Regulation of Building Standards, Building Quality and Building Disputes First Report
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LEGISLATIVE COUNCIL PUBLIC ACCOUNTABILITY COMMITTEE Regulation of building standards, building quality and building disputes First report Report 4 November 2019 www.parliament.nsw.gov.au LEGISLATIVE COUNCIL Public Accountability Committee Regulation of building standards, building quality and building disputes First report Ordered to be printed 13 November 2019 Report 4 - November 2019 i LEGISLATIVE COUNCIL Regulation of building standards, building quality and building disputes New South Wales Parliamentary Library cataloguing-in-publication data: New South Wales. Parliament. Legislative Council. Public Accountability Committee. Regulation of building standards, building quality and building disputes : first report / Public Accountability Committee [Sydney, N.S.W.] : the Committee, 2019. [xiv, 178] pages ; 30 cm. (Report no. 4 / Public Accountability Committee) “November 2019” Chair: David Shoebridge, MLC. ISBN 9781920788414 1. Construction industry—Law and legislation—New South Wales. 2. Building laws—New South Wales. 3. Building failures—Law and legislation—New South Wales. 4. Standards, Engineering—Quality control. 5. Building—Quality control. 6. Architects and builders—Quality control. I. Shoebridge, David. II. Title. III. Series: New South Wales. Parliament. Legislative Council. Public Accountability Committee. Report ; no. 4 690.83709944 (DDC22) ii Report 4 - November 2019 PUBLIC ACCOUNTABILITY COMMITTEE Table of contents Terms of reference vii Committee details viii Chair's foreword ix Recommendations xi Conduct of inquiry xiv Chapter 1 Introduction to the first report 1 Purpose of the first report 1 Report outline 1 Chapter 2 Inquiry background and recent initiatives 3 Reform of building regulation 3 Reforms over the last 30 years 3 Reforms to building insurance 4 Stakeholder views on reforms 5 Previous reports into the building and construction industry 6 Campbell report 2002 6 Lambert report 2015 7 Lacrosse Building fire report 2015 8 Grenfell Tower fire report 2018 9 Shergold Weir report 2018 9 High profile building failures 10 Opal Tower, Sydney Olympic Park 10 Mascot Towers, Mascot 12 Landmark Building, Charlestown 16 Extent of the problems and other building failures 16 Recent government initiatives 19 Legislative response to Lambert report 19 Other legislative reforms 20 Consolidation of building regulation 20 Legislative and national response to Shergold Weir report 21 Measures to address combustible cladding 21 Stakeholder views on government reforms 22 Committee comment 22 Report 4 - November 2019 iii LEGISLATIVE COUNCIL Regulation of building standards, building quality and building disputes Chapter 3 Oversight by a Building Commissioner 25 Appointment of a NSW Building Commissioner 25 Resourcing and powers of the Building Commissioner 26 Calls to establish a Building Commission 29 Location of a Building Commission within government 30 Approach in other jurisdictions 32 Queensland Building and Construction Commission 32 Victorian Building Authority 33 Stakeholder views on other jurisdictions 34 Committee comment 35 Chapter 4 Insurance protections for consumers 37 Statutory warranties for residential buildings 37 Overview of statutory warranties 37 Time period to claim 38 Definition of major and minor defects 40 Illegal phoenix activity 42 Professional indemnity insurance 43 Overview of professional indemnity insurance and exclusions relating to flammable cladding 44 Increase in premiums 45 Extending professional indemnity insurance to other building practitioners 47 Home Building Compensation scheme 49 Overview of the Home Building Compensation scheme 49 Participation of private insurers 51 Exclusion of high-rise buildings 53 Increase in premiums 55 Strata Building Bond and Inspections Scheme 57 Overview of the Strata Building Bond and Inspections Scheme 57 Adequacy of the scheme 58 Committee comment 61 Chapter 5 Regulation of building practitioners 65 Adequacy of the current licensing and registration system 65 Electricians 65 Plumbers 68 Fire safety practitioners 69 Engineers 71 Builders 73 iv Report 4 - November 2019 PUBLIC ACCOUNTABILITY COMMITTEE Extending the registration system across the chain of responsibility 74 Government regulation 75 Compliance and enforcement 76 Recommendations on licensing and regulation - Shergold Weir and Lambert 77 Response to licensing and regulation recommendations 79 Stakeholder views on the government's licensing and regulation proposals 81 Response by government representatives 82 Committee comment 84 Chapter 6 Design and Building Practitioners Bill 2019 87 Background to the bill 87 Purpose of the bill 88 Stakeholder feedback on the bill 91 Key issues 92 Overarching response to the bill 92 Reliance on supporting regulations 94 Alignment with other Acts 96 Classes of buildings covered in the bill 98 Practitioners covered in the bill 99 Registration of engineers 101 Role of principal design practitioner 104 Role of Building Commissioner 105 Insurance provisions 106 Duty of care provisions 108 Addressing illegal phoenix activity 112 Response by government representatives 113 Committee comment 116 Chapter 7 Blueprint for reform 121 NSW Government response to the Shergold Weir and Lambert reports 121 Shergold Weir report 121 Lambert report 122 Stakeholder views on implementation of Shergold Weir and Lambert 124 Issues requiring further comment 125 Proposal to reintroduce clerk of works 125 Improving records and documentation 128 Committee comment 130 Report 4 - November 2019 v LEGISLATIVE COUNCIL Regulation of building standards, building quality and building disputes Appendix 1 Submissions 133 Appendix 2 Witnesses at hearings 139 Appendix 3 Minutes 145 Appendix 4 Dissenting statement 177 vi Report 4 - November 2019 PUBLIC ACCOUNTABILITY COMMITTEE Terms of reference 1. That the Public Accountability Committee inquire into and report on the regulation of building standards, building quality and building disputes by government agencies in New South Wales, including: (a) the role of private certification in protecting building standards, including: (i) conflicts of interest (ii) effectiveness of inspections (iii) accountability of private certifiers (iv) alternatives to private certifiers, (b) the adequacy of consumer protections for owners and purchasers of new apartments/dwellings, and limitations on building insurance and compensation schemes, including: (i) the extent of insurance coverage and limitations of existing statutory protections (ii) the effectiveness and integrity of insurance provisions under the Home Building Act 1989 (iii) liability for defects in apartment buildings, (c) the role of strata committees in responding to building defects discovered in common property, including the protections offered for all strata owners in disputes that impact on only a minority of strata owners, (d) case studies related to flammable cladding on NSW buildings and the defects discovered in Mascot Towers and the Opal Tower, (e) the current status and degree of implementation of recommendations of reports into the building industry including the Lambert report 2016, the Shergold/Weir report 2018 and the Opal Tower investigation final report 2019, and (f) any other related matter. 2. That the committee table an interim report as soon as practical and its final report by 14 May 20201. The terms of reference were self-referred by the committee on 4 July 2019.2 1 The original reporting date was 14 February 2020 (Minutes, NSW Legislative Council, 6 August 2019, p 305). The reporting date was later extended to 14 May 2020 (Minutes, NSW Legislative Council, 15 October 2019, p 504). 2 Minutes, NSW Legislative Council, 6 August 2019, p 305. Report 4 - November 2019 vii LEGISLATIVE COUNCIL Regulation of building standards, building quality and building disputes Committee details Committee members Mr David Shoebridge MLC The Greens Chair The Hon Robert Borsak MLC Shooters, Fishers and Farmers Party Deputy Chair The Hon Scott Farlow MLC Liberal Party The Hon John Graham MLC Australian Labor Party The Hon Courtney Houssos MLC Australian Labor Party The Hon Trevor Khan MLC The Nationals The Hon Matthew Mason-Cox MLC Liberal Party Contact details Website www.parliament.nsw.gov.au/publicaccountability Email [email protected] Telephone (02) 9230 3672 viii Report 4 - November 2019 PUBLIC ACCOUNTABILITY COMMITTEE Chair's foreword The public's faith in building standards and building quality in New South Wales is at an all-time low. The lack of standards in the industry has been highlighted in many reports before us, dating back 20 years. It has been a two decade-long experiment with privatisation, deregulation and industry self- regulation. It is unacceptable that to this day comprehensive reform has not been put in place. I hope that this report will help deliver that change. The government's approach to tackling the longstanding issues within the building and construction industry will not fix the crisis. Piece-meal legislation, and the progress in implementing it, is no-where near enough to address the loss of confidence in the industry. Regulators have failed to regulate in New South Wales and it is home owners who are paying the cost. The problems with the government's approach are illustrated by the Building and Development Certifiers Act 2018, which is yet to be implemented – almost two years after the legislation was passed. The committee and stakeholders also critiqued the Design and Building Practitioners Bill 2019, which was introduced as this inquiry