Are You a Developer in NSW? Here’s What the Law Says You Must Do

Introduction

Navigating the legal responsibilities for construction projects in New South Wales is a critical task for any developer. A series of reforms from the NSW Government, including the Design and Building Practitioners Act 2020 (NSW) and the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW), has significantly reshaped the compliance landscape, aiming to improve building standards and protect consumers from defects.

For anyone considered a “developer” under this framework—understanding these obligations is crucial for managing risk and ensuring project success. This guide offers practical information on the key responsibilities and enforcement powers established by NSW building law, helping you understand the requirements for compliance from project commencement to completion.

Who Is Considered a Developer in New South Wales

Legal Definition Under RAB Act

In New South Wales, the legal definition of a “developer” is broad to ensure accountability across the construction industry. The term extends beyond the entity that simply commissions a project, capturing various parties involved in residential apartment buildings and other construction work.

This expanded definition is a core component of the NSW building law reforms. Under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) (abbreviated hereafter as the RAB Act), a developer can include any of the following parties:

• The person who contracts, arranges, or facilitates the work: This includes any individual or company that causes building work to be carried out, whether directly or indirectly.
• The owner of the land: The person or entity that owns the land at the time the building work is being performed is considered a developer.
• The principal contractor: The principal contractor responsible for the overall coordination and control of the building work, as defined under the Environmental Planning and Assessment Act 1979 (NSW), also falls under this definition.
• The strata scheme developer: For developments involving strata titles, the developer of the strata scheme is also identified as a developer under the Act.

Additional Definitions Under Home Building Act

The Home Building Act 1989 (NSW) also defines “developer” as the person or company on whose behalf work is done in particular circumstances. This applies when:

• Residential building work is done on a property where four or more dwellings are owned by that single entity
• In a retirement village context where the developer owns all the units

Furthermore, a person who contracts with and coordinates two or more separate contractors on the same residential building project is often considered to be acting as a ‘builder’. In such cases, that person or entity takes on the responsibilities of a builder and must hold the appropriate licence from NSW Fair Trading. This highlights that the role is defined by function and control, not just by title.

Your Key Responsibilities Under the Home Building Act 1989

Ensuring Correct Insurance & Licensing

As a developer in New South Wales, you have a critical responsibility to verify that the builder you engage for residential building work has the correct insurance. Before any work commences on a project valued over $20,000, you must ensure the principal contractor has arranged cover under the Home Building Compensation (HBC) Scheme. This insurance is designed to protect consumers if the builder becomes insolvent, dies, or disappears.

It is important to note that the standard HBC Scheme policy does not cover the developer. To mitigate potential losses arising from a builder’s default, developers should seek independent professional advice. This may involve requiring the builder to provide alternative security, such as:

• An on-demand bank guarantee
• A letter of credit
• A performance bond

Furthermore, developers must ensure all contractors they engage are appropriately licensed. Under the Home Building Act 1989 (NSW), it is an offence to knowingly employ an unlicensed contractor.

The penalties for this non-compliance are significant and can include:

Offence Category	Maximum Penalty
Corporation	A fine of $110,000.
Individual (First Offence)	A fine of $22,000.
Individual (Subsequent Offences)	A fine of $55,000 or 12 months imprisonment, or both.

Your Obligations as a Spec Builder

If you are a developer who owns the land and also carries out the residential building work yourself, you are considered a ‘spec’ builder. This typically occurs when a licensed builder develops a property with the intention of selling it upon completion.

As a spec builder, you have distinct obligations under the Home Building Act 1989 (NSW). Regardless of whether you intend to sell the property or retain it for investment, you must fulfil specific requirements. These responsibilities include:

Obligation	Requirement
Arrange HBC Scheme Cover	You must obtain insurance coverage under the Home Building Compensation (HBC) Scheme for the proposed work before the project begins.
Attach Certificate to Sale Contract	When selling the property, you must attach the certificate of cover from the HBC Scheme to the contract for sale.

Failing to attach the insurance certificate to the sale contract has serious consequences. Not only are you committing an offence that can result in a penalty, but the purchaser also gains the right to cancel the contract at any time before the settlement is finalised.

Obligations for Developers of Regulated Buildings

Fulfilling Requirements Before Building Work Starts

For developers working on regulated buildings in New South Wales, several mandatory tasks must be completed through the NSW Planning Portal before construction can commence. These regulated buildings include Class 2, 3, or 9c buildings, and the requirements form a critical part of the compliance framework established by the Design and Building Practitioners Act 2020 (NSW).

The initial process involves two key steps:

• Create a developer account: Developers must first establish a dedicated account on the NSW Planning Portal. This account is essential for: Step Key Actions Create a developer account Establish a dedicated account on the NSW Planning Portal to lodge documentation and manage compliance obligations. Complete pre-construction requirements Formally appoint registered design and building practitioners, nominate the principal certifier, and lodge the official building work commencement date via the portal.

Meeting Prerequisites Before Applying for an Occupation Certificate

As a regulated building project approaches completion, developers must fulfil several crucial prerequisites before applying for an occupation certificate. Failure to meet these obligations under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) can result in:

• Significant penalties
• Prevention of the occupation certificate being issued

The primary obligations at this stage include:

• Lodge an Expected Completion Notice (ECN): Developers must notify the Secretary of the Department of Customer Service of their intention to seek an occupation certificate. This notice must be: Obligation Details and Requirements Lodge an Expected Completion Notice (ECN) Notify the Secretary of the intent to seek an occupation certificate. This must be lodged 6-12 months before the application, or within 30 days of commencement for shorter projects. Pay the building work levy This mandatory payment is triggered by the submission of the ECN and is required for new buildings, significant additions, or major repair work before an occupation certificate can be granted. Lodge a Strata Building Bond For new residential apartment buildings four storeys or higher, a bond equal to 2% of the total contract price must be submitted with NSW Fair Trading before an occupation certificate is issued.

The Statutory Duty of Care & Liability for Building Defects

Understanding the Scope of the Duty of Care

The Design and Building Practitioners Act 2020 (NSW) introduced a significant statutory duty of care for anyone involved in construction work in New South Wales. This duty requires a person who carries out construction work to exercise reasonable care to avoid economic loss caused by defects in both:

• The building itself
• Issues arising from the construction work

This duty of care extends beyond the initial property owner to all subsequent owners of the land. As a result, current and future owners can claim damages for a breach, regardless of whether they were a party to the original construction contract. Furthermore, this duty applies retrospectively, covering construction work carried out in the 10 years prior to the Act’s commencement on 10 June 2020.

The scope of who owes this duty is broad and comprehensive. As clarified by the New South Wales Supreme Court, it includes not only those physically performing the work but also any party involved in:

• Coordinating the project
• Supervising construction
• Project managing
• Otherwise having substantive control over the project

This broader interpretation ensures that developers and other key figures in the construction law framework are held accountable for their responsibilities.

Non-Apportionable & Non-Delegable Liability

A landmark decision by the Australian High Court has confirmed that the statutory duty of care is both non-delegable and non-apportionable for a developer. In practical terms, this means a developer cannot:

• Transfer their responsibility to another party (such as a builder or subcontractor)
• Argue that their liability should be divided among other parties involved in the project

The ruling established that developers and head contractors are personally and fully liable for all economic loss arising from defects, even if their role was limited to supervising work performed by others. The court determined that the duty under the Design and Building Practitioners Act 2020 (NSW) extends to all defects from the construction work, making arguments about the quality of supervision irrelevant to the scope of the duty itself.

As a consequence of this ruling, developers cannot use proportionate liability defences to reduce their share of blame by pointing to faults of subcontractors, architects, or certifiers. If a defect claim arises, the developer is 100% responsible for the loss. It then becomes the developer’s responsibility to pursue any liable third parties, such as subcontractors, in separate legal actions and to bear the risk if those parties are unable to pay.

NSW Building Commissioner’s Enforcement Powers

Responding to Building Work Rectification & Stop Work Orders

Under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW), the Secretary of the Department of Customer Service holds significant enforcement powers to address non-compliance and defects in residential apartment buildings. These powers include issuing Building Work Rectification Orders and Stop Work Orders to developers.

A Building Work Rectification Order can be issued if the Secretary reasonably believes that building work is being carried out in a way that could result in a serious defect. This order compels a developer to eliminate, minimise, or remediate the defect. Before issuing the order, the Secretary will typically provide a ‘show cause’ notice, allowing the developer to respond unless there is an emergency.

Failure to comply with a Building Work Rectification Order can lead to:

Consequence of Non-Compliance	Description
Financial Penalties	A corporation faces penalties up to $330,000, plus an additional $33,000 for each day the offence continues.
Secretary-Arranged Rectification	The Secretary can arrange for the required work to be completed and then recover all associated costs from the developer as a debt.

A Stop Work Order may be issued if the Secretary believes that building work is being, or is likely to be, carried out in a manner that could result in significant harm or loss to the public or occupiers. This order requires the developer to halt all work and can remain in force for up to 12 months. Non-compliance with a Stop Work Order carries the same severe financial penalties as a rectification order.

The Impact of Prohibition Orders on Occupation Certificates

One of the most significant enforcement powers available is the Prohibition Order, which directly impacts a developer’s ability to complete a project. This order can prevent the issuing of an occupation certificate and the registration of a strata plan, effectively stopping purchasers from occupying the building and developers from finalising sales.

The Secretary can issue a Prohibition Order under several specific circumstances, including when:

Trigger for a Prohibition Order
An Expected Completion Notice (ECN) was not lodged correctly or was provided less than six months before the occupation certificate application.
The Secretary is satisfied that a serious defect exists within the residential apartment building.
The developer has failed to lodge the required 2% strata building bond with NSW Fair Trading.

Any occupation certificate issued in contravention of a Prohibition Order is invalid. While a developer has the right to appeal the order to the Land and Environment Court within 30 days, the order remains in effect unless the court decides otherwise.

Conclusion

The NSW building law reforms, including the Design and Building Practitioners Act 2020 (NSW) and the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW), have significantly expanded a developer’s responsibilities, imposing a non-delegable duty of care for defects and strict compliance obligations. To avoid severe penalties and project delays, developers in New South Wales must carefully navigate these requirements, from initial practitioner nominations and notices through to addressing the Building Commissioner’s enforcement powers.

Managing this complex legal landscape requires expert guidance to ensure every requirement is met. For specialised legal support tailored to your conveyancing and property legal needs in NSW, contact our experts at LawBridge today to secure your project’s compliance and success.

Frequently Asked Questions