee or covenant chargee of a lot in a strata scheme.

Amendment to Environmental Planning and Assessment Act 1979

The Act prescribes that planning certificates issued by a council under s 149 of the Environmental Planning and Assessment Act 1979 (NSW) will need to include a statement of:

  • any affected building notice,
  • any outstanding building product rectification order,
  • or any intention to issue a building product rectification order in respect of the land.

Powers of the Court

The Supreme Court will be able to grant an injunction on application by the Commissioner made with the consent of the Minister to respond to situations of imminent danger or prevent repeat offenders

Industry criticisms of the Act

The Act has been criticised by industry groups on the grounds that it fails to deal with supply chain liability which has been included in the original version of the Bill.3

The initial expectation of the Industry was that the Act would include key aspects of the Non-conforming Building Products (NCBP) – Chain of Responsibility legislation which commenced in Queensland on 1 November 2017.

According to the Australian Steel Institute Media Release dated 20 November4 (the Act):

“…only contains provisions to act after a non-conforming product has been brought to the Government’s attention…

“….shoring up the supply chain …is surely preferable than applying punitive measures after non conforming product is already built in or God forbid, a disaster occurs”

The Building Products Council has called upon the Government to reinstate provisions which had been deleted by the Government from the original Bill5 including chain of responsibility provisions

WHAT DOES THE ACT MEAN?

The changes introduced by the Act will have widespread consequences for the construction and property industries.

  • Building owners can be required to rectify their building even where the unsafe building product was installed before the commencement of the Act.
  • Owners Corporations will need to include particulars of outstanding building product rectification under the Strata Schemes Management Act 2015.
  • Builders may contravene a building product use ban if they undertake building work installing the banned product.
  • Manufacturers and suppliers may contravene a building product use ban if they represent that a banned building product is suitable for use,

The contravention of a building product use ban is an offence and an individual may be fined and/or imprisoned, and a corporation may be fined.

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1See http://www.planning.nsw.gov.au/Policy-and-Legislation/Under-review-and-new-Policy-and-Legislation/Building-Regulation-and-Certification-Reform

2The relevant enforcement authorities are a person or body who may give orders under section 121B of the Environmental Planning and Assessment Act 1979 (which is generally a council)

3https://www.thefifthestate.com.au/business/government/industry-fury-as-nsw-government-waters-down-building-products-legislation

4Draft Building Products (Safety) Bill dilutes supply chain Duty of Care obligations www.medianet.com.au/releases/148473/

5See letter from the Building Products Innovation Council to the Hon Matthew John Kean dated 17 November 2017 www.bpic.asn.au/…/letterBPIC-MinisterKean-Callforreinstatementofdeletedclauses.