We are working to raise the standard of construction in NSW by reducing the number of buildings with serious defects. A key part of this strategy is to audit developers before an occupation certificate (OC) is issued.
On this page:
Key information
Our audit strategy
Why we audit developers
How we choose who gets audited
Types of inspections
The audit process
Notification of orders to potential purchasers
Using audit findings to improve the construction industry
Related information
Key information
- An occupation certificate (OC) is issued by a certifier and gives legal permission for a building to be occupied.
- Sites are selected for an OC audit based on risk rating tools to identify potentially risky developers and buildings.
- After a developer lodges an expected completion notice (ECN), the project will be reviewed and may be selected for an OC audit.
- If serious defects are identified, we can issue a Stop Work Order, Prohibition Order or Building Work Rectification Order.
- Audits help raise the construction standard of residential apartment buildings in NSW by reducing the number of buildings with serious defects, as well as ensuring transparency for buyers.
Our audit strategy
Our OC audit strategy gives us the power to raise the standard of construction in NSW by inspecting residential apartment buildings before an occupation certificate is issued.
We can use our powers under the Residential Apartment Buildings Act 2020 (RAB Act) to take action against developers in relation to serious defects in building work.
What is a serious defect?
A serious defect includes any defect that is likely to cause the inability to inhabit or use the building or part of the building for its intended purposes, or any building element that does not comply with the requirements of the Building Code of Australia, relevant Australian Standard or relevant approved plans, or any use of products in contravention of the Building Products (Safety) Act 2017.
OC audits are currently conducted on class 2 residential apartment buildings, with the expansion to classes 3 and 9c soon.
Why we audit developers
By auditing developers prior to the issue of an occupation certificate we aim to:
- Encourage developers to meet their regulatory requirements under the RAB Act.
- Raise the standard of construction for class 2 buildings and minimise the harm or loss to consumers due to serious defects.
- Promote mentoring and education to reinforce accountability and responsibility amongst key industry players. This helps us to identify areas of building non-compliance and capability gaps to reduce these in the future.
How we choose who gets audited
We choose which developers and building sites to audit based on risk rating tools to identify potentially risky developers and buildings. We conduct these audits prior to the issue of an occupation certificate because we want to identify buildings with serious defects before they are occupied.
The RAB Act gives Fair Trading the power to conduct an audit of a class 2 building. If required, Fair Trading can issue Orders to a developer. These include Stop Work Orders, Building Work Rectification Orders, Prohibition Orders and Developer Undertakings.
An authorised Fair Trading officer can ask a developer for:
- information and records
- to provide answers and further information
- to take possession of records to be used as evidence.
Developers must comply with any direction by an authorised officer to provide information, answers, or records. A maximum penalty of $110,000 (for body corporates) or $22,000 (in any other case) applies.
Types of inspections
Types of inspections that may take place under the RAB Act include:
Pre-OC audits
This is our most common OC audit inspection type. After a developer lodges an expected completion notice (ECN) on the Planning Portal, we review the project and may select it for an audit using our risk analysis tools.
Post OC audits
Occupied class 2 sites up to 10 years old can also be selected for an audit or inspection. These may be because of a referral or reported issues or complaints made to us.
Anytime/anywhere inspections
Anytime/anywhere inspections allow us to visit and enter any class 2 building site in NSW at any stage of the build or after completion. They are designed to be conducted rapidly.
Depending on the nature and type of defects identified, these can result in the scheduling of a more comprehensive audit.
The audit process
The key steps in an audit are shown below. The actual process followed during an audit process may vary:
1. Notification of audit
We notify the developer in writing if they have been selected for an audit.
The notification will provide the date and time of the audit and other important information. Developers will be invited to attend a developer briefing with inspectors to discuss the upcoming audit.
2. Upload of documents to the NSW Planning Portal by the developer
The developer must provide a list of required project documents. We will conduct a review of the documents on the NSW Planning Portal prior to the site visit.
3. On-site inspection
Our inspectors will attend the site for the initial audit.
The inspectors focus on five key building elements:
- structure;
- waterproofing;
- fire safety systems;
- building enclosures, and;
- essential services (such as lifts and acoustics).
Other building elements may be audited and we may do follow-up audits and inspections, where necessary.
4. Communication of audit completion and next steps
At the completion of an audit, communication to developers may include:
a) Close out letter
If no issues are identified during the audit, we provide the developer, builder and certifier with a close out letter. The developer is then able to progress to pay the building work levy and Strata bond before applying for an occupation certificate.
b) Written directions notice by a certifier
A principal certifier working on a class 2 development must issue a written direction notice (WDN) if they become aware of a prescribed non-compliance.
During the initial stages of an audit where serious defects have been identified, we will discuss these obligations with certifiers to ensure that the certifier has considered the issuing of a WDN.
If a WDN has been issued in relation to development that is subject to an audit, we will communicate with the certifier to obtain regular updates in relation to compliance with the WDN.
The Certifier Practice Standard sets out the expected conduct of registered certifiers carrying out building certification work.
c) Orders issued
Where a serious defect has been identified and a WDN has been considered but not issued, an Order may be issued to the developer under the RAB Act.
Types of Orders include:
A draft order (or Notice of Intent to issue an Order) is issued to the developer and relevant third parties, providing them time to review and respond. After we consider any submissions from the developer or if the time to make a submission has expired, we may issue a Final Order to the developer.
It is an offence under the Act to fail to comply with an Order. The maximum penalty for a body corporate is $330,000.00 and in addition, in the case of a continuing offence, $33,00.00 for each day the offence continues. In any other case, the maximum penalty is $110,00.00 and in addition, in the case of a continuing offence, $11,000.00 for each day the offence continues.
A copy of the Final order is published on our website. An Order is removed from the website when defects have been satisfactorily rectified and the Order revoked by the Secretary.
We can issue orders to both developers and builders. We may also take other appropriate compliance action if necessary.
d) Rectification of other defects
If issues are identified during the audit, which are not serious defects, we will work with the developer to fix these. The site will not continue to the OC application stage until the developer has demonstrated that all identified issues have been satisfactorily rectified.
5. Closing an audit
If there is no rectification action required by the developer, we will issue audit finalisation letters to the developer, builder and certifier.
Additionally, once we’re satisfied that all defects have been appropriately rectified, audit finalisation letters will be issued to the developer, builder and certifier.
Once a developer has received notification that the audit is closed, the project can then continue to the OC application process, with the next requirement being the lodgement of the strata bond and as-built drawings.
Notification of Orders to potential purchasers
Real estate agents must disclose an Order in force under the RAB Act to prospective purchasers. (see The Property and Stock Agents Regulation 2014 (the Regulation) link.
When an Order is issued, we will contact the developer to obtain a list of properties for sale in the building and the agents marketing the building. Fair Trading will issue education letters to the real estate agents reminding them of their obligations to disclose the Order.
We will conduct regular checks on real estate agents to know if and when they disclosed to the purchaser that an Order was in force.
Using audit findings to improve the construction industry
We are committed to using data collected from our OC audits to improve the industry. We communicate our findings regularly at industry events with the aim of improving industry standards and best practice.
Data collected from the audit program is used to develop targeted compliance programs and educational strategies including technical case studies.