How we audit Class 1 building constructions

The Building Commission NSW has powers under the Home Building Act 1989 to enter residential construction sites and conduct audits before an occupation certificate (OC) is issued. If breaches are identified, we can issue rectification orders, stop work orders and on-the-spot penalties. Serious conduct issues can also result in disciplinary action. 

Key information

• We will audit class 1 buildings before and after they are completed because we want to build public confidence in the quality, safety and trustworthiness of NSW’s residential building industry.
• We will choose projects to audit based on a risk analysis and random sampling. Risk factors that we will focus on include the conduct of licensees, complaints history, the complexity of the project and safety performance. 

Our audit strategy

This audit strategy applies to compliance obligations of licensees and certificate holders under the Home Building Act 1989.

Our audits aim to: 

• Raise the standard of residential construction by reducing the number of serious defects arising during the project.  
• Identifying areas of non-compliance and poor practice where industry would benefit from additional education and training.

Authority to conduct audits

Under the Home Building Act 1989, the Secretary can:

• investigate any residential building work or specialist work, whether or not a complaint has been received (Section 60 of the Act). 
• obtain relevant information (Section 127 of the Act)
• enter any building to carry out any examination or inspection in connection with any structure or work, whether or not it has been completed (Section 126 of the Act).

Recently added powers under the Home Building Act 1989 include:

• more detailed powers for authorised persons to examine and inspect while onsite (Section 126 of the Act)
• the power to investigate for defects in residential building work (this includes specialist work, work under the Act that impacts other land or building, and work that relates to, or leads to, other residential building work) (Part 3B)
• the power to issue rectification orders under Part 3B (which are distinct from those issued as a result of building complaints), if satisfied that:
  • the residential building work done is defective
  • was or is carried out in a way that could result in a defect
  • the contractor or agent has in the course of doing residential building work, caused damage to a structure or work;
  • the defective residential building work leads to a structure or work being damaged (Section 49B of the Act).
• the power to issue stop work orders to a developer / contractor if satisfied that: 
  • the building work is, or is likely to be, carried out in a way that could result in significant harm or loss to the public or to occupiers or potential of the building to which the work relates or significant damage to property
  • there is a change in principal certifier or building practitioner
  • the building work is, or is likely to be, carried out in a way that could prevent the valid issue of an occupation certificate or building compliance declaration for the residential building work (Section 129 of the Act). 

How we choose who and what gets audited

We will choose projects to audit based on a risk analysis and random sampling. Risk factors we will focus on include the builder’s complaints history, historical conduct, safety performance, and whether there are potential risks related to key practitioners on a project (e.g. contractors, certifiers, engineers, consultants).

Other risk factors may include:

• observed poor site management or low levels of supervision
• builders that are at risk of insolvency or have restrictions applied under the home building compensation fund (HBCF) 
• projects located in areas with poor soil conditions
• projects where the builder, certifier or other key practitioners change
• owner-builder projects, and 
• where there is a degree of higher technical complexity in the project or the use of high-risk building products.

The audit process

The key steps in an audit are set out below.

1. Site selection
   Class 1 building sites for inspection are selected both randomly and taking into consideration the risk factors outlined in How we choose who and what gets audited section. 
2. Types of Inspections
   Inspections may be unannounced where authorised officers enter the building site anytime and at any stage of construction. Alternatively, inspections may be notified beforehand and occur at a specific date and time.
3. Compliance or Home Warranty Insurance requirements
   We will examine if insurance requirements (home building compensation cover) have been met for building projects worth over $20,000 including GST, unless exempt (exemptions found under Part 6, Division 6 of Home Building Regulation 2014).
4. Obtaining documentation and information
   The authorised officer may request information throughout the audit process, and is likely to focus on documents such as designs, approvals, certificates and test reports. If further information or documentation is required, the authorised officer may issue a written notice requesting the builder to provide such information. This written notice will specify the manner in which the information or records required must be provided and when they must be provided by. 
5. On-site audit
   On-site inspections will focus on compliance with the Building Code of Australia and relevant Australian Standards related to the key building elements (structure, building enclosure, waterproofing, fire safety, services). 
   
   We will also seek to align inspections with key stages in the construction process, including:

• before pouring an in-situ reinforced concrete building element
• before covering the framework for a floor, wall, roof or other building element,
• before covering waterproofing in a wet area,
• before covering stormwater drainage connections
• after the building work has been completed and prior to any occupation certificate being issued in relation to the building.
  
  Assessments may be carried out as to whether:
• building work is defective or could result in a defect,
• in the course of doing residential building work damage has been caused to a structure or work;
• work could result in significant harm or loss to the public or occupiers (including potential occupiers) or significant damage to property, or
• work could prevent the valid issue of an occupation certificate or building compliance declaration.
  
  While on-site, we will also look for compliance with requirements such as:
• signage related to the principal contractor and certifier
• if the workers and supervisors hold the required licences and certificates;
• if there is appropriate on-site supervision, especially when there is specialist work being performed
• compliance with obligations under other building legislation (e.g. Gas and Electricity (Consumer Safety) Act, Plumbing and Drainage Act).

Possible audit outcomes

Builders will be contacted regarding the outcome of an audit. This communication will include any defective work, potentially defective work and other observations. 

There are a range of possible responses and compliance tools available to the NSW Building Commissioner. This could include:  

1. No further action 
2. Formal warnings in relation to the conduct or work practices 
3. Penalty infringement notices – the imposition of a fine for an identified offence
4. Education – this could include clarification of legislative requirements or a referral to specific training such as learning modules on the Construct NSW digital platform.
5. Stop Work Order (for matters that meet the criteria specified in Section 129 of the Home Building Act 1989)
6. Undertakings – the parties agree to remedy breaches or other issues in a specific manner
7. Referral of the matter for further investigation and consideration of potential disciplinary action
8. Referrals to other regulators (eg. Local councils or principal certifiers)

Appeal of audit outcomes

A person given a Stop Work Order or a Rectification Order may discuss the matter with the issuing officer. If they are not satisfied, they can also appeal the Order to the NSW Civil and Administrative Tribunal (NCAT). 

Appeals must be made to NCAT within 30 days of the Order being given. 

The lodging of an appeal will not, unless NCAT directs otherwise, cause for a stay to be made on the Order.

Recording of compliance and enforcement actions

We maintain a public register of stop work orders and rectification orders (Section 130A of the Home Building Act 1989).    

A copy of the final order is made publicly available.  An Order is removed from the website when defects have been satisfactorily rectified and the Order is revoked. A copy of the Order will also be provided to the local council or the principal certifier (if council is not the certifier).  

The Building Commissioner NSW maintains a register of registered licensees and certificate holders (Section 120 of the Home Building Act 1989). The register records details, including:

• Disciplinary action taken against the licensees and certificate holders,
• Results of any prosecutions against the licensees and certificate holders,
• Penalty notices issued to the licensees and certificate holders, and
• Any cancellation or suspension of licenses or certificates, whether made under this or any other Act

Sharing findings with industry and continuous improvement

Audit program findings will be shared with stakeholders to help improve industry standards and practice. It will also be applied to develop education strategies and learning modules to improve industry practice.

Contact Building Commission NSW

For questions related to Class 1 building construction audits, contact Building Commission NSW on 13 32 20.