New law to protect the Sydney’s home unit boom

There is a boom in home unit developments in Sydney, most of them sold off the plan. Private certifiers are required to ensure that the buildings are properly constructed, but the system has shown deep flaws. New laws are designed to overcome these problems.

NSW has about 50% of the total number of occupied apartments in all of Australia.[1] At first glance, this might seem staggering, given that there are 5 other states and 2 territories, but with a capital city bordered by National Parks (one of which is world heritage listed), and of course, the Pacific Ocean, urban sprawl is severely limited. If you can’t go out, you go up.

Indeed, there are about 5 million people living in Sydney, and about 30% of them in apartments.[2] That is expected to increase to 50% in the next 30 years, at a time when the Sydney population is expected to reach 10 million.[3] In other words, in the next 30 years, it is expected that the total number of Sydneysiders living in strata title apartments will be equivalent to Sydney’s current population.

To some, this might not seem attractive, given the stigma about new strata titled buildings, largely as a result of events like the Opal Towers, where cracks in structural concrete beams started to appear about 4 months after the building was completed. The Opal Towers debacle was just the icing on the cake of a long trend of a “build it, sell it and walk away”[4] business model adopted by property developers across Greater Sydney. To put a stop to this, the NSW Government has recently enacted the Design and Building Practitioners Act 2020 (NSW) (“the Act”).

As of 1 July 2021, the Act imposes many new obligations on private certifiers before they can issue an occupation certificate. If an occupation certificate is issued, the property is deemed to be habitable, so almost all “off-the-plan” sale contracts have a clause that makes the sale conditional on an occupation certificate being issued. The problem arises because the person who certifies the building  is engaged, and paid, by the developer directly (hence the name “private certifier”). If a developer desperately needs need to complete sales, and has used the same private certifier for many years, there might be some flexibility on the part of the private certifier. This should come to no surprise, as the whole idea of private certification, which was introduced in 1998, was to reduce red tape and streamline the approval process. Prior to this, occupation certificates could only be issued by Council, who had absolutely no skin in the game. The new reforms should strike a good balance between stubborn Councils and private certifiers too comfortable with turning a blind eye without any accountability.

The Act also imposes a statutory duty of care on almost everyone involved in the building work (including engineers, suppliers and designers), whereas previously the buck stopped at the builder, which would usually be a company in liquidation by the time the building defects arose. The duty of care is also owed to subsequent owners of the building, such as the owners corporation and apartment owners, whereas previously the duty of care was only owed to the developer. On many occasions, this left apartment owners of out of pocket when defects arose because they had no cause of action against the builder. More information on the statutory duty of care can be found at https://www.somervillelegal.com.au/greater-consumer-protection-for-nsw-strata-owners/.

With apartment living on the rise in Sydney, the recent law reforms are welcomed. With more red tape on the issuance of occupation certificates and increased incentives for builders to get it right the first time, perhaps the “build it, sell it and walk away” business model will be a thing of the past. Perhaps Sydney will be at the forefront of high-quality buildings for strata title living. After all, strata title itself was invented in Sydney (in Burwood to be precise) and is now used all over the globe.

For more information contact Tim Somerville (02) 9923 2321 tsomerville@somervillelegal.com.au