Introduction
Resolving disputes related to serious building defects has traditionally been an expensive and time-consuming process, often requiring litigation. Project Intervene was a temporary trial initiative launched in November 2022 by NSW Fair Trading and now led by the NSW Building Commission in an effort to reduce the costs of resolving these disputes.
Project Intervene is a form of alternate dispute resolution aiming to resolve disputes between developers and owners corporations in relation to defects in Class 2 buildings under the National Construction Code and covered by the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) (RAB Act). The aim of the scheme is to address serious defects that emerge after the initial occupation certificate had been issued, and a key benefit of the scheme when compared to litigation is that owners corporations incur no costs.
Project Intervene involves the NSW Building Commission negotiating with developers to fix serious defects on behalf of the owners corporation. During the process, the NSW Building Commission can exercise its powers under the RAB Act once defects are identified, such as accepting undertakings from developers or issuing building rectification orders.
Eligibility
Buildings that meet all the below criteria were eligible for Project Intervene:
- The building must be a Class 2 building under the National Construction Code with at least 3 storeys (excluding any levels that are below ground);
- There must be ‘serious defect’ of a ‘building element’ in the ‘common property’ of the building;
- The developer or builder is still trading and active i.e. not insolvent; and
- The occupation certificate was issued within the last 10 years.
Under RAB Act s 3, a ‘serious defect’ is:
‘Building element’ has the same meaning as in the Design and Building Practitioners Act 2020 (NSW) (DBP Act): RAB Act s 3. Under the DBP Act s 6, the ‘building elements’ are:
The ‘common property’ is defined in Strata Schemes Development Act 2015 (NSW) s 4 as ‘any part of a parcel that is not comprised in a lot (including any common infrastructure that is not part of a lot)’.
Project Intervene Process
1. Application to the NSW Building Commission
An application for Project Intervene can be made by a representative of the owners corporation of the affected building, usually a member of the strata committee or the strata manager. This means that the application must usually be authorised by the owners corporation at a strata committee meeting. An expert report is recommended to support an application.
Once the application is submitted, the Building Commission typically provides a notice to the developer and requests records and information regarding construction of the affected building. The Building Commission then reviews the application, the eligibility and the documents provided.
2. Building Inspection
An independent expert, on behalf of the NSW Building Commission, conducts a non-destructive building inspection to create a list of significant serious defects. The independent expert will also examine all material provided to come to their conclusions. While the investigation aims to be exhaustive and to capture most of the defects, defects that are discovered later on can be added to the list in the future. Preliminary findings are shared with the developers. However, these findings remain confidential between the NSW Building Commission and the developer and are not shared with, and cannot be used by, the owners corporation.
3. NSW Building Commission Response
After allowing the developer to provide feedback, the NSW Building Commission may then exercise one of two powers conferred to it by the RAB Act if serious defects are identified.
If the developer agrees, the NSW Building Commission will commence the process to work towards a accepting a written undertaking from the developer to remedy the defects, a process which can be undertaken under RAB Act s 28.
If this process is agreed to by the developer, the developer must sign an Undertaking Process Deed Poll to enter the process, after which the NSW Building Commission appoints an Undertaking Manager. According to the NSW Government, the Undertaking Manager ‘is to work with the developer to finalise the list of serious defects to be remediated and the expected timeline for remediation work’.
After the work of the Undertaking Manager is complete, a draft building work rectification order is issued to the developer which outlines the defects and the proposed rectification works required to rectify the defects. The developer then may provide an ‘undertaking’ to the Secretary of the Department of Customer Service (Secretary) based on the draft building work rectification order which sets out the serious defects, the process to rectify those defects and the roles of all involved parties. It may also include details on how the developer will monitor the emergence of future defects.
The Secretary may accept or reject the undertaking. If it is accepted, the owners corporation must then also accept the undertaking and sign the Owners Corporation Deed Poll to gain its benefits.
However, in situations where an undertaking cannot be agreed to, the NSW Building Commission may issue a building work rectification order under RAB Act pt 5 based upon the draft building work rectification order, which forces the developer to rectify the defects. This can occur if the undertaking from the developer is rejected by any party or the developer does agree with the list of defects.
4. Rectification Work
Once either an undertaking is agreed to or a building rectification order issued, the developer must comply with the undertaking or order and rectify the defects in the affected building. Before the works begin, regulated designs must be prepared, declared and lodged.
The developer and the NSW Building Commission must also jointly appoint a Superintendent to oversee the rectification works. While the developer is to cover the cost of the Superintendent, the Superintendent is to remain independent of the developer.
Project Intervene and Concurrent Legal Proceedings
There is no limitation preventing Project Intervene from operating in conjunction and concurrently with legal proceedings. Indeed, the NSW Supreme Court in Strata Plan 99576 v Central Construct Pty Ltd [2023] NSWSC 212 rejected a stay application made by a builder and a developer for proceedings on the basis of a pending Project Intervene, although a stay could possibly be ordered in a case with different circumstances. When owners corporations are deciding whether to discontinue concurrent legal proceedings, they must consider the fact that damages cannot be awarded through Project Intervene, unlike in legal proceedings, and thus they cannot recover any expenses incurred.
Conclusion
Project Intervene, in its original form, was only intended to be a trial of a new dispute resolution procedure in the construction industry. Registrations for Project Intervene have now closed and the program is now unavailable to new participants. This means that owners corporations with defective buildings will have to make complaints to the NSW Building Commission through the ordinary processes, and the NSW Building Commission will continue to assist with finding solutions and exercising its powers under the RAB Act.
If you require any advice on building claims, including if you have a potential claim or have a claim made against you, please do not hesitate to contact our expert lawyers at admin@valorumlaw.com.au or voregan@valorumlaw.com.au. Our expert construction lawyers will be on hand to assist you.
The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.
Sources:
‘Residential Focus: Project Intervene Held Not a Reason to Stay Proceedings’, Holding Redlich (Web Page) <https://www.holdingredlich.com/residential-focus-project-intervene-held-not-a-reason-to-stay-proceedings>
‘Navigating the Changing Landscape: Project Intervene’, Madison Marcus (Web Page) <https://www.madisonmarcus.com.au/news-media/areas-of-law/navigating-the-changing-landscape-project-intervene/>
‘Project Intervene: Resolving Serious Defects in Residential Apartment Buildings’, NSW Government (Web Page) <https://www.nsw.gov.au/housing-and-construction/building-commission/project-intervene>
‘Project Intervene: The Toolkit’, NSW Government (Presentation) <https://nsw.strata.community/wp-content/uploads/2022/11/The-Toolkit.pdf>
‘What’s Involved in Project Intervene’, NSW Government (Web Page) <https://www.nsw.gov.au/housing-and-construction/building-commission/project-intervene/whats-involved-in-project-intervene>
‘Project Intervene in NSW: A Comprehensive Guide How Project Intervene Approaches Defect Resolution in NSW’, PBL Law Group (Web Page) <https://pbl.legal/project-intervene-a-guide-to-solving-strata-defects-in-nsw/>
‘Project Intervene: New Protections Against Defects for Residential Work in NSW’, Russell Kennedy (Web Page) <https://www.russellkennedy.com.au/insights-events/insights/project-intervene-new-protections-against-defects-for-residential-work-in-nsw>
‘Project Intervene – Resolving Serious Defects in NSW Residential Apartment Buildings less than 6 Years Old’, Strata+ (Web Page) <https://www.strataplus.com.au/nsw-govt-project-intervene/>
Contributors: Harry Chen
