Second Reading Speech
Mr ANOULACK CHANTHIVONG (Macquarie Fields—Minister for Better Regulation and Fair Trading, Minister for Industry and Trade, Minister for Innovation, Science and Technology, Minister for Building, and Minister for Corrections) (15:12): I move:
That this bill be now read a second time.
I am pleased to introduce the Building Legislation Amendment Bill 2023. The bill delivers on the Government's ongoing commitment to transformational reforms to the oversight of the New South Wales building industry. Our comprehensive reform agenda will secure behavioural change in the industry and uplift the quality of buildings in New South Wales, helping restore public confidence in the construction industry. The New South Wales Government understands the serious impacts that unsafe building products and noncompliant buildings can have on people's lives. We have examined the data, listened to the public and the industry, and developed reforms that will make buildings in New South Wales safer and more reliable.
The bill makes amendments to various Acts to improve accountability and responsibility in the construction industry by (1) expanding proactive enforcement powers for the Building Commissioner, including rectification and stop-work orders for residential homes, to ensure greater oversight of and confidence in low-rise residential construction—a key recommendation of the Legislative Council's Public Accountability Committee's report further inquiry into the regulation of building standards that this Government has already started to implement; (2) imposing obligations and accountability on all persons in the building product supply chain to ensure the design, manufacture, supply and installation of safe and compliant building products; (3) enhancing the framework for decennial liability insurance to increase consumer protections for apartment building owners; (4) expanding powers for the New South Wales building regulator to tackle illegal phoenixing; (5) enabling immediate suspension of key building, design and certifier practitioners where allowing them to continue to work would pose a serious risk to public safety, consumers or other building businesses; and, lastly, ensuring existing data and information sharing arrangements remain viable when the NSW Building Commission is established towards the end of this year.
I want to firstly give an overview of the big-ticket items that the bill delivers. Schedule 1 to the bill will support the NSW Building Commissioner to carry out crucial proactive work in the residential building space. It will ensure that the building regulator has the right powers and access to information to weed out poor workmanship at the construction phase. We are using industry-leading, data-driven regulatory interventions so that the Building Commissioner can restore confidence for home owners, future purchasers and renters in the quality, safety and trustworthiness of low-rise residential buildings, as he has so successfully begun for high‑rise residential apartments.
The work of the Building Commissioner in addressing serious defects in class 2 apartment buildings has been transformative for the people of New South Wales, giving owners confidence that the building regulator has the tools it needs to hold to account those who cause building defects. The amendments in the bill will extend those powers to ensure that the regulator can effectively oversee the construction of class 1 residential houses across New South Wales. As we prepare to set up the State's first Building Commission, we want to ensure that the commissioner has the right tools to support the work of the commission and ensure its effectiveness.
Schedule 1 to the bill also enhances powers for the building regulator to ensure that people who have been involved with a building company that has become insolvent or people who have engaged in intentional phoenixing activity cannot continue to operate in the industry. The level of harm that can occur where building companies become insolvent and set up new companies to avoid paying outstanding debts—often to subcontractors further down the contracting chain—cannot be overstated. The bill gives the building regulator new tools to target intentional phoenixing, providing better protections from this abhorrent behaviour.
The amendments set out in schedule 2 to the bill focus on ensuring that building products are safe and compliant, that the regulator has ample powers for early intervention in the construction of homes, and that consumer rights and interests are well protected. Those amendments will enable the regulator to identify, manage and respond to building products that pose a safety risk to consumers and building practitioners. All persons in the supply chain of building products will have a duty to ensure that the building products they design, manufacture, sell or install are suitable for their intended use. This will signal to the industry that everyone will be held accountable. Cutting corners will not be tolerated when it comes to safety.
In 2018 the Australian Government and the Building Ministers' Forum commissioned Dr Peter Shergold, AO, and Bronwyn Weir to examine compliance and enforcement problems across jurisdictions. One recommendation in theirBuilding Confidence report was to establish a compulsory product certification system for high-risk products. To achieve this, the Australian Building Codes Board developed the National Building Product Assurance Framework. The framework was developed as a model for jurisdictions to use, with a view of providing national consistency through legislative reforms. New South Wales supports the goal of national consistency, given the international nature of supply chains. The bill has therefore taken the Australian Building Codes Board framework into account and will provide immediate improvements to New South Wales' oversight of building product safety.
Through schedule 3 to the bill, New South Wales will be well placed to offer stronger consumer protections for apartment building owners through decennial liability insurance, or DLI. DLI provides 10‑year protection against serious defects in the common property of the building, starting from when the building is completed. DLI covers critical building elements, including the building's structure, enclosure, waterproofing, fire safety systems and building services. New South Wales is a national leader in providing this strong consumer protection for apartment owners, a protection that applies even where the developer or builder has become insolvent. The bill will set up a procedural framework of administrative requirements, enabling DLI to continue operating and to expand as an alternative to the strata building bond. The amendments will provide DLI with the necessary legislative framework to encourage insurers to enter the market and will also encourage uptake by developers of available DLI products.
The Government intends to introduce more comprehensive and prescriptive DLI legislation to Parliament next year following detailed consultation with industry and insurers. It is a massive win for apartment owners in New South Wales and provides confidence for owners that they will not be out of pocket if there is a need to rectify the sorts of serious defects we have seen all too often in apartment buildings. The amendments are a precursor for future reforms to come. I am proud to introduce these building reforms, which will make the lives of the people of New South Wales safer and provide peace of mind to apartment owners through encouraging an insurance system that will cover serious defects in common property for up to 10 years.
I now turn to the substance of the bill. In terms of compliance and enforcement powers, schedule 1 to the bill will expand proactive regulatory powers to the building regulator for class 1 buildings. The expansion of such powers to buildings that include freestanding houses and terraces is critical and builds on the success of the NSW Building Commissioner in the stronger regulation of apartment buildings. The proposed amendments have been informed by the ongoing operation of the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020, also known as the RAB Act. The RAB Act contains comprehensive and wideranging investigation powers. They include powers to issue rectification orders to eliminate or mitigate defects in class 2 apartment buildings. Class 2 buildings are defined as apartment buildings. They may also be single‑storey attached dwellings with a common space below, for example, two dwellings above a common basement or car park.
That legislation has empowered the building regulator to proactively investigate, audit and target poor performers in the industry. Home owners deserve a building regulator that has sufficient powers to call out poor performers in the industry. The current rectification order provisions under the Home Building Act are reactive and can only be issued for class 1 buildings if a complaint or dispute is raised by the consumer. That puts pressure on consumers to pursue complaints and can lead to expensive litigation to have defects rectified. The emotional and mental stress of having to pursue rectification through the courts is taxing on consumers. Schedule 1 to the bill will enable rectification orders to be used proactively, ensuring that inspectors can identify issues early and defective work is rectified before the building is actually occupied.
As of March 2023, more than 37,000 class 1 houses were under construction in New South Wales. The regulator currently has no powers to audit the quality of construction in any of those houses during construction. Defective building work in low-rise residential construction costs Australian consumers more than $700 million annually. That cost can be reduced, if not avoided, through proactive identification of defects early and having them rectified during construction. The bill will remedy the regulatory gap by giving the regulator powers to inspect, investigate and issue relevant orders while class 1 buildings are under construction. Inspectors will have powers to enter houses that are under construction and may seek the production of documents or information regarding building work. Of course, inspectors will need to obtain the consent of the home owner, or a search warrant, to enter homes that are occupied. But the key change here will mean practitioners cannot avoid scrutiny during construction.
The secretary may issue a rectification order for any defective work or for building work being carried out in a way that could result in a defect. That power will not only extend to work that has been contracted for but will also cover situations where the defective work has caused damage to parts of the building or other structures, including neighbouring properties. Further, to ensure that the rectification orders have sufficient impact, the amendments require the regulator to give a copy of the order to the local council of the area where the building work is being carried out. If the local council is not the principal certifier, a copy is also provided to the principal certifier. This is an extra measure to ensure defective work is rectified before it receives final sign‑off from the certifier.
The bill will extend the powers of the regulator to issue rectification orders for residential homes being built. It will create a consistent approach across the industry with the existing powers currently available for class 2 buildings. The amendments send a strong message that the New South Wales Government will ensure the Building Commissioner has the power to tackle noncompliant work. The amendments will make compliance with a rectification order a licence condition for the licence holder, and failure to comply will result in disciplinary action. Failure to comply with a rectification order will also attract large penalties of up to $330,000 for a corporation and $110,000 for an individual. For every day the offence continues, corporations will be hit with penalties of up to $33,000 per day, or $11,000 per day for individuals. The penalties will ensure that noncompliant players are held accountable.
The New South Wales Government is aware of the impact those orders can have on the industry. Provisions in the bill ensure the amendments are procedurally fair. Parties will be given an opportunity to be heard or remedy any wrong before an order is made. The amendments will allow parties to appeal against rectification orders, preserving the parties' right to natural justice and making sure the provisions are balanced. To ensure that any building work that could cause or is likely to cause significant harm or loss is stopped, the bill will also introduce stop-work orders similar to those that have been effectively used to address serious defects associated with class 2 residential apartment buildings. Expanding the operation of stop-work orders to all residential building work will mean the developer of a project can be ordered to stop work if that work could result in significant harm or loss to the public or building residents.
The power is necessary and will enable the secretary or their delegate to take immediate action where necessary on unsafe work practices or serious noncompliance. A breach of a stop-work order is a serious offence and can carry penalties of up to $330,000 for a corporate or $110,000 for an individual. Procedural fairness will apply, with an appeal process available for a developer issued with a stop-work order. In the spirit of transparency and accountability, rectification orders and stop-work orders will be published on a public register. That will not only warn consumers about the existence of such orders but also signal the seriousness of those orders to industry and the public.
Schedule 1 to the bill also strengthens crucial protections to prevent people from holding contractor licences under the Home Building Act 1989 where they have been involved in insolvencies or intentional phoenixing activity. The construction industry experiences the second highest rate of external administration in Australia. We know insolvency has significant and devastating effects on trades, suppliers and consumers. While the oversight and regulation of corporate behaviour and insolvencies remain the primary responsibility of the Commonwealth, it is still critical that the New South Wales building regulator has sufficiently strong powers to take action in relation to those who have a history of insolvency to prevent them from creating further harm in the State.
In those circumstances, the bill introduces new powers in schedule 1 to prevent the issuing of licences, cancel existing licences and disqualify a person from holding a licence to disrupt dodgy corporate behaviour and stop poorly behaved players from operating in New South Wales. New section 22 enables the regulator to cancel a licence where the licence holder was a director or involved in the management of a company and that company is under administration or has been convicted of an offence under the relevant provisions of the Corporations Act 2001. The powers will extend to the period six months before those events to ensure directors and people with corporate influence are not simply allowed to walk away without consequence.
New section 33A of the bill largely mirrors those cancellation powers but permits the building regulator to disqualify a person or company from holding an authority under the Home Building Act. Where a person seeks a licence, the bill provides further insolvency reach by extending the period to be considered from the existing three‑year period out to 10 years, again sending a clear message that this Government does not condone that type of behaviour. When applying for a licence, applicants will be required to disclose their prior association with a body corporate that has become insolvent.
In addition, the bill will reverse the presumption on a person applying for a licence. That means that, where the applicant has become bankrupt or been a director or person involved in the management of a company in the six months prior to that company becoming insolvent, they will have to prove why they are not a risk to consumers or subcontractors. The change has been made to capture the unlawful behaviours of some directors who deliberately surrender their directorships before insolvency to avoid liability, leaving others to deal with the consequences of their actions. The measures in this bill will hold individuals accountable where their actions or decisions have resulted in the insolvency of a company that has left consumers and subcontractors unduly exposed.
As I mentioned earlier, this Government is creating accountability in the building products supply chain through the amendments in schedule 2 to the bill. These proposed changes to the Building Products (Safety) Act 2017 will introduce a chain of responsibility for building products. New part 2A will create a legally enforceable regime of responsibility of compliance for all persons involved in building product supply. Those who design, manufacture or sell products, those who prepare building designs, and those who install products in a building, such as tradespeople, will be captured in the chain of responsibility.
New section 8B will allow lawmakers to respond to changing circumstances in the way products are manufactured and distributed by allowing the regulations to expand or limit those people captured in the chain of responsibility. This is particularly relevant given the rapid pace of change in technology and processes we are seeing in the construction industry. Currently, not all persons in the chain of supply for a building product are held to the same level of accountability as others. Licensed builders who install products at the end of a long supply chain can face high penalties for noncompliance, while those who produce or supply products do not bear much responsibility. This provides less incentive for manufacturers and suppliers of products to provide compliant and fit-for-purpose products. To reverse this, the bill introduces clear duties for persons in the chain of responsibility.
The primary duty, as outlined in new section 8E, is to ensure products used on buildings are conforming and compliant. This means that not only does the product itself need to meet performance standards under the National Construction Code or prescribed standard, but it must also be used in a way that conforms with how it has been manufactured to ensure it does not create a safety or build quality risk. For example, certain wall systems are appropriate where they are internal but may be non-conforming if used for structural purposes. The offence attached to this provision means corporations will pay up to $165,000, and individuals up to $55,000, for failing to ensure their product is conforming and compliant.
To ensure that building products used in New South Wales buildings are compliant with the National Construction Code and relevant Australian standards, the bill will introduce information obligations on parties in the chain of responsibility, with the same penalties attaching to this duty as for that in new section 8E. Each person in the chain must provide certain information about a building product to the next person in the chain, such as whether the product is suitable for its intended use, whether the product is only suitable in certain conditions, instructions on how to ensure compliant use of the product, and how to maintain the product. For example, the bill provides that a building designer who incorporates or recommends the use of a particular product in a building must ensure that the required information is given to the person who will give effect to the design, such as the builder or installer. Likewise, installers and those who use a product in a building must ensure the owner of the building is given information about the product.
The focus to date of building reform has been on ensuring building work is compliant, safe and trustworthy. We rightly impose clear obligations on designers and engineers to design compliant buildings, and on builders to follow those designs to deliver buildings that meet the performance requirements of the Building Code of Australia. However, the missing piece has been ensuring that the products being used in the construction of buildings meet Australian standards and building codes. The first step to filling this gap is making information about the product available to all persons in the supply chain so that practitioners have accurate information to make informed decisions about whether the product is compliant and conforming for the intended purpose.
Therefore, the bill will introduce requirements for manufacturers, suppliers and importers to provide information or representations about building products. By enhancing transparency and information flow between players in the chain, the bill will allow for industry to self-regulate in conjunction with more formal government regulation. It will also clarify the role and responsibilities of each person in the chain, which will make it easier for people to exercise their rights and take action against the relevant party if something goes wrong.
Ensuring everyone in the chain has the information they need to perform their role effectively will also benefit consumers at the end of the supply chain. The bill will require a person in the chain of responsibility to inform the secretary if they become aware of a noncompliance or safety risk for an intended use of a product. We understand this duty imposes a small burden on industry. However, the benefits of creating better risk awareness and visibility are clear and will allow the Government to work hand in hand with industry to identify unsafe and noncompliant building products.
We know that there has been an unacceptable increase in the use of non-conforming building products on Australian construction sites. Inferior and sometimes dangerous products are being used in the construction of buildings that the people of New South Wales live and work in. Negligent and often deliberately fraudulent behaviour is occurring in the building products supply chain, including falsifying product test certificates and hiding underweight steelwork with water-filled tubes. This has to end.
We have designed a framework that industry representatives agree can work, and we have also proposed new regulatory powers to back up our chain of responsibility changes. The bill will give the secretary powers to identify and prevent non-conforming building products from being used in New South Wales buildings. The secretary will be able to issue a notice to warn consumers about a building product where there is a noncompliance risk or safety risk in relation to the product. Further, where the secretary is reasonably satisfied that a building product is non-compliant or unsafe, they may issue a building product supply ban to prohibit continued supply of the product. Under a supply ban, a person in the chain of responsibility who is in possession or control of the building product may be required to notify the secretary that they have the product and ensure they dispose of the product appropriately.
The bill provides powers to the secretary to issue a building product recall in circumstances where swift action should be taken to protect the public. The issuing of a compulsory recall will be limited to instances where the building product is a non-conforming product and a safety risk exists in relation to the use of the product. A safety risk exists if a product has caused, will cause or may cause death or serious injury to a person, or damage to or a defect in a building which results in the building being uninhabitable, destroyed or at risk of collapse. Manufacturers will be given prior notice of the issue of a warning, recall or ban. Where the product manufacturer is based overseas, the secretary may give notice to the Australian importer or supplier instead. Where appropriate, the secretary may also call for public submissions on the question of whether a warning, recall or ban is warranted, and the proposed terms of the notice.
The residents of New South Wales are used to seeing product recalls for allergen risks in food or where there are choking risks for toys. Similarly, we owe it to the people of New South Wales to be able to quickly pull unsafe or otherwise non-conforming building products off shelves and alert consumers in the same way. If a compulsory recall is issued, the secretary can immediately alert the community of safety concerns and enforce the withdrawal of products without delay from the supply chain and the marketplace. To enhance accountability, the bill will provide offences for continuing to supply a building product where a building product supply ban is in place, or to cause a building product to be used where the secretary has issued a building product use ban.
Those who contravene or fail to carry out requirements and duties under a building product recall will also be guilty of an offence. Recognising the serious financial consequences and risks to human safety that can arise where unsafe and non-conforming products are used in or on buildings, a maximum penalty of $1.1 million will apply to corporations and a maximum penalty of $220,000 to individuals. Where the offence continues, a further maximum penalty of $110,000 per day for corporations and $44,000 per day for individuals will apply. The size of these penalties reflects the seriousness of these offences and will provide a strong deterrent for the use of unsafe building products.
The bill creates a similar offence for falsely representing that a product would be suitable for use in a building when the product is subject to a ban or recall. These penalties are entirely appropriate to protect the people of New South Wales from safety risks and the devastating financial impacts when shoddy products are used on their homes. The bill also gives the secretary powers to remove dodgy operators from the supply chain. Where the secretary is satisfied that someone involved in building product supply or use has repeatedly engaged in unlawful conduct, the bill gives the secretary powers to issue a show cause notice to the person. The person would have two weeks to make a submission as to why they should not be banned from carrying on the business of supplying building products.
The secretary must consider the submissions and may make further enquiries if necessary. If the secretary considers the person is likely to engage in unlawful conduct again, the secretary may apply to the Supreme Court of New South Wales for an order to prohibit the dodgy supplier from carrying on business either indefinitely or for a period of time, depending on the seriousness of the unlawful conduct. Although the secretary has this power under section 73 of the Fair Trading Act, existing limitations to consumer goods will not apply under the bill to the supply of building products. A benefit of the trade prohibition provision is that it would allow the court to order the supplier to give compensation to people in the chain or consumers who had incurred loss or damage.
The bill will also provide powers for an authorised officer to issue directions about the use of building products to appropriate persons where needed, for example, to address safety risks. The direction may require the person to cease using or supplying a product, cease using a product in a specific way or make a product incapable of being used or operated. An "appropriate person" for the purpose of section 46B of the bill might be a person in the chain of responsibility, someone in possession of the building product, or an employee of a company where the building product is manufactured, supplied, stored or used. A direction will remain in force for 90 days unless revoked sooner. The bill also creates necessary enforcement and investigation powers so that noncomplying building products can be tested and seized, if needed, to determine whether they carry a noncompliance or safety risk or if an offence against the Act has already been committed in relation to the product.
Turning to schedule 3 to the bill, as I touched on earlier in my second reading speech, decennial liability insurance is a game‑changing consumer protection insurance product for apartment owners in New South Wales. The insurance provides protection for strata buildings and is a first resort insurance product—that is, where an owner can prove there is defective work, the claim will be paid without the need to establish fault. DLI is currently a voluntary alternative to the Strata Building Bond and Inspections Scheme under the Strata Schemes Management Act 2015 for residential apartment buildings. The strata bond scheme requires developers to lodge a bond worth 2 per cent of the development's contract price for two years before the building is occupied. The bond covers the costs of defect rectification works up to the 2 per cent bond amount and is limited to defects identified in the first 18 months of the building being occupied.
However, the current bond often does not provide sufficient funds or time to deal with typical claims of a minor nature, let alone those that require rectification of a "serious defect". For example, a building with a contract price of $10 million would only need a bond of $200,000. To give an idea of how insufficient that amount of money is, a survey carried out by the Office of the Building Commissioner in 2021 identified that the average cost per building to rectify serious defects was $332,000, with audits by NSW Fair Trading indicating the average cost of rectification exceeds $40,000 per dwelling.
On the other hand, DLI provides cover up to the full construction value of rectifying the defects, providing a significant new consumer protection to apartment owners in this State. This is also at no additional project cost, with modelling showing that 2 per cent of the project contract value is likely to be the upper limit of premiums for a DLI product. This bill supports the uptake of an insurance scheme that will provide sufficient cover to rectify defects for up to 10 years for a class 2 building. Further, this coverage of the full construction value is generated from premiums paid for by the developer.
To firmly enshrine DLI in legislation, schedule 3 to the bill proposes important amendments to the Strata Schemes Management Act 2015 and its supporting regulation. These amendments set up a robust regulatory framework for DLI that will assure and encourage insurers to enter the market knowing they have the appropriate legislative support. The inclusion of section 211AB in the bill makes clear that developers who obtain a DLI product for their class 2 apartment building project are exempt from the existing strata building bond and inspection scheme requirements except for section 206 of the Strata Schemes Management Act, which permits a builder reasonable access to a building to rectify defects.
We must work with industry to ensure the success of DLI in NSW. This includes making DLI an attractive proposition for developers of class 2 buildings and removing the unnecessary expense associated with a mandatory inspection scheme. This will allow insurers in the market to manage their own risk and have greater control in ensuring developers and builders produce defect‑free buildings while concurrently extending the duration of remedies for homeowners from two to10 years.
Section 211AC of the bill enables regulations to be made that would allow DLI to be taken out as an alternative to home building compensation insurance for the construction of low‑rise apartment buildings that are up to three storeys. It does this by providing exemptions from the insurance requirements of sections 92 and 96 of the Home Building Act 1989 where the developer has notified the secretary of the developer's intention to obtain DLI for the building work. The regulations can also set out conditions and requirements for DLI being used as an alternative to home building compensation insurance. This regulation‑making power will only be exercised with careful consideration about the impact on strata homeowners, and necessary conditions and requirements to protect their interests.
A DLI product will provide protection on a strict liability basis. In contrast, home building compensation insurance is claimable as a "last resort" where a building business has become insolvent. DLI is intended primarily as a market‑driven solution to prevent and address building defects. However, it is important the secretary has sufficient powers to monitor the state of the market and ascertain when there is market maturity in the DLI space. Market maturity is a key factor in any future consideration of mandating DLI. To enable this, section 211AD includes appropriate powers for the secretary to direct an insurer to give information about their DLI policies, such as the number of policies issued, including the terms and premiums payable; the names of developers where DLI policies have been issued and the buildings they relate to; and the number and value of claims made under DLI policies issued.
The amount and duration of the existing strata bond is intended to be increased and lengthened incrementally, with these changes being informed by the maturity of the DLI market. As a first step, the bill will amend the current 2 per cent strata bond mandated in the Act to enable a prescribed percentage in the supporting regulation. Likewise, the two‑year period a bond must be held will be prescribed in the supporting regulation. The Strata Schemes Management Regulation will prescribe the strata building bond to increase to 3 per cent of the total contract cost of the build from 1 February 2024, providing more money to be set aside for consumers to rectify defects identified during inspections done under the scheme. These regulation powers will enable proportionate and responsible changes to the strata bond scheme to encourage greater uptake of DLI products, which is a far superior consumer protection for apartment owners in New South Wales.
Complementary to the direction powers for insurers are new powers in section 211AE to direct developers to give information about their insurance. This will ensure the building regulator has sufficient ability to interrogate DLI policies that have been purchased by developers. Failure by an insurer or developer to comply with the secretary's direction attracts a maximum penalty of $55,000 in the first instance and $22,000 for every day the offence continues, providing appropriate incentive to comply. Importantly, these directions can also be issued to insurers and developers who are located outside of New South Wales where the building work is within New South Wales. Section 211AF also creates a general penalty provision of $110,000 for a corporation and $22,000 for any individual who knowingly gives the secretary information in relation to DLI that is false or misleading in a material particular.
In rare cases where a resident denies access to their unit, and this access is necessary to determine whether there is defective building work or to rectify defective building work, section 211AG of the bill allows the NSW Civil and Administrative Tribunal to make an order requiring access to the building be granted. Finally, sections 211AH and 211AI in the bill establish the necessary regulatory framework for DLI within the building regulatory framework. The requirement for DLI will interact with the existing statutory building certification scheme under the Environmental Planning and Assessment Act 1979. A developer will be required to provide the secretary with a certificate of currency of the DLI policy for the building before an application is made for a construction certificate for the building work.
When a developer does not provide this notification, the application will not be able to be progressed, and consequently work will not be able to be carried out. Likewise, there will be a check and balance before an application is made for an occupation certificate to ensure that a DLI policy is in place. The insurance itself can commence once an occupation certificate is issued, but there needs to be evidence of the policy before an occupation certificate is applied for or issued. Like the construction certificate provisions, an application for an occupation certificate will not be able to be progressed until appropriate notification has been provided to the secretary.
As a backstop, there will be a new ground added to the RAB Act to prohibit the issuing of an occupation certificate where the developer has failed to notify the secretary of their DLI policy. If an occupation certificate is issued in contravention of a prohibition order it will be invalid by virtue of the prohibition order powers under the RAB Act. The reason there is such an emphasis provided at this stage is because occupation certificates are often used for strata buildings to settle contracts. The Government is committed to ensuring that people who live in and own apartments have the strongest consumer protections in the country, and DLI is a crucial step towards this.
Schedule 4 to the bill ensures that the building regulator will be able to immediately suspend players in the building process when their conduct poses a serious risk to public safety, consumers or other businesses. Under part 4, division 2 of the Home Building Act 1989, the building regulator has an existing power to immediately suspend an individual from holding a contractor licence, supervisor certificate or tradesperson certificate pending a determination by the secretary whether to take disciplinary action under the Act. The bill replicates this power in the Building and Development Certifiers Act 2018 and the Design and Building Practitioners Act 2020 to allow the secretary to immediately suspend a registered certifier or registered practitioner in circumstances that pose significant risk of harm to persons or buildings. Under these reforms, a certifier or design practitioner may be immediately suspended where that person has been issued a show cause notice.
A show cause notice is a procedural fairness mechanism that gives practitioners a chance to explain why their conduct should not attract cancellation or ongoing suspension of their registration. It allows them to make submissions to the secretary as to why they think their conduct does not pose a risk of harm, loss or damage to the public, consumers or businesses. The secretary must consider those submissions when deciding whether to proceed with cancelling or suspending a registration. The secretary must be satisfied that there is, or is likely to be, a serious risk to public safety, a consumer or another business if the person was to continue to do building, design, engineering or certification work during the show cause period. A suspension will be in place for no more than 60 days at a time and may be extended if the cause of action continues. However, the bill ensures that a suspended person has a right of appeal to the NSW Civil and Administrative Tribunal if they are aggrieved by the secretary's decision to issue an immediate suspension or to otherwise take disciplinary action. These are strong but necessary preventative powers to ensure protection against unlawful, harmful conduct.
Finally, in schedule 5 the bill proposes some minor but important amendments to the Building and Development Certifiers Act and the Home Building Act to ensure necessary information sharing can take place between New South Wales Government agencies to support the establishment of the Building Commission. The information that can be shared will be limited to that which is reasonably necessary to assist the secretary and relevant agencies to carry out relevant functions related to these Acts, such as allowing for the registration of certifiers. The amendments will ensure the new Building Commission has access to the information needed to assist with the investigation and enforcement of residential buildings in New South Wales.
The Government has made a commitment to delivering more housing for the people of New South Wales. However, we will not sacrifice quality for quantity. The Government sees the soon to be established Building Commission as a critical enabler to the Government's housing delivery strategy. The bill gives the commission the tools and powers it needs to execute this strategy. But this is not the end of the action our Government is going to take. Building failures across all building types are a risk to safety for people left with noncompliant building work and they increase costs to owners, other practitioners, financiers and insurers to remediate those defects. These failures tarnish the industry as a whole, even for those who produce quality work, and reduce confidence in the building and construction industry.
The bill implements important reforms and lays the groundwork for the sweeping transformation under our building bill to be introduced into Parliament next year. This is not a Government that rests on its laurels with such an important industry. We are pushing forward with meaningful reform. Our rental reforms, the appointment of a rental commissioner, the injection of new money for the Building Commission and the reforms proposed by this bill are strong indicators to industry and the community that this Government will deliver on its commitments to support industry to deliver compliant, safe and affordable housing across the State. I commend the Building Legislation Amendment Bill 2023 to the House.
Second Reading Debate
Mr TIM JAMES (Willoughby) (15:55): I lead for the Opposition in debate on the Building Legislation Amendment Bill 2023. I indicate from the outset that the Liberal-Nationals support the bill. It is the case that the provisions within the bill borrow and build significantly upon the important work of the former Coalition Government, which had been undertaken to strengthen the building industry sector and confidence, and consumers' rights within it. It is an industry where we should have high standards and practices, as well as appropriate safeguards for individuals to protect them when something does go wrong. Questionable, unscrupulous operators have no place in this industry and regulators need strong powers to respond.
Recently there have been well-publicised challenges in the building sector. We have seen some poor and unscrupulous practices, building defects that have proven costly for consumers and high levels of insolvencies. This has unquestionably adversely affected confidence in the industry. With an increased need to grow the State's housing stock to meet future growth challenges and address the home affordability crisis, consumers must have full confidence to make the big investment decision required to build a new home. We understand the bill is a precursor to a future more comprehensive building bill. The Coalition Government released draft building bills for public consultation in 2022: the draft building bill, the draft building compliance and enforcement bill, and the draft building and construction legislation amendment bill and regulation.
Indeed, the former Government laid the groundwork for the measures before us today and the consolidated building laws to come that the current Government has now taken up. We welcome this, but there is much more to do. I make some observations on the bill's key provisions. All members will recall the building disasters in the apartment building sector involving the Opal and Mascot towers, among others. I acknowledge the incredible work that Building Commissioner David Chandler, OAM, has done since being appointed by the Coalition in 2019. The commissioner brings a tough but fair and consistent approach to the job, and rightly so. He is a strong cop on the beat, cleaning up the apartment building sector, seeking to weed out dodgy operators and practices, and rebuilding confidence for consumers and industry alike.
The Coalition supports expanding the commissioner's powers to class 1 dwellings, standalone single homes. This was something the previous Government was working on, and we have been pressing the current Government to proceed with this change. This expansion is a testament to the commissioner's work in the apartment space, as well as the success of the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020—the RAB Act, as it is known—that empowers the commissioner and his work. The bill will allow the proactive investigation of building defects in standalone single residential dwellings, class 1, giving the commissioner powers of entry, inspection and making rectification and stop work orders. This is a model that we know works through the RAB Act.
The Opposition supports this move so the commissioner can get straight to work on seeking to clean up the home building industry. We have seen too many unscrupulous operators inflicting financial and emotional pain upon home builders. These are real people and real lives that have been affected. We have heard the stories of young families waiting years for their home to be finished only for defects to emerge that are so bad the home must be demolished and rebuilt. By that stage, the builder has apparently gone out of business. We have heard examples in the media in recent weeks of homes not being completed and consumers who are seeking to build their home—sometimes their first home—waiting and waiting. That is often a heartbreaking experience.
I believe the work of the Building Commissioner, empowered by the regulatory tools provided in the bill, will go some way to cleaning up this industry and restoring confidence. The Opposition supports the moves to strengthen building product safety and establish a chain of responsibility. That has been informed by the National Building Product Assurance Framework, which is a national process aiming to establish consistency across Australian jurisdictions. We want harmonisation, and in government the Coalition engaged with that national process but was frustrated at the time it was taking to establish the national model. Establishing a chain of responsibility between manufacturer, supplier and installer was a feature of the Coalition's draft building and construction legislation amendment bill.
The Opposition supports New South Wales getting ahead of the national model. That needs to be done with some urgency. Confidence needs to be returned to building products. I note that building products generally do not fall under the protections of the Australian Consumer Law. Products such as cladding materials, some of which have proven to be quite combustible, have resulted in extremely high rectification costs. The bill requires that persons within the supply chain for building products have a duty to ensure that the building products they design, manufacture, sell or install are suitable for their intended use. Other provisions assist in tackling the problem of insolvency. It is a problem for the industry and for consumers left seeking redress when defects emerge sometimes years down the track.
The building industry has the second highest rate of insolvencies. Decennial liability insurance [DLI] is an emerging insurance product involving 10-year cover taken out by a developer or builder as a first resort protection for future owners for the cost of remediating building defects. Many strata corporations have faced large remediation costs when defects emerge later, particularly when the builder has since become insolvent. Decennial liability insurance would be used as an alternative to a strata building bond or the Home Building Compensation Fund, and the bill facilitates that by lifting some of the requirements in relation to bonds and the Home Building Compensation Fund where a DLI policy is in place.
The former Government authorised DLI as an alternative to the strata bond levy, subject to approval by the Secretary of the Department of Customer Service. In August 2022 a ministerial advisory panel reported on its research into the feasibility of introducing a DLI scheme in New South Wales. It found that once there is a mature market, DLI will not place an undue burden on project costs, housing supply or housing affordability. The bill involves a voluntary DLI rather than a mandatory model that would replace bonds. It is understood the Government has recently concluded consultation on a proposal to introduce later mandatory DLI for all new apartment buildings.
The Opposition acknowledges the measures to discipline practitioners who have engaged in phoenixing. We are united with the Government on that. Individuals who engage in phoenixing have no place in business, and the book must be thrown at them. It is underhanded and deceptive behaviour, and we support the regulator and courts having the necessary tools to stamp it out. On behalf of the Opposition, I thank the extensive list of stakeholders who were consulted on this bill. I acknowledge the wider building reforms that were in train under the Coalition. I acknowledge the tireless and diligent staff at Fair Trading who have worked on building reform for some period. I also acknowledge the Minister for Better Regulation and Fair Trading for his support and work on the important measures, along with his office. The Opposition awaits more measures from the Government to further boost confidence in the building sector. I commend the bill to the House.
Ms CHARISHMA KALIYANDA (Liverpool) (16:03): I contribute to debate on the important Building Legislation Amendment Bill 2023. The bill provides another piece of the puzzle in the broken and dysfunctional housing system in New South Wales. The purpose of the bill is to progress a range of reforms to strengthen consumer protections for home owners, ensure accountability for unsafe building products and provide necessary powers to address practitioners' noncompliant work and poor behaviour. The bill makes changes to the Building Commissioner's enforcement powers. Those changes were recommended by the Legislative Council Public Accountability Committee in its report entitledFurther inquiry into the regulation of building standards. They will enable the new Building Commission to restore confidence to the New South Wales residential construction sector.
Liverpool, particularly in the CBD, has been on the front line of high-rise housing development over the past decade. I have spoken to many community members who live with the reality that their building is one of the four in every 10 residential apartment buildings built between 2014 and 2020 that have serious defects. I commend the Minns Government for taking swift action on this issue and commend the Minister and all the staff at Fair Trading for their work in this space over many years. I will specifically address some of the key aspects of the legislation. Firstly, the bill delivers an urgently needed reform agenda. The Building Legislation Amendment Bill 2023 will improve transparency, accountability and the quality of work in the building and construction industry in New South Wales. The New South Wales Government recognises the imminent need for more homes to ease pressure in the housing market and ensure that everyone has a safe place to live. But we cannot sacrifice quality for quantity. The Government is committed to ensuring the tens of thousands of new homes that New South Wales needs are quality homes.
The creation of a standalone Building Commission bolstered by $24 million in funding and more than 400 dedicated staff will drive dodgy builders out of the market and ensure that buyers get the quality homes they deserve. The Building Commission will put trust and confidence back into the sector to ensure continued investment and give people confidence as they make what is sometimes the biggest investment of their lifetime. The legislation will support the crucial work of the Building Commission and deliver on the Government's commitment to transformational reforms to secure behaviour change in the building and construction industry. Building failures increase risks to the safety of families who live in those buildings and result in home owners having to fork out large amounts of money to fix defects. Those failures tarnish the industry, drive down consumer confidence and negatively impact traders who produce quality work. The bill will take some fundamentally important steps forward and improve building regulation.
However, the Government does not intend to stop there. The bill implements the first tranche of reforms this Government expects to make as part of the biggest overhaul of New South Wales building laws in the State's history. The Government has made a commitment to introduce a whole-of-sector building Act to consolidate and modernise all New South Wales building legislation. That is the first step to providing immediate support to the Building Commissioner and responding to issues in the construction sector. That and other reforms form part of the Government's plan to transform and rebuild public confidence in the industry. I recognise the many voices who have been exposing the substandard work and dodgy practices that are rife in the industry. In the midst of a cost-of-living crisis, the last thing many in our community can afford is a defects or damages bill through no fault of their own. But that is a reality for many in the community.
The second aspect of the legislation I will highlight is its approach to tackling insolvency and phoenixing. For the 2022-23 financial year, the construction industry experienced the highest rate of insolvency in Australia compared with all other industries. Starting a new company after a failed company is a common and lawful part of the business cycle. There is an important distinction though between legitimate insolvency process and intentional phoenixing activity. Intentional phoenixing activity is where directors intentionally create a new company to continue the business of an existing company that has been deliberately liquidated to avoid paying outstanding debts, including taxes and payments owed to subcontractors and employee entitlements.
Company directors involved in intentional phoenixing activity usually transfer the assets of an existing company to a new company without paying the assets' true value, leaving debts with the old company. Once those assets have been transferred, the old company is placed into liquidation. When the liquidator is appointed there are no assets to sell so creditors cannot be paid. That has significant and devastating impacts on traders, suppliers and consumers. While insolvency regulation is the responsibility of the Commonwealth Government, the bill will implement measures to help the New South Wales regulator stop those people who have been involved in intentional phoenixing from creating further harm in the New South Wales construction industry. The bill provides grounds to cancel a licence, refuse an application or disqualify a person if they have been involved in the management of a company that has become insolvent in the past 10 years. This will put the onus on applicants with a history of insolvency to prove that they do not present a risk to future customers in order to get a licence.
Finally, the bill ensures accountability of building product safety by expanding requirements in the Building Products (Safety) Act and introduce new duties on all persons in the supply chain for building products. The primary duty for each person in the supply chain is to ensure that the building product they design, manufacture, supply or install meets the National Construction Code and other relevant standards and laws and is suitable and safe for its intended use. The Australian Senate report into nonconforming building products found that nonconformance occurs across electrical, lighting, plumbing, wood, steel and PVC products, which is a frightening reality. The National Electrical and Communications Association expressed concern to the Senate that nonconforming electrical products can cause electrical fires and shocks, serious injury and death, and property damage.
HPM Legrand told the Senate about how it had discovered that counterfeit versions of its socket outlets had been manufactured in China and sold in Australia without its approval. With the help of NSW Fair Trading, the supplier was tracked down and issued a fine. The bill will ensure that, going forward, the building regulator has the power it needs to create meaningful deterrents against the production of dodgy products and take swift action to prevent these products hitting New South Wales shelves. I have previously spoken about the importance of the bill to so many parts of our community, especially in Western Sydney, which is bearing the brunt of this country's housing and population growth. This legislation responds to the alarming situations and experiences of many people in our community and the growing concerns held by many stakeholders. I commend the bill to the House.
Mr ALEX GREENWICH (Sydney) (16:11): I make a contribution to the Building Legislation Amendment Bill 2023. Decades of fast-tracking development at the expense of design excellence, sustainability and quality workmanship has made defects in new apartments a common occurrence. In the Sydney electorate, where 80 percent of my constituents live in apartments and any new development is a multi-dwelling, I have heard shocking stories of defects like flooding balconies, fire stairwells too small for an evacuation, and cracking foundations. Getting remedies through warranties is challenging and often the cost ends up being borne by owners through massive levies, despite defects not being their fault or something they could have foreseen. The situation has been unfair and it has undermined confidence in the building sector. Exposés of substantial defects at Opal Tower and Mascot Towers, which left owners in peril and unable to live in or rent their homes while facing bankruptcy, led the previous Government to act and commence real reform.
The Building Legislation Amendment Bill continues the recent trend of restoring consumer safeguards in the building industry. It comes at a vital time, as the State prepares to increase density and build more homes. Importantly, the bill will make it harder for builders and developers to phoenix their companies to avoid liability for defects they created. Phoenixing in the construction industry has been described as endemic in New South Wales. Directors create new companies for specific projects and as the project finishes up, profits are taken, assets are moved to other companies and the initial company is placed into liquidation, leaving owners no avenues to pursue directors for building defects. Meanwhile, those directors and managers continue to operate in the industry through different companies. The bill will make it harder for persons who have been convicted of an offence under the Corporations Act, or who were the director or involved in the management of a construction company that has gone into administration, from continuing to operate by strengthening the conditions for issuing and renewing a licence and cancelling one.
The Owners Corporation Network has identified additional loopholes that should be closed to prevent builders from continuing to work in the industry if they have attempted to avoid their obligations to fix defects. A director of a company that becomes a debtor under a judgement of money is excluded from holding a builder's licence but no-one else involved in the management of the company is penalised. Furthermore, a builder or developer whose licence is suspended because they did not comply with a court tribunal order to pay money for a defect can continue to operate in the industry via other existing licences. I ask the Minister in reply to outline how these loopholes will be addressed.
Other changes in the bill will help facilitate and encourage the uptake of decennial liability insurance, which provides significant potential to give apartment owners a simple and quick pathway to resolving defects without the costs and administrative burden. Building insurance has been vexed since the collapse of HIH in 2001. To make home warranty insurance more sustainable for insurance companies, it became a last resort scheme, with claims limited to situations where the builder died, disappeared or became insolvent. Then the scheme was simply scrapped for buildings of four or more storeys.
The introduction of the defects bond was the first real opportunity in years for owners of new multi-unit dwellings to pursue defects outside the court system. However, the bond is too low for most defect bills, has a limited availability period and requires extensive negotiation between parties. The return of insurance through the decennial liability insurance scheme provides an alternative option that is superior. Decennial liability insurance covers fixes to all identified defects within a 10-year period. It has the benefit of encouraging good building practices, with good builders more likely to get insurance and insured builders more attractive to engage and buy from. I hope decennial liability insurance grows to be useful and sustainable.
Other changes create a chain of responsibility for building products, from design, manufacture, sale, designed use and installation. Everyone across the chain will have responsibility to ensure that products are safe and that unsafe products are identified and banned. The bill also extends the Building Commission's remit from only apartments to class 1 buildings, which include houses and terraces. The Building Commissioner has been a game changer for the industry, and I pay tribute to the passion, dedication and expertise of David Chandler.
Defects in a new home are challenging, regardless of the type. If we want to clean up the building industry entirely, we should take a holistic approach to enforcement and monitoring. For most people, a home is the biggest investment, and uncovering defects is the start of a headache. Defects affect liveability, value and insurance, and can significantly disrupt life. New South Wales is discussing how to move forward with a massive lift in the number of homes under construction to help improve affordability. But building new homes will only improve affordability if people have confidence that those homes will be safe, liveable and sound. I congratulate the Government on introducing this important bill.
Ms KAREN McKEOWN (Penrith) (16:17): I make a contribution to debate on the Building Legislation Amendment Bill 2023. The bill makes amendments to various Acts across the Better Regulation and Fair Trading and Building portfolios. These Acts include the Home Building Act 1989, the Building Products (Safety) Act 2017, the Building and Development Certifiers Act 2018, the Design and Building Practitioners Act 2020 and the Strata Schemes Management Act 2015. These amendments will improve accountability, responsibility and confidence in the construction industry. This Government has openly committed to a progressive reform agenda for the oversight of the New South Wales building industry. The bill progresses a range of much-needed reforms to strengthen consumer protections for homeowners, ensure accountability for unsafe building products, and provide the necessary powers to address practitioners' noncompliant work and poor behaviour.
We have all heard the horror stories and seen the serious impacts that unsafe building products and noncompliant buildings can have on people's lives and livelihoods. We all know someone who has been badly impacted and suffered huge financial losses to fix building defects as a result of often illegal building practices or the use of substandard products in order to save a few dollars. Defective building work in low-rise residential construction costs Australian consumers more than $700 million annually. We do not need to be reminded about the Opal and Mascot towers debacle. Years later, those residents are still suffering the ramifications.
The Labor Government has unashamedly committed to tackling the housing crisis. However, it will not sacrifice construction quality for quantity. That is why it is creating a standalone Building Commission and investing $24 million in funding with more than 400 dedicated staff to confront the shonky players in the building market. In this, the bill has teeth. The Building Legislation Amendment Bill makes changes to the Building Commissioner's enforcement powers that were recommended by the Legislative Council Public Accountability Committee report entitledFurther inquiry into the regulation of building standards. It will enable the new Building Commission to effect behavioural change while restoring confidence to the New South Wales residential construction sector, investors and, importantly, home owners.
The bill implements the first tranche of reforms this Government expects to make as part of the biggest overhaul of New South Wales building laws in the State's history. Further reforms to building legislation will be introduced to Parliament in 2024 by way of a whole‑of‑sector building Act to consolidate and enhance all New South Wales legislation, thus delivering this Government's reform agenda. The bill amends the Home Building Act 1989 to introduce new powers for the building regulator to undertake proactive investigation and order rectification of building defects in low-rise residential class 1 homes during construction. This will allow early detection of defects and reduce the burden on home owners having to lodge complaints or take costly legal action to rectify any building defects.
In the 2022-23 financial year, the construction industry experienced the highest rate of insolvency in Australia compared with all other industries. It is important that we increase powers to the commissioner to prevent practitioners with a history of insolvency or illegal phoenixing from working in the building sector. So what is phoenixing? Phoenix activity occurs when a new company rises from the ashes of a former company. It is of little or no value, and it continues the business of the existing company that has been liquidated or otherwise abandoned, thus leaving debts with the old company. The new phoenix company is formed with the intention to exploit the corporate form to avoid paying outstanding debts, which can include taxes, creditor debts and employee entitlements. It is important to address this abhorrent behaviour in the building industry.
Amendments to the Building Products (Safety) Act 2017 impose a range of obligations and accountabilities on persons who form part of a building product supply chain and expand current requirements to ban and/or recall the supply of building products that are deemed to be non-conforming. A non-conforming product is a building product that does not meet the National Construction Code, standards and laws, or is not suitable or safe for its intended use. The bill introduces new duties to apply to all persons in the supply chain of building products to ensure that products that are designed, manufactured, supplied and installed in buildings are safe and compliant with the relevant standards and building codes.
It is intended that the building product safety reforms will come into force at the same time as the comprehensive building Act that the Government intends to introduce next year. This is a commonsense approach to allow time for the Government to establish the dedicated Building Commission and to educate people in the building product supply chain about their new obligations. This will also give industry appropriate time to prepare to comply with its new obligations.
The bill amends the Building and Development Certifiers Act 2018 and the Design and Building Practitioners Act 2020 to enable the building regulator to immediately suspend practitioners who are subject to a show cause notice. This means the secretary is satisfied there is, or is likely to be, a serious risk to public safety, consumers or other businesses if the practitioner is allowed to continue work until the disciplinary action is finalised. This is much welcomed news in the local government sector, where there has been significant advocacy over many years on this issue.
The bill makes administrative changes to support the new Building Commission to share information with other government agencies. Extensive consultation has been conducted on the reforms contained in the bill. In August last year the Department of Customer Service publicly consulted on a wide range of building reforms, including the reforms proposed in the bill. Stakeholders provided feedback and comment on the draft bill and accompanying regulatory impact statements. The consultation received 1,477 survey submissions and 117 submissions from consumers, tradespeople and industry associations. There was broad support for the reforms contained in the bill. Indeed, I have received positive feedback from businesses in my electorate of Penrith.
Separate public consultation was carried out between August and October this year on the proposal to introduce mandatory 10-year serious defects insurance for all new apartment buildings. The proposals contained in the bill are separate from this consultation and are intended to enable the ongoing voluntary uptake of serious defects insurance. As I said, the bill introduces commonsense reforms that the Government is committed to delivering for the people of New South Wales, and it has further reforms on the way. I commend the bill to the House.
Ms LIZA BUTLER (South Coast) (16:26): I speak in favour of the Building Legislation Amendment Bill 2023. The bill will progress a range of reforms to strengthen consumer protections for home owners, ensure accountability for unsafe building products and provide necessary powers to address practitioners' noncompliant work and poor behaviour. The Minns Government recognises the imminent need for more homes to ease pressure in the housing market and to ensure that everyone has a safe place to live. But we cannot sacrifice quality for quantity. This Government is committed to ensuring that the tens of thousands of new homes that New South Wales needs are quality homes. To ensure that homes are built to a quality we all expect, the Government will oversee the creation of a standalone Building Commission, bolstered by $24 million in funding and more than 400 dedicated staff to drive dodgy builders out of the market and ensure buyers get the quality homes they deserve.
The Building Legislation Amendment Bill 2023 will improve transparency, accountability and the quality of work in the building and construction industry in New South Wales. The legislation will support the crucial work of the Building Commission and deliver on the Government's commitment to transformational reforms to secure behavioural change in the building and construction industry. The Building Commission will put trust and confidence back into the sector to ensure continued investment and give people confidence as they make the biggest investment of their lifetime.
I have worked within the building industry, and I know firsthand that building failures increase safety risks to families and result in homeowners having to fork out large amounts of money to fix defects. These failures tarnish the industry, drive down consumer confidence and negatively impact tradespeople who produce quality work. The bill makes amendments to various Acts across the Better Regulation and Fair Trading portfolio and the Building portfolio, including the Home Building Act 1989, the Building Products (Safety) Act 2017, the Building and Development Certifiers Act 2018, the Design and Building Practitioners Act 2020 and the Strata Schemes Management Act 2015.
The bill amends the Home Building Act 1989 to introduce new powers for the building regulator to undertake proactive investigation and order rectification of building defects in low-rise residential class 1 homes during construction and to increase its powers to prevent practitioners with a history of insolvency or illegal phoenixing from working in the building sector. Amendments to the Building Products (Safety) Act 2017 impose a range of duties and obligations on persons who form part of a building product supply chain and expand the current requirements to ban and/or recall the supply of building products that are deemed to be nonconforming. A nonconforming product is a building product that does not meet the National Construction Code, standards or laws or is not suitable or safe for its intended use. Amendments to the Strata Schemes Management Act 2015 will clarify that obtaining 10‑year warranty insurance on an apartment building means that developers are exempt from certain requirements under the current strata building bond scheme and home building compensation scheme.
The bill amends the Building and Development Certifiers Act 2018 and the Design and Building Practitioners Act 2020 to enable the building regulator to immediately suspend practitioners who are subject to a show cause notice where the secretary is satisfied there is, or is likely to be, a serious risk to public safety, consumers or other businesses if the practitioner is allowed to continue to work until the disciplinary action is finalised. One of the key reforms is the expanding of proactive enforcement powers for the building regulator class 1, which is low-rise residential buildings under the Home Building Act 1989. These reforms will allow for powers of entry, inspection, rectification orders and stop-work orders during the construction phase of residential homes.
On ABC Illawarra radio this morning, a representative from the Master Builders Association welcomed the news of these reforms and said, "This is a good thing. If you find a defect or issue early on in the build, then that is far preferrable than finding the defect once the building is handed over." Not a truer word has been spoken. While the current proactive powers for apartment buildings have resulted in significant improvements and purchaser confidence due to the early detection and remediation of defects, we must build on this momentum and expand these powers to all homes built to ease the burden on home owners having to lodge complaints or take costly legal action to rectify building defects. Inspectors will now be able to enter residential homes under construction to not only inspect the build quality and order rectification work where defects are identified but also to test materials and components to ensure that they are compliant with Australian building standards. The regulator will also be given the power to issue a stop-work order where they consider that continuing building work could lead to significant harm to the public, residents or future residents of a building.
The bill makes it clear that the Government will not tolerate builders who do not do the right thing. Failing to comply with a rectification or stop work order will attract a maximum penalty of $330,000 for a company and $110,000 in any other case. Where the offence continues, the penalty amount will increase every day by $33,000 for a company and $11,000 for an individual. For a person who holds a contractor's licence, disciplinary actions can be taken against the person if they do not comply with a rectification or stop work order, which can result in suspension or loss of licence.
Last year I witnessed the perfect example of a residential build where rectification work was luckily identified before the new family home was handed over. The slab had failed and, just before handover, the split‑level house was filled with water which was seeping into the house from the concrete stairs that separated the two levels. While the rectification work took many months to fix, the family was extremely lucky that they had not moved in and the works has not been signed off. It could have been a long and drawn-out process—and a costly one. If the building regulator had the powers then to proactively inspect and investigate class 1 residential homes, it is likely that this fault would have been identified and not left to pure luck and a severe thunderstorm for the issue to be identified.
As already mentioned, the bill will also expand requirements in the Building Product (Safety) Act and introduce new duties on all persons in the supply chain for building products. The definition of a "building product" will not change—building products remain any product, material or other thing that is, or could be, used in a building. The definition excludes asbestos or asbestos-related products. The supply chain will capture all people who design, manufacture, import or supply building products. It will also include people who design, draft or write plans or specifications for a building or part of a building and recommend or incorporate the use of building products, such as architects, building designers and engineers. The "supply chain" will capture those who install or do building work where a building product is used. This new regulatory framework will be enforced and overseen by a dedicated building commissioner, and the Government will ensure that the NSW Building Commission is properly equipped with the expertise and capacity to use existing and new regulatory powers to respond to defective and untrustworthy design, building work and products across the sector.
The bill will take some fundamentally important steps forward and improve building regulation. It will implement the first tranche of reforms this Government expects to make as part of the biggest overhaul of New South Wales building laws in the State's history. The Government has made a commitment to introduce a whole‑of‑sector building Act to consolidate and modernise all New South Wales building legislation. The bill is a first step to provide immediate support to the NSW Building Commissioner and to respond to issues in the construction sector. It is an important step. The bill forms part of the Government's plan to transform and rebuild public confidence in the building industry. I commend the bill to the House.
Ms MARYANNE STUART (Heathcote) (16:35): I am delighted to contribute to debate on the Building Legislation Amendment Bill 2023, which is incredibly important to all home owners. The purpose of the bill is quite simple: to improve transparency, accountability and the quality of work in the building and construction industry. The bill amends the Home Building Act 1989 to introduce new powers to the building regulator. Those powers will allow the regulator to undertake proactive investigations and order building defects to be rectified for low-rise or freestanding homes. This will allow the regulator to inspect homes during the construction phase to ensure that works are rectified promptly. Importantly, the increased powers will also prevent practitioners with a history of insolvency or illegal phoenixing from working in the building sector.
Amendments to the Building Products (Safety) Act 2017 will impose obligations on those who form part of the building supply chain as well as expand current requirements to ban or recall the supply of nonconforming building products—a product that does not meet the National Construction Code. Amendments to the Strata Schemes Management Act 2015 will clarify that obtaining 10-year warranty insurance on an apartment building means developers are exempt from certain requirements under the current strata building bond scheme and home building compensation scheme. Amendments to the Building and Development Certifiers Act 2018 and the Design and Building Practitioners Act 2020 will allow the regulator to suspend practitioners who are subject to a show cause notice where the secretary is satisfied there is, or is likely to be, a risk to public safety. In essence, these amendments will ensure that those in the building and construction industry who are doing the wrong thing, either deliberately or through substandard work, are held accountable.
The Minister for Planning and Public Spaces has been handed one of the most difficult jobs in New South Wales politics: rectifying the myriad of planning mistakes of the former Government. The National Housing Accord targets stipulate that 377,000 homes need to be constructed in New South Wales in the next five years. We know that we need to reduce the red tape and get on with the job of improving the housing supply, but that does not mean we should accept shonky workmanship. Quality should not come at the cost of quantity—both can coexist. Improving accountability and the quality of work in the construction industry is of the utmost importance. The Opal Tower fiasco is perhaps the greatest recent example of what happens when quality is compromised. To those residents, Opal Tower was their home and their dream. However, it has been well documented how substandard work turned that great Australian dream of owning a home into a nightmare. I cannot imagine the anxiety and devastation that the residents felt. Under those opposite, shoddy builders and tradespeople were allowed to run roughshod and sign off on work that was well below expectations.
The amendments to the Home Building Act 1989 are an enormous and vital step to ensuring new home owners can move into their homes knowing the work has been completed to a high standard. Allowing the regulator to undertake proactive investigations means shoddy workmanship will be caught earlier. It will result in substandard work being rectified a lot earlier, and it will put those looking to cut corners on notice. We know the best cure is prevention, and that is exactly what these new powers are designed to achieve. The targeting of phoenixing is also significantly important.
Phoenixing is essentially an illegal practice that sees directors of companies abandon a company or transfer the business of an existing company to a new company. They do this without paying true market value—in other words, leaving the old company with the debts. It is fraudulent, it is immoral, and it is a practice that the New South Wales Government is serious about cracking down upon. That is why, as part of these amendments, the regulator would be given the power to prevent those with a history of insolvency or illegal phoenixing from working in the building sector. I thank the Minister for his prompt action. These amendments are great news for home owners in New South Wales. I commend the bill to the House.
Ms ANNA WATSON (Shellharbour) (16:40): I speak in favour of the Building Legislation Amendment Bill 2023. I thank the Minister for bringing forward this important bill. The bill is very much welcomed by the residents of Shellharbour, many of whom have arrived from all over New South Wales to start a new life in the Illawarra. As existing housing is in short supply, considering the high population growth, thousands of new homes have been built in the past decade, with thousands more on the way. The Minns Labor Government is on a mission to increase housing supply, but there is no point in encouraging the building of more houses if they are of such poor quality that the owners need to move out within a few years because of major repairs.
Like many fast-growing regional areas, most homes being built in New South Wales—particularly in Shellharbour—are class 1 buildings, such as freestanding houses. Those homes are being built in both new greenfield estates, such as Wongawilli or Shell Cove, and across other suburbs, such as Oak Flats or Shellharbour Village, via knockdown and rebuild. Like any industry driven by profit, the building industry needs government oversight. For too long, a minority of builders have been allowed to get away with building houses that just are not up to scratch. Way too many houses are being built that do not comply with strict building codes. Whilst most builders across the Illawarra do the right thing, this legislation targets the incompetent and lazy builders that give all honest builders a bad name.
I know these reforms will be welcomed by most hardworking builders, who hate the dodgy builders as much as I do. We need to restore confidence amongst buyers of new homes that their builder is doing the right thing and that their new house will survive many decades, rather than just a few years, before requiring major repairs. Buying a home with major defects has been the reality for many residents of the Waterfront development in Shell Cove, where Frasers has constructed numerous houses that fell apart within a few years of being completed. Indeed, some of the increased powers outlined in the bill were requested by the Building Commissioner after he visited Shell Cove on 24 June this year. As reported in theIllawarra Mercury at the time, the fantastic journalist Connor Pearce stated:
The NSW Building Commissioner has inspected the defect-riddled homes in The Waterfront development in Shell Cove and come away disappointed in Shellharbour City Council's flagship project.
I can assure the House that it is not just the Building Commissioner who is disappointed. The residents of Shell Cove who are impacted by these faults are absolutely disgusted, and rightly so, as they are living with major issues with waterproofing, as well as general poor-quality build: homes so poor that the owners must think that they were built by amateurs who watched a "how to" video on YouTube just before showing up to the building site—that is how pathetic it is in the Shell Cove area for many home owners; roof construction so poor that the owners would have been better off leaving the roof off and having the whole house open to the sky—at least it would dry faster and there would be no chance of mould. I was delighted to read some quotes from Commissioner Chandler in last week'sSunday Telegraph, where he stated:
The message we want to get across is it is better and cheaper to get it right than have me come along and order it to be pulled down—and I will order it to be pulled down.
Frasers will be trembling at the thought of the Building Commissioner visiting one of its class 1 homes currently under construction. Frasers has many questions to answer, and it has many apologies to make. I hope that the builders across the Illawarra are listening, because they need to do better, and the Building Commissioner will be watching. I have seen the dodgy work myself, as I drive around my electorate. Frasers and developers will no longer be able to turn a blind eye. I have spoken with so many of my constituents who are frustrated with the current system, where no-one seems to care about building works on low-rise housing sites where poor workmanship is being ignored. These customers are in a difficult position under the current legislation because they need to pursue rectification orders through courts to get justice. They are generally up against experienced builders who will use every trick in the book to minimise the amount of work that they need to do to fix the problem or to avoid paying at least the most decent compensation possible.
Taking on a builder is stressful and mentally draining, and many customers simply give up and are forced to live in dodgy homes. It is not good enough, and that is why this Minns Labor Government is taking action. The people of Shellharbour are also delighted by the anti-phoenixing provisions of the bill. Dodgy builders should not be able to close one company and start another with a different name to continue to rort hardworking home buyers out of their money. I am looking forward to welcoming the Building Commissioner back to Shell Cove after this legislation passes. I say to Frasers and to dodgy builders that they are on notice. They should do better, do their job and get it right the first time around. I commend the bill to the House.
Ms KYLIE WILKINSON (East Hills) (16:46): I contribute to debate and speak in support of the Building Legislation Amendment Bill 2023. The bill will improve transparency, accountability and the quality of work in the building and construction industry in New South Wales. The building and construction industry plays a pivotal role in shaping the landscape of our communities. It is not just about erecting structures; it is about creating homes where families thrive, businesses flourish and communities come together. Therefore it is incumbent upon us to establish robust legislation that not only governs the construction process but also instils confidence in the hearts of New South Wales residents.
The New South Wales Government recognises the imminent need for more homes to ease pressure in the housing market and ensure everyone has a safe place to live, but we cannot sacrifice quality for quantity. This Government is committed to ensuring the tens of thousands of new homes that New South Wales needs are quality homes. The creation of a standalone Building Commission, bolstered by $24 million in funding and more than 400 dedicated staff, will drive dodgy builders out of the market and ensure buyers get the quality homes they deserve. The Building Commission will put trust and confidence back into the sector to ensure continued investment and give people confidence as they make the biggest investment in their lifetime. This legislation will support the crucial work of the Building Commission and deliver on the Government's commitment to ensure behavioural change in the building and construction industry.
Building failures increase risks to the safety of families who live in those buildings and result in home owners having to fork out large amounts of money to fix those defects. These failures tarnish the industry, drive down consumer confidence and negatively impact traders who produce quality work. The bill will take some fundamentally important steps forward and improve building regulation. However, the Government does not intend to stop here. The bill implements the first tranche of reforms this Government expects to make as part of the biggest overhaul of building laws in the State's history. The Government has made a commitment to introduce a whole-of-sector building Act to consolidate and modernise all New South Wales building legislation. The bill is a first step to provide immediate support to the Building Commissioner and respond to issues in the construction sector.
I now turn to the scope of the bill. The bill makes amendments to various Acts across the Better Regulation and Fair Trading, and Building portfolios. The recent surge in building defects has cast a shadow over the dream of home ownership and the safety of our built environment in New South Wales. Recognising the high incidence of defects in the residential market, the bill specifically provides compliance and enforcement powers for low‑rise residential dwellings, otherwise known as class 1 buildings under the National Construction Code. They include houses and townhouses. The bill will also introduce new duties on all persons in the supply chain of building products to ensure that products that are designed, manufactured, supplied and installed in buildings are safe and compliant to relevant standards and building codes.
To build on the momentum to date, the bill will expand those powers to class 1 low-rise residential homes. It will allow early detection of building defects and reduce the burden on home owners having to lodge complaints or take costly legal action to rectify those defects. Inspectors will be able to enter residential homes under construction to inspect build quality and order rectification work where defects are identified. Inspectors will also be able to test materials and components to ensure that they are compliant. The regulator will also be given the power to issue a stop work order where it considers that continuing building work could lead to significant harm to the public, or residents or future residents of a building.
The bill makes it clear that the Government will not tolerate builders who do not do the right thing. Failing to comply with a rectification or stop work order will attract a maximum penalty of $330,000 for a company and $110,000 in other cases. Where the offence continues, the penalty amount will increase every day by $33,000 for a company and $11,000 for an individual. Disciplinary action can be taken against a person who holds a contractor licence if they do not comply with a rectification or stop work order. That can result in suspension or loss of licence. I acknowledge that random inspections and audits of low-rise residential buildings may cause delays to construction; however, delays will only result where defects are found or rectification or stop work orders are made in response.
Delays will be offset by the benefits of improving the quality and safety of buildings and protecting consumers from having to fix defects after they move into their new home. As we deliberate on the importance of building legislation, let us remember that its impact extends far beyond the drafting of rules and regulations. It is about nurturing an environment where residents feel secure in the structures that house their dreams and aspirations. The bill prioritises safety, quality and accountability not only to construct buildings but also to build confidence, trust and a brighter future for the people of New South Wales as they make the biggest investment of their lifetime. I commend the bill to the House.
Mr TRI VO (Cabramatta) (16:52): I make a contribution to debate in support of the Building Legislation Amendment Bill 2023. As we are aware, the median house price in Sydney is over $1.1 million. In other major cities, it is just below that figure. The current population of New South Wales is over eight million people and is estimated to increase by about one million in 10 years' time and nearly two million in 20 years' time. Addressing the affordable and reliable housing shortage is one of this Government's top priorities. New South Wales is projected to require 904,000 new homes over the next 20 years. That means we need to build 45,200 new homes per year, including 28,500 in Greater Sydney and 16,700 in regional New South Wales.
In New South Wales the cost of defective building work is estimated to be up to $700 million per year. Between 2019 and 2021, NSW Fair Trading received about 11,000 complaints each year, with poor quality construction being the most common complaint for new homebuyers. Other major issues raised include defective work, incomplete work and unsatisfactory performance. We need to boost housing supply but at the same time restore confidence in the building industry. The Building Legislation Amendment Bill 2023 will improve transparency, accountability and quality of work in the building and construction industry in New South Wales.
The creation of a standalone Building Commission, supported by $24 million in funding and more than 400 staff, will drive dodgy builders out of the market and ensure that buyers get the quality homes they deserve. The Building Commission will put trust and confidence back into the sector to ensure continuing investment and to give people confidence as they make the biggest investment of their lifetime. The bill makes amendments to various Acts across the Better Regulation and Fair Trading, and Building portfolios, including the Home Building Act 1989, the Building Products (Safety) Act 2017, the Building and Development Certifiers Act 2018, the Design and Building Practitioners Act 2020 and the Strata Schemes Management Act 2015.
Schedule 1 to the bill covers compliance and enforcement and expands the current powers provided to the Building Commissioner under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 for high-rise residential apartment buildings, otherwise known as class 2 buildings under the National Construction Code. The current proactive powers for apartment buildings have resulted in significant improvements in purchaser confidence due to the early detection and remediation of defects. The bill will expand those powers to class 1 low‑rise residential homes. Inspectors will be able to enter residential homes under construction to inspect building quality and order rectification work where defects are identified. The regulator will also be given the power to issue a stop work order where it considers that continuing building work could lead to significant harm to the public, or residents or future residents of a building.
The bill also has appropriate procedural fairness. Except in emergency situations, the secretary must notify the person to whom the proposed order is directed about their intention to issue an order. That will allow the person issued with a notice to make written representations to the secretary as to why the order should not be given or about the terms of the order. If required, a person could appeal a rectification or stop work order through the NSW Civil and Administrative Tribunal. Those procedural fairness safeguards will ensure that everyone is sufficiently protected and that the laws operate in a fair and proper manner. Failing to comply with an order will attract a maximum penalty of $330,000 for companies and $110,000 in other cases. That sends a clear message to the industry that the Government will not tolerate builders who do not do the right thing. Disciplinary action can be taken against a person who holds a contractor licence if they do not comply with a rectification or stop work order. That can result in suspension or loss of licence.
Schedule 1 to the bill also covers insolvency and phoenixing. For the 2022-23 financial year, the construction industry experienced the highest rate of insolvency in Australia compared to all other industries. Starting a new company after a failed company is quite common in the business cycle; however, the intention of phoenixing activity is different. It is where directors intentionally create a new company to continue the business of an existing company that has been deliberately liquidated to avoid paying outstanding debts, including taxes; payments owed to subcontractors; and employee entitlements.
Insolvency regulation is the responsibility of the Commonwealth Government; however, the bill helps the New South Wales regulator to stop people who have been involved in intentionally phoenixing from creating further harm in the New South Wales construction industry. The bill provides grounds to cancel a licence, refuse an application or disqualify a person who has been involved in the management of a company that has become insolvent in the past 10 years. Where such a person has become bankrupt or has been a director or person involved in the management of a company in the six months prior to that company becoming insolvent, the responsibility is on them to prove they are not a risk to the industry.
Schedule 2 to the bill covers building product safety. The bill will expand requirements in the Building Products (Safety) Act and introduce new duties on all persons in the supply chain for building products, including people who design, manufacture, import or supply building products and those who install or do building work where building products are used. Nonconforming building products are products or materials that claim to be something they are not, do not meet required standards for their intended use or are marketed and supplied with the intent to deceive those who use them. All persons in the supply chain will also need to provide certain information about building products as they pass them to the next person in the chain. The bill seeks to promote public confidence by expanding the secretary's powers to protect public safety by introducing building product warnings, supply bans and recalls while maintaining the current power to issue building product use bans.
Schedule 3 to the bill covers the decennial liability insurance, or DLI. Currently under the Strata Schemes Management Act 2016, DLI is offered as an alternative to the strata building bond and inspections scheme for class 2 buildings. DLI is a 10-year insurance policy that provides consumers with protection where serious defects arise in common property, including the building's structure, cladding, waterproofing and fire safety systems. It covers rectification of the defect up to the contract costs of the building works, and will be provided even if the developer or builder becomes insolvent. The cost of a DLI clause is estimated to be 1.8 per cent of the project contract value, compared with lodgement of a building bond, which is currently 2 per cent.
The bill proposes administrative amendments to make clear that developers who obtain a DLI product for their class 2 apartment building project are exempt from the existing strata building bond and inspection scheme requirements. Providing those exemptions in the bill will encourage insurers to enter the market, as they will have legislative assurance that DLI products will be supported. Schedule 4 to the bill covers the suspension of an authorisation. It will amend the Building and Development Certifiers Act, and Design and Building Practitioners Act, enabling the regulator to immediately suspend a certifier or registered practitioner while disciplinary action is being finalised.
The DEPUTY SPEAKER (Ms Sonia Hornery): It being 5.00 p.m., debate is interrupted for the public interest debate. I set down the resumption of the debate as an order of the day for a later hour.