Australian Building Industry Contracts (ABIC): These are typical standard contracts that parties use in building and construction projects. ABIC are intended for use where an architect administers the contract. These contracts are provided on a lump sum basis and categorised by the value of the work. Some of the most common contracts ABIC provides include:

  • Major Works Contract – Contract for projects with a value of over $2 million;
  • Simple Works Contract – Contract for projects with a value of up to $2 million;
  • Basic Works Contract – Contract for projects with a value of up to $50,000.

Similar corresponding contracts also apply to subcontracting agreements.

Building and Construction Industry Security of Payments Act 1999 (NSW) (SOPA): The SOPA is one of the key pieces of legislation in the construction industry in NSW. It regulates progress payments and ensures that any person or company that carries out construction work can promptly receive the payments due.

Building Code of Australia 2007 (BCA): This is the Code that regulates Australia’s building and construction industry. It is a uniform set of rules that regulate the design and construction of buildings across federal Australia. It is maintained by the Australian Building Codes Board.

Compliance Certificate: This is a certificate given confirming that the building work contracted has been completed and complies with the plans and specifications of the contract. A compliance certificate can also be used to have a building classified or partly classified under the BCA. See also Practical Completion.

Construction Certificate: This certificate confirms that once the builders have completed the building work according to specified plans, it will also comply with the requirements of regulations made under the Environmental Planning and Assessment Act 1979 (NSW), including development consent conditions.

Construction Project: Under the Work Health and Safety Act 2011 (NSW), the definition of a construction project is a project involving construction work where the cost is greater than $250,000.

Construction Work: Under the Work Health and Safety Act 2011 (NSW), construction work means work carried out to a structure, including:

  • Construction;
  • Alteration;
  • Conversion;
  • Fitting-out;
  • Renovation;
  • Repair;
  • Maintenance;
  • Refurbishment;
  • Demolition;
  • Commissioning/Decommissioning;
  • Dismantling;

It does not include manufacturing of plant or prefabrications of materials to be used in construction.

Consumer Trader & Tenancy Tribunal (CTTT): In NSW, this is the primary tribunal which hears disputes relating to consumer, trader, tenancy and home building claims. Its jurisdiction is capped at claims not over $500,000.

Defects: There are two types of defects:

  • Structural defects (or major defects); and
  • Non-structural defects.

Different insurance time periods will apply to the two types of defects, and it is important to recognise what type of defect has arisen. A ‘major defect’ is one that goes towards the structural element of a building, including a defect that causes:

  • The destruction of part of the building;
  • Inability to use the building; or
  • A threat of collapse of the building.

Defects Liability Period: This is the period that begins after Practical Completion (see below), usually between 12-24 months, which allows the contractor to rectify any defects that arise. Its purpose is to recognise that defects will arise after completion and to allow the contractor the opportunity to fix it.

Development Application (DA): This is a formal application for approval to carry out a proposed development, such as a change of use of land, building, landscaping and other work. A DA must be approved, and a Development Consent received before work can begin on the land.

Development Consent: This is the formal consent required by the appropriate authority (usually the Council of the land that the work is to be on) before work can begin. See also Development Application.

Environmental Impact Statement (EIS): This is a report setting out potential environmental impacts of development. It is mandatory for certain types of development such as any development under Part 5 of the Environmental Planning and Assessment Act 1979 (NSW). The EIS must be considered before the relevant authority gives Development Consent.

Environmental Planning and Assessment Act 1979 (NSW) (EPA): This legislation governs all environmental and conservational issues concerning development and construction works. Before work begins, principals and contractors should ensure they have complied with the necessary requirements such as submission of an EIS.

Home Building Act 1989 (NSW): This is the key legislation relating to the residential building industry which governs:

  • The licensing of persons who undertake residential building and specialist works;
  • The required contractual provisions for home building contracts;
  • Dispute resolution (including under the CTTT); and
  • Insurance matters.

For regulations regarding process payments, see Building and Construction Industry Security of Payments Act 1999 (NSW).

Home Building Contracts: There are two main types of home building contracts:

  • Small jobs contracts for residential building work valued between $5,000-$20,000; and
  • Contracts for residential building work valued over $20,000.

These contracts must have specific provisions in them which are specified under sections 7 and 7AAA of the Home Building Act 1989 (NSW).

Home Warranty Insurance: This insurance is required for residential building work to cover the tenant of the house. This insurance is to protect the person against the risk that the work is incomplete, whether that is due to insolvency, death or disappearance of the contractor.

Land and Environment Court (NSW): This is NSW’s specialist court to deal with disputes involving environmental and planning law. It also has the power to hear matters related to or ancillary to the planning or environmental dispute. Major construction disputes which relate to these issues will often end up in this court.

Master Builders Australia: This is the main Australian building and construction industry association. Master Builders also produces some of the most frequently used contracts used in construction, including:

  • Project Management Agreements – this agreement governs the relationship between a project manager and a building owner, where the manager acts as the owner’s agent and is in charge of managing the entire construction project up till completion.
  • Construction Management Contracts – this agreement is specifically between a construction manager and the building owner. It puts the construction manager in charge of supervision and management of the project. Note that you cannot use this for domestic building work.
  • Design and Construct Contracts – More commonly referred to as a D&C contract, this is an agreement between building owners and contractors where the contractor becomes responsible for all trades and design work to be carried out. All design consultants and subcontractors are engaged and paid for by the contractor, with the owner only paying progress payments to the contractor.

Occupation Certificate: This certificate authorises the occupation and use of a new building or a change of use in an existing building. The relevant authority (e.g. the council) cannot issue it until they are satisfied that the building is suitable for occupation or use under its BCA classification.

Pay When Paid: A pay when paid clause in a construction contract allows a party, who is owed money from a third party to the contract, to make payment after they receive these funds. This type of clause has no effect with regards to payment for construction work carried out under the contract.

Practical Completion: This is the stage where the builder or contractor has substantially completed the building works and where the tenant or owner of the property becomes reasonably capable of using the property for its intended purpose. Minor defects and issues will be accounted for at this stage, and a certificate issued upon completion.

Principal: This is the entity who has management and control of a workplace for the purpose of a construction project.

Progress Payments: These are payments made to a person who has undertaken to carry out construction work or undertaken to supply related goods and services under a construction contract. These could be final payments, one-off payments or an event-based payment. Note that any clauses which provide additional conditions to the right to receive progress payments will be seen to restrict the SOPA and be rendered void.

Rectification Order: The NSW Fair Trading Inspectors will issue these orders if the builder or contractor does not fix a defect or if there is a dispute over defective works. Rectification orders are the preferred outcome of any proceedings related to defect disputes.

Residential Building Work: This refers to any work involved in, or the coordination or supervision of any work relating to dwellings. This can include:

  • Construction;
  • Alterations/additions;
  • Renovation;
  • Decoration; or
  • Protective treatment

The Home Building Act 1989 (NSW) governs residential building work.

Section 73 Certificate: Issued under the Sydney Water Act 1994 (NSW), this certificate is given to development work and certifies the requirements associated with that development (e.g. payment of the cost of works required due to proposed development).

Section 149 Planning Certificate: The relevant local council issues this concerning the specific land that sets out planning considerations which are applicable, such as zoning and land use controls and whether the land is subject to coastal protection.

Statutory Warranties: Contained in section 18B of the Home Building Act 1989 (NSW), these warranties set out certain obligations imposed on the building contractor which apply to every residential building work contract that they execute. The warranties include:

  • That building contractors do the work with due care and skill;
  • That all materials supplied are good and suitable for use;
  • That the work will be done with due diligence and within the contracted time.

Work Health and Safety Act 2011 (NSW): This Act governs and provides a framework towards the health and safety of workers and workplaces. It also allows inspectors to investigate the performance of duties and the standard of health and safety.

Lianne Tan

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