Introduction

The Building Legislation Amendment Act 2023 (NSW) stands as a considerable moment for New South Wales, shaking up the building world with new rules to boost the quality, safety, and responsibility of home building. These changes are set to shield homeowners better and demand higher standards from builders, making sure fresh builds and renovations hit top-notch quality and obey strict codes.

This article provides a comprehensive overview of the key changes introduced by the bill and explores the potential impacts these modifications will have on both homeowners and builders. From improved oversight to increased accountability, consumer protection measures, and beyond, these changes are set to reshape New South Wales’ landscape of residential construction in 2025.

Building Legislation Amendment Act 2023: Key Changes and Key Outcomes for Homeowners and Builders

The Building Legislation Amendment Bill 2023 (NSW) introduced several changes aimed at enhancing the oversight and quality of construction in New South Wales, with significant impacts on homeowners and builders alike. The Building Legislation Amendment Bill 2023 (NSW) was passed by the NSW Parliament on 21 November 2023 and received formal assent on 11 December 2023, officially becoming the Building Legislation Amendment Act 2023 (NSW) (Act No 44 of 2023).

Here’s a breakdown of the key reforms and how these changes might affect homeowners and builders:

Amendments	Explanation	Impact on Homeowners	Impact on Builders
Improved Oversight by the new Building Commission NSW	The newly established Building Commission NSW receives enhanced powers to proactively investigate, issue rectification orders, and stop-work orders for defective work on all residential buildings, including standalone houses and strata properties (Class 1 buildings).	Homeowners benefit from the regulator’s ability to step in and order fixes during construction, even without a formal complaint, reducing the risk of defects in new homes.	Builders of all residential homes now face the same level of regulatory scrutiny previously applied only to apartment buildings, increasing the pressure to maintain high-quality practices to avoid costly orders and project delays.
Increased Accountability Across the Supply Chain	Obligations are set across all roles in the building supply chain to ensure the safety and compliance of building materials and practices. This includes responsibilities for design, manufacture, supply, and installation, aiming to ensure end-to-end quality and safety.	Ensures homeowners are investing in properties constructed with compliant and safe materials, reducing the likelihood of future structural issues and enhancing overall trust in the construction industry.	Places a greater emphasis on compliance and safety across the entire supply chain, from design through to construction. Builders must ensure all materials and practices meet strict standards, increasing project scrutiny.
Decennial Liability Insurance (DLI) as an Alternative to the Strata Bond	The Act formally introduces Decennial Liability Insurance (DLI) as a voluntary alternative to the Strata Building Bond and Inspection Scheme (SBBIS). DLI is a 10-year insurance policy that protects against major defects in an apartment building’s common property.	DLI provides homeowners with a more comprehensive safety net, offering direct access to insurance funds to fix serious defects for 10 years without needing to prove fault or pursue the builder, who may have become insolvent.	Developers can now choose between providing a building bond or obtaining DLI. While DLI may involve higher upfront costs, it can reduce long-term litigation risk. The government is encouraging its uptake, with only one insurer currently offering a DLI product in NSW.
Crackdown on Illegal Phoenixing	New measures strengthen anti-phoenixing laws by allowing the regulator to refuse or cancel a licence if a person was involved in the management of a construction company that became insolvent within the previous 10 years, a significant increase from the former three-year period.	This protects homeowners from builders who use insolvency to evade their responsibilities, ensuring greater accountability and reducing the risk of being left with unfinished or defective work.	This levels the playing field for reputable builders by making it harder for unethical operators to shed liabilities and continue trading. Individuals with a history of corporate failure now face significant barriers to re-entering the industry.
Enhanced Penalties for Non-Compliance	The Act introduces significant financial penalties for non-compliance. For example, failing to comply with a rectification or stop-work order can result in fines of up to $330,000 for a corporation and $110,000 for an individual, with further daily penalties for ongoing offences.	These severe penalties act as a strong deterrent against non-compliance, giving homeowners greater assurance that builders will follow orders to fix defects and adhere to high standards.	The high financial stakes for non-compliance create a powerful incentive for builders to prioritise quality and immediately address any issues identified by the Building Commission NSW, as the cost of ignoring orders is now substantial.
Increased Strata Building Bond	To further protect apartment owners and encourage the uptake of DLI, the government has increased the mandatory strata building bond developers must lodge as security against defects. The bond will increase from 2% to 3% of the building’s contract price, effective from 2 November 2024.	The larger bond provides a greater pool of funds to cover the cost of rectifying defects in the common property of new apartment buildings, offering better financial protection for the owners corporation.	Developers of strata projects will face higher upfront costs. This change is strategically designed to make the cost of obtaining a comprehensive DLI policy more competitive compared to lodging the higher 3% bond.

Key Legal Developments in 2024-2025: Personal Liability and Proportionality

Recent court decisions have clarified how these new laws apply in practice, with significant consequences for industry leaders.

• Personal Liability for Directors: In a landmark 2024 decision, Kazzi v KR Properties Global Pty Ltd t/as AK Properties Group [2024] NSWCA 143, the NSW Court of Appeal found a company director personally liable for the cost of fixing building defects. The court ruled that because the director supervised the work, he had a direct statutory duty of care under the Design and Building Practitioners Act 2020 (NSW). This ruling pierces the “corporate veil,” meaning directors and supervisors can no longer assume the company alone will be responsible for defect costs; their personal assets are now at risk.  
• Reasonable and Proportional Damages: The NSW Supreme Court provided clarity on how damages for defects are calculated. In Metricon Homes Pty Ltd v Lipari [2024] NSWSC 566, a concrete slab did not meet the Australian Standard, but it caused no structural damage. The Court rejected the homeowner’s claim for a full “knock-down and rebuild,” ruling it was disproportionate. This confirms that courts will only award repair costs that are reasonable and necessary to address the actual problem, not just to meet a standard on paper.  

On the Horizon: Preparing for the Building Bill 2024

The 2023 Act is a step towards a much larger transformation. The government is currently finalising the Building Bill 2024 (NSW), which aims to consolidate nine separate pieces of legislation, including the Home Building Act 1989 (NSW), into a single, modernised Act. While still in draft form, key proposals that the industry should prepare for include:  

• A New Tiered Licensing System: The Bill proposes a five-tier licensing framework for builders based on the complexity of the work (e.g., low-rise, medium-rise, unrestricted) and may expand licensing to previously unlicensed practitioners like building designers.  
• Expanded Duty of Care: The statutory duty of care to avoid economic loss from defects, which has already had a major impact on the residential sector, is proposed to be extended to cover all classes of buildings, including commercial and industrial projects.

Amendments to Building and Construction Laws: Make Sure You are Ready. 

The Building Legislation Amendment Act 2023 and recent court decisions have created a new reality for the construction industry in New South Wales. Homeowners now have stronger protections, backed by a more powerful regulator in the Building Commission NSW. For builders and developers, the landscape has fundamentally shifted. Adherence to higher standards is no longer just best practice. It is a critical risk management strategy to avoid significant penalties and, following the Kazzi decision, potential personal liability.

As the industry prepares for the sweeping changes proposed in the upcoming Building Bill 2024, staying informed is essential. Understanding these evolving regulations is key to ensuring compliance, managing risk, and thriving in the new era of NSW’s construction industry. If you are seeking guidance or have questions about how these changes may affect you, contact PBL Law Group’s building and construction lawyers for expert advice.

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