Keeping up with building and construction law in NSW

On top of all this, the government is pressing forward with three proposed pieces of legislation, the Building Bill, the Building Compliance and Enforcement Bill, and the Building Insurance Bill, indicating that the draft Building Bill will be finalised in 2025, and the three bills may be introduced to Parliament this year. Together, these bills are intended to consolidate and modernise NSW building laws, strengthen consumer protection, streamline the approvals system, and ensure “end-to-end accountability” for building work.

Overlaying this program of reform is the High Court’s decision in Pafburn Pty Ltd v Owners – Strata Plan No 84674 [2024], which has fundamentally altered the allocation of liability in defect cases. In Pafburn, the court confirmed that builders and developers are vicariously liable for all defects within their projects and cannot rely on proportionate liability defences under the Civil Liability Act 2002 (NSW). Their duty is non-delegable to subcontractors, for example. For owners’ corporations, the significance is clear: they can now pursue builders or developers for the full cost of rectification, in turn leaving those parties to chase subcontractors. Needless to say, many builders and developers feel that this new legal reality is unjust.

Both the legislative reforms as well as the Pafburn decision share a common policy thread and have a profound impact. They are designed, on the one hand, to restore public confidence in the residential property market, recognising that property owners often commit their life savings to what should be a safe and defect-free home. On the other hand, they place responsibility squarely on industry participants, ensuring that builders and other professionals cannot avoid accountability. This common policy seems to be that if confidence is to be restored, the industry must bear the compliance costs and litigation risks that come with reform.

Among the most significant statutory shifts is the replacement of the “major defect” test under section 18E of the HBA with the broader “serious defect” standard in the proposed Enforcement Bill, where an owners’ corporation will not need to show that a defect risks the collapse of a building; simple non-compliance with the National Construction Code (NCC) or relevant standards will suffice. This redefinition is paired with longer warranty periods: 10 years for serious defects and three years for minor defects, replacing the current six- and two-year limitations.

There is also an expansion of the definition of “developer” to include any person who “arranged for or facilitated” the building work, which expansion may capture a broader range of participants, extending liability to financiers, project managers and others who may not have previously been exposed.

For owners’ corporations, these changes will provide substantial relief. Not only will they have a stronger framework to recover losses, from building defects, but new tools, including Decennial Liability Insurance (DLI), will provide a 10-year safety net for defects in common property, even if builders or developers become insolvent.

As we have seen, for industry stakeholders, however, the picture is harsher. Builders and developers may face claims for projects completed up to a decade ago, at a time when these reforms were not even contemplated. They must now adapt to an environment where liability cannot be delegated, even when subcontractors with specialist expertise were engaged. A policy risk may be that higher compliance costs and increased litigation exposure may deter investment and further exacerbate our already critical housing shortage.

The proposed bills also bring sweeping licensing reforms: builder licences will be divided into levels (Builder A through E); waterproofing will become a standalone trade; and licence thresholds in some areas will drop from $5,000 to $3,000. Ongoing professional development and testing will be mandatory, and certifiers will face stricter conflict-of-interest rules and inspection obligations.

More robust enforcement mechanisms will include the Building Commission NSW being empowered to issue stop-work, rectification, and prohibition orders, with disputes being referred to the commission before reaching the tribunal and with limitation periods being suspended during mediations. Penalties for unlicensed work will rise sharply, and “phoenixing” will be directly targeted through provisions allowing the commission to pierce the corporate veil and pursue directors personally.

The reforms, of course, have drawn mixed reactions: architects warn of risks to professional standards, industry fears higher costs and reduced investment, while consumer advocates and owners’ corporations see them as necessary and long overdue.

For lawyers in this field, the practical implications are clear. When acting for owners, they must be ready to frame claims under the “serious defect” test, leverage extended warranties, and navigate Building Commission processes. When acting for builders and developers, lawyers must help them manage compliance and risk, develop insurance strategies, and defend claims in a far more complex and possibly hostile environment. Litigation may proliferate, regulation may deepen, and the complexity of legal advice must keep pace.

While much remains unsettled, until the bills are passed, I see the reforms as a decisive policy shift towards accountability and consumer protection. My task as a lawyer will be to keep up: to absorb the changes already made, to anticipate those still to come and to guide my clients through an area of law that is evolving as quickly as the skyline it governs.

Giselle Casagrande is an associate at Kreisson.