How the Design & Building Practitioners Act 2020 (NSW) Impacts Strata Defect Claims in NSW

Introduction

Strata owners and managers in New South Wales have faced ongoing challenges with building defects, often resulting in costly repairs and complex strata disputes. In response, the Design and Building Practitioners Act 2020 (NSW) was introduced to improve accountability and provide stronger protections for those affected by strata defects.

Since its commencement, the Act has reshaped the legal landscape for strata schemes by imposing clear statutory duties of care, expanding liability for defects, and introducing new compliance requirements. Understanding these changes is essential for anyone involved in managing, owning, or maintaining strata properties in NSW.

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Understanding the Design & Building Practitioners Act 2020 (NSW)

What is Considered ‘Building Work’ for a Strata Scheme

The Design and Building Practitioners Act 2020 (NSW) provides distinct definitions for “building work” depending on the context.

Section 4 offers a broad definition, encompassing the construction, alteration, repair or renovation of certain classes of buildings relevant to a strata scheme.

Moreover, for the statutory duty of care outlined in Part 4, Section 36 adopts the definition of “residential building work” from the Home Building Act 1989 (NSW). This comprehensive definition covers nearly all activities associated with a dwelling, including:

• Construction and erection
• Alterations and additions
• Repairs and renovations
• Decorative or protective treatments

Which Strata Buildings Are Covered by the Act

The regulatory and compliance components of the Act initially applied to Class 2 buildings from 1 July 2021, specifically targeting the typical multi-unit residential strata building.

Furthermore, the government has planned to expand these requirements to cover Class 3 and Class 9c buildings from 1 July 2026.

The building classes are defined as follows:

• Class 2: Typically multi-unit apartment buildings where residents live above or below each other. This class also includes single-storey attached dwellings sharing a common basement or car park, as is common in many strata properties.
• Class 3: Residential buildings used for long-term or transient accommodation by unrelated people, such as boarding houses and hostels.
• Class 9c: Residential care facilities, like aged care homes, that house residents requiring physical assistance.

While the regulatory framework is class-specific, court decisions have confirmed that the statutory duty of care extends far more broadly. It applies to any “building” as defined in the Environmental Planning and Assessment Act 1979 (NSW), meaning it can also cover various other building types, including commercial strata properties.

The Statutory Duty of Care for Strata Properties Explained

A Duty to Avoid Economic Loss from Defects

Under Section 37 of the Design and Building Practitioners Act 2020 (NSW), individuals and companies involved in construction have a statutory duty to exercise reasonable care. This duty is designed to prevent economic loss caused by defects in a building or arising from the construction work itself, providing a new avenue for how owners corporations can sue for building defects.

The duty is owed to both current and future owners, ensuring that accountability extends beyond the initial purchase. The scope of ‘economic loss’ is broad and can include several costs that a strata scheme might face, such as:

• The direct cost of rectifying building defects.
• Reasonable expenses for providing alternative accommodation to residents if the property becomes uninhabitable.
• Other financial losses directly resulting from the defective work.

This duty of care is based on negligence. Therefore, a claim requires proof that a practitioner failed to exercise the reasonable care expected of them. It is not enough to simply identify a defect; a claimant must also show how the practitioner’s actions or inactions led to the economic loss.

Retrospective Application of the Duty of Care

A significant feature of the statutory duty of care is its retrospective application. This provision allows owners corporations to pursue claims for economic loss from defects that became apparent up to 10 years before the duty of care provisions commenced on 11 June 2020.

If your strata property was completed on or after 11 June 2010, you may be protected under this duty. This look-back period is a critical protection for owners of older buildings who may have previously been unable to make a claim because the standard two and six-year warranty periods under the Home Building Act 1989 (NSW) had expired.

The introduction of this retrospective duty provides a vital pathway for many strata schemes to seek compensation for long-standing or latent defects that were previously out of time. It has expanded:

• The scope for pursuing claims
• The range of practitioners who can be held accountable

Expanded Liability for Those Involved in Strata Construction

Personal Liability for Directors & Developers in Your Strata Scheme

The Design and Building Practitioners Act 2020 (NSW) allows for the “piercing of the corporate veil,” meaning individuals can now be held personally responsible for building defects. This marks a significant shift, as it prevents directors or developers from escaping liability by liquidating the single-purpose companies often created for specific strata projects. Liability extends to any person who had “substantive control” over the carrying out of the construction work.

A person is considered to have substantive control if, as a matter of fact, they were in a position where they could control how the work was carried out. This does not mean they had to be actively exercising that control at all times, but rather that they had the ability and power to do so. Those who may fall under this definition include:

• Directors of a building company
• Project managers
• Site supervisors
• Developers

In the case of Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, the NSW Supreme Court found a project manager personally liable for defective works. The court determined he had supervised the construction and was therefore a person who carried out construction work under the Act. As a result, this principle ensures that key individuals who oversee a strata project can be held accountable for failures to exercise reasonable care.

The Non-Delegable Duty After the High Court’s Pafburn Decision

A landmark High Court decision in Pafburn Pty Ltd & Anor v The Owners – Strata Plan No 84674 [2024] HCA 49 confirmed that the statutory duty of care under the Design and Building Practitioners Act 2020 (NSW) is non-delegable. This means that principal builders and developers are held 100% liable for the economic loss caused by defects, regardless of whether the faulty work was performed by subcontractors.

This ruling prevents “upstream parties” like builders and developers from using the proportionate liability defence available under the Civil Liability Act 2002 (NSW). They can no longer reduce their liability by apportioning blame to “downstream parties” such as subcontractors or consultants they engaged. The High Court clarified that builders and developers are treated as if they are vicariously liable for any failure to exercise reasonable care by those they entrust to carry out the work.

The practical effect of this decision is that the risk of a subcontractor’s insolvency or poor workmanship now rests with the principal builder or developer, a scenario related to the broader issue of what to do when a builder goes bust. While they may still pursue their own claims against subcontractors, they cannot use that as a defence against a claim brought by an owners corporation for a strata property.

Expanded Liability for Those Involved in Strata Construction

Personal Liability for Directors & Developers in Your Strata Scheme

The Design and Building Practitioners Act 2020 (NSW) allows for the “piercing of the corporate veil,” meaning individuals can now be held personally responsible for building defects. This marks a significant shift, as it prevents directors or developers from escaping liability by liquidating the single-purpose companies often created for specific strata projects. Liability extends to any person who had “substantive control” over the carrying out of the construction work.

A person is considered to have substantive control if, as a matter of fact, they were in a position where they could control how the work was carried out. This does not require them to be actively exercising that control at all times, but rather that they had the ability and power to do so.

Those who may be found to have substantive control include:

• Directors of a building company
• Project managers
• Site supervisors
• Developers

For example, in Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, the NSW Supreme Court found a project manager personally liable for defective works. The court determined he had supervised the construction and therefore was a person who carried out construction work under the DBP Act. This principle ensures that key individuals who oversee a strata project can be held accountable for failures to exercise reasonable care.

The Non-Delegable Duty After the High Court’s Pafburn Decision

A landmark High Court decision in Pafburn Pty Ltd & Anor v The Owners – Strata Plan No 84674 [2024] HCA 49 confirmed that the statutory duty of care under the Design and Building Practitioners Act 2020 (NSW) is non-delegable. This means that principal builders and developers are held 100% liable for the economic loss caused by defects, regardless of whether the faulty work was performed by subcontractors.

This ruling prevents “upstream parties” like builders and developers from using the proportionate liability defence available under the Civil Liability Act 2002 (NSW). They can no longer reduce their liability by apportioning blame to “downstream parties” such as subcontractors or consultants they engaged.

The High Court clarified that builders and developers are treated as if they are vicariously liable for any failure to exercise reasonable care by those they entrust to carry out the work.

The practical effect of this decision is that:

• The risk of a subcontractor’s insolvency or poor workmanship now rests with the principal builder or developer.
• While principal builders or developers may still pursue their own claims against subcontractors, they cannot use that as a defence against a claim brought by an owners corporation for a strata property.

Ultimately, the risk and responsibility for construction defects now sits squarely with those at the top of the construction chain.

Compliance Obligations & Disciplinary Powers Under the DBP Act

Mandatory Registration & Documentation for Your Strata Project

The Design and Building Practitioners Act 2020 (NSW) introduced significant compliance requirements to improve accountability in the building and construction of strata properties. All design and building practitioners involved in specific types of construction must be registered, with their details made available on a public list to ensure transparency and qualification.

Before any construction work begins on a strata project, registered design practitioners are required to:

• Prepare and provide detailed designs, often referred to as ‘Construction Issued Regulated Designs’ or ‘declared designs’.
• Lodge these documents on the NSW planning portal.
• Issue a declaration confirming that these designs comply with the Building Code of Australia and other relevant standards.

To be eligible for registration, practitioners must meet strict criteria, including:

• Qualifications and Experience: Possessing the necessary qualifications, skills, knowledge, and practical experience relevant to their field. For building practitioners, this often includes at least five years of recent practical experience.
• Police Checks: Providing a current National Police Certificate to verify their background.
• Mandatory Training: Successfully completing required learning modules, such as those offered by Construct NSW.
• Insurance Requirements: Holding adequate insurance to cover their work, ensuring a level of financial protection.

Disciplinary Oversight & ‘Stop Work’ Powers

The Design and Building Practitioners Act 2020 (NSW) grants substantial enforcement powers to the Secretary of the NSW Department of Customer Service to ensure compliance and maintain public safety. This authority allows for direct intervention in strata building projects where necessary.

The Secretary can take various disciplinary actions against registered practitioners who fail to meet their obligations, such as:

• Levying significant fines.
• Suspending a practitioner’s registration, thereby preventing them from working on future projects.

Furthermore, if a building project is found to be in violation of the Act or is deemed to pose a significant risk to the public, future occupants, or the property itself, the Secretary has the power to issue a ‘stop work’ order. This powerful tool can halt all construction activity on a strata site until the non-compliance or safety issues are fully rectified.

Practical Implications for Remedial Works in Your Strata Scheme

Navigating the Process for Remedial Waterproofing & Other Works

The Design and Building Practitioners Act 2020 (NSW) has introduced a more stringent and complex process for certain remedial works in existing strata buildings, particularly for tasks like waterproofing, which is a key part of preventing and fixing water ingress. This can result in significant time delays and increased costs for your strata scheme due to the additional administrative and planning requirements involved.

For many remedial projects, such as fixing a leaking balcony in a Class 2 strata building, the process involves several key steps:

• A registered design practitioner must prepare a ‘Construction Issued Regulated Design’.
• A registered building practitioner is then required to carry out the work in accordance with that design.

This rigorous process cannot be bypassed unless the work qualifies as an emergency repair.

Remedial work is only considered an emergency repair if it meets all of the following conditions:

• Immediate action is required to address an issue.
• The issue is causing or is likely to cause damage, inhibit the use of the building, or pose a risk to health and safety.
• The impacts of the issue are serious in nature.
• The work is limited only to what is necessary to mitigate the immediate impacts until more comprehensive remedial work can be undertaken.

Understanding When a DA or CDC is Triggered for Strata Repairs

While many types of remedial building work can be completed as “Exempt Development,” certain conditions will trigger the need for formal planning and environment law approvals Your strata project may require a Development Application (DA) or a Complying Development Certificate (CDC) if specific circumstances arise.

A DA or CDC is generally required for remedial works if:

• The strata plan does not have a current Annual Fire Safety Statement (AFSS) in place.
• The project has non-exempt heritage impacts.
• A Performance Solution is needed because the work cannot meet the ‘Deemed-to-Satisfy’ provisions of the National Construction Code.
• The remedial works are outside the defined parameters of exempt development.

If a DA is required, the approval process can take three to six months or even longer, adding considerable time and expense to your strata repair project. These planning requirements place a significant strain on the system and can lead to unforeseen costs.

Conclusion

The Design and Building Practitioners Act 2020 (NSW) was introduced as a response to rising strata defects, significantly increasing accountability for everyone involved in the design and construction of a strata scheme. This legislation empowers strata owners with a range of new rights and remedies while establishing extensive regulatory and compliance requirements for design and building professionals.

A thorough understanding of these mandates is crucial, whether you are a lot owner, an owners corporation, or a practitioner. To ensure you are navigating these complex changes correctly, seeking advice from expert strata lawyers is invaluable, so contact PBL Law Group’s strata building defect lawyers to guide you through this evolving landscape.

Frequently Asked Questions