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Government reforms changing the risk profile for property developers

30 January 2017
Read Time 4 mins reading time

The next phase of the NSW Government’s building reforms is underway with public consultation on the proposed reforms to the Environmental Planning and Assessment Regulation 2000 (“EPR”) closing on 31 January 2017.

The reforms to the EPR will form part of the Governments building control system for NSW and will complement the changes made to the Home Building Act 1989 (“HBA”) in 2015 and the Strata Schemes Management Act 2015 (“SSMA”) in 2016. The reforms are aimed at shifting greater responsibility for building safety and quality on to the developer and it is time for developers to give some consideration to their corporate structuring and the terms under which they will contract with builders on future developments.

Looking in particular at the reforms to Fire Safety Regulation, there are 8 key area of reform:

  1. The creation of a new class of specialist within the EPR, being a Competent Fire Safety Practitioner;
  2. Requiring the submission of plans and specifications for relevant fire safety system work relating to Class 2-9 buildings;
  3. Some exemptions from compliance with the National Construction Code (NCC) (formerly known as the Building Code of Australia) relating to fire safety system work in existing buildings;
  4. New mandatory critical stage inspections for Class 2-9 buildings;
  5. New inspection of fire safety system work relating to Class 2 and 3 buildings by Fire and Rescue NSW (FRNSW) before an Occupation Certificate can be issued;
  6. Requiring Performance Solution Reports for all fire safety Performance Solutions for Class 1b-9 buildings;
  7. Requiring Fire Safety Certificates, issued at the end of construction works, to be in a set form and to be issued by a Competent Fire Safety Practitioner; and
  8. Requiring Annual Fire Safety Statements, being an annual certification of the fire safety systems in a building, to be in a set form and to be issued by a Competent Fire Safety Practitioner

In order to properly contemplate the risk profiles available to developers in the future, developers will need a holistic understanding of the Governments complete building control system. By way of example it should be noted that:

  • Under the proposed reforms to the EPR, building work involving the installation, modification or extension of a fire safety system cannot commence unless plans showing the layout of the system and specifications describing the design, installation and construction of the system are endorsed by a “competent fire safety practitioner” and submitted to the certifying authority (minor works modifying or extending a system are exempt).
  • Also, under the proposed reforms, there will be additional mandatory critical stage inspections, including in relation to fire compartmentation and the fire sealing of service penetrations through fire rated building elements.  The current proposal is that a minimum of 30% of all units in a residential flat building, and 20% of the floor area of Class 2- 9 buildings generally will require an inspection of the internal fire rated construction.
  • Under Section 18F of the HBA, which was revised by the Government in 2015, proceedings for the breach of a statutory warranty may be defended if the defendant proves that the defects arise from written instructions provided by a professional acting for the developer.
  • Under Part 11 of the SSMA, which was revised by the Government in 2015 and which is scheduled to apply to building work contracted or commenced on 1 July 2017, the developer must give the strata scheme a bond amounting to 2% of the contract price to secure the payment of the costs to rectify any defective building work which is identified in a final report which must be provided 2 years after the completion of the work.

In light of the reforms and the examples provided above, those contemplating the development of strata schemes, particularly after 1 July 2017, should start considering risk allocation strategies earlier rather than later. Please contact the property and construction team of Macpherson Kelley if you would like to discuss the legal issues in more detail, or contact Credwell Consulting to discuss reading your next construction project, or existing Annual Fire Safety Statement process.

For more information please contact our Property and Construction team in Sydney on 02 8298 9533.

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Government reforms changing the risk profile for property developers

30 January 2017

The next phase of the NSW Government’s building reforms is underway with public consultation on the proposed reforms to the Environmental Planning and Assessment Regulation 2000 (“EPR”) closing on 31 January 2017.

The reforms to the EPR will form part of the Governments building control system for NSW and will complement the changes made to the Home Building Act 1989 (“HBA”) in 2015 and the Strata Schemes Management Act 2015 (“SSMA”) in 2016. The reforms are aimed at shifting greater responsibility for building safety and quality on to the developer and it is time for developers to give some consideration to their corporate structuring and the terms under which they will contract with builders on future developments.

Looking in particular at the reforms to Fire Safety Regulation, there are 8 key area of reform:

  1. The creation of a new class of specialist within the EPR, being a Competent Fire Safety Practitioner;
  2. Requiring the submission of plans and specifications for relevant fire safety system work relating to Class 2-9 buildings;
  3. Some exemptions from compliance with the National Construction Code (NCC) (formerly known as the Building Code of Australia) relating to fire safety system work in existing buildings;
  4. New mandatory critical stage inspections for Class 2-9 buildings;
  5. New inspection of fire safety system work relating to Class 2 and 3 buildings by Fire and Rescue NSW (FRNSW) before an Occupation Certificate can be issued;
  6. Requiring Performance Solution Reports for all fire safety Performance Solutions for Class 1b-9 buildings;
  7. Requiring Fire Safety Certificates, issued at the end of construction works, to be in a set form and to be issued by a Competent Fire Safety Practitioner; and
  8. Requiring Annual Fire Safety Statements, being an annual certification of the fire safety systems in a building, to be in a set form and to be issued by a Competent Fire Safety Practitioner

In order to properly contemplate the risk profiles available to developers in the future, developers will need a holistic understanding of the Governments complete building control system. By way of example it should be noted that:

  • Under the proposed reforms to the EPR, building work involving the installation, modification or extension of a fire safety system cannot commence unless plans showing the layout of the system and specifications describing the design, installation and construction of the system are endorsed by a “competent fire safety practitioner” and submitted to the certifying authority (minor works modifying or extending a system are exempt).
  • Also, under the proposed reforms, there will be additional mandatory critical stage inspections, including in relation to fire compartmentation and the fire sealing of service penetrations through fire rated building elements.  The current proposal is that a minimum of 30% of all units in a residential flat building, and 20% of the floor area of Class 2- 9 buildings generally will require an inspection of the internal fire rated construction.
  • Under Section 18F of the HBA, which was revised by the Government in 2015, proceedings for the breach of a statutory warranty may be defended if the defendant proves that the defects arise from written instructions provided by a professional acting for the developer.
  • Under Part 11 of the SSMA, which was revised by the Government in 2015 and which is scheduled to apply to building work contracted or commenced on 1 July 2017, the developer must give the strata scheme a bond amounting to 2% of the contract price to secure the payment of the costs to rectify any defective building work which is identified in a final report which must be provided 2 years after the completion of the work.

In light of the reforms and the examples provided above, those contemplating the development of strata schemes, particularly after 1 July 2017, should start considering risk allocation strategies earlier rather than later. Please contact the property and construction team of Macpherson Kelley if you would like to discuss the legal issues in more detail, or contact Credwell Consulting to discuss reading your next construction project, or existing Annual Fire Safety Statement process.

For more information please contact our Property and Construction team in Sydney on 02 8298 9533.