Occupation certificates – are you ready for the changes?

If you are in the business of developing, designing or building residential apartments in New South Wales then you should by now:

1. be aware that such work is the subject of sweeping reforms brought in by the New South Wales Government in the wake of building scandals such as that seen with the Opal Towers in Sydney Olympic Park;
2. be taking steps to ensure compliance with the rigorous scheme of registration, checks and certification.

Construction activity of this kind is to be regulated not just by the Home Building Act  (NSW) but also the Strata Schemes Management Act 2015 (NSW), Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 No.9 (NSW), which came into force on 1 September 2020, and the Design and Building Practitioners Act 2020 (NSW), parts of which came into effect on 11 June 2020 (such as the duty of care) with the balance coming into effect on 1 July 2021 or as proclaimed.

Transitional provisions under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 No.9 for obtaining the occupation certificate will expire on 1 March 2021. The occupation certificate is a necessary element not just for permitting use of the constructed building but almost invariably is a necessary element for achieving practical completion under the relevant construction contract.

On and from 1 March 2021, the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 No.9 will impose upon a “developer” a strict and stepped regime for obtaining the occupation certificate, which will be in addition to those which would normally apply under the Environmental Planning and Assessment Act 1979.

“Developer” is given a broad meaning in the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 No.9 and could apply to a developer (as it is traditionally understood), the Principal under a head contract, the owner of the land on which the construction takes place or the head contractor. In this respect, it captures how the industry may allocate the contractual responsibility for obtaining the occupation certificate.

To reflect the change to occur from 1 March 2021, you must ensure whichever entity under the construction contract is tasked with applying for the occupation certificate is aware of and prepared for the requirement that that entity must give a written notice (called an expected completion notice) to the Secretary of the Department of the date (called the expected date) on which an application for an occupation certificate is expected to be made. This notice has to be given between 6 to 12 months prior to the expected date.

If following the giving of an expected completion notice, circumstances indicate that the expected date may have changed, then an expected completion amendment notice must be issued within seven days of the developer becoming aware of the change.

The generous notice periods are clearly designed to give the Secretary the opportunity to conduct any investigation of the work carried out for the purposes of identifying issues that could fundamentally affect the safety and stability of the structure.

If we have prepared contracts for you, you would find the statutory scheme to be quite familiar because our contracts already contain a similar regime for obtaining practical completion.

There will be serious consequences for non-compliance. In addition to attracting prescribed financial penalties, the Secretary has powers to make an order prohibiting the issue of the occupation certificate and, if relevant, the registration of the strata plan.

Such an event could have serious financial consequences for all concerned:

1. if this triggers a breach of the construction contract because the date upon which practical completion can be obtained is impacted;
2. if completion under the sale contracts are impacted, which could include not only delayed settlement but also give rise to rights to rescind if sunset date provisions are triggered.

Hence, whatever role you might have in the procurement of residential apartments in New South Wales, all of the key parties concerned have a common interest in achieving compliance with this statutory scheme.

When the Design and Building Practitioners Act 2020 comes into effect on 1 July 2021, the applicant for an occupation certificate will have to comply with additional notification requirements.

What should you do?

• Review your standard construction contracts to ensure that they have been amended to clearly identify the entity that is contractually obliged to obtain the occupation certificate and insert contractual obligations reflecting the statutory notification scheme. These are not the only changes that will be required to construction contracts once the key provisions of the Design and Building Practitioners Act 2020 come into effect on 1 July 2021.
• If you will be the entity applying for the occupation certificate, your project delivery team must be thoroughly versed with the new statutory notification scheme.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).