How we audit developers – occupation certificate audits
Learn about how we audit developers, including how we choose who is audited, the types of inspections we do and the steps in the audit process before an occupation certificate is issued.
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 developers and buildings of concern.
- 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.
OC audits are currently conducted on class 2, class 3 and class 9c buildings.
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 qualityof 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 developers and buildings of concern. 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 Building Commission NSW the power to conduct an audit of a class 2 building. If required, Building Commission NSW can issue orders to a developer. These include Stop Work Orders, Building Work Rectification Orders, Prohibition Orders and Developer Undertakings.
An authorised Building Commission NSW 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:
This is the most common OC Audit inspection type. The risk analysis tool takes into consideration the date the developer lodges the expected completion notice (ECN) on the NSW Planning Portal, and the date that Critical Stage Inspections (CSIs) are conducted, to name a few.
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.
The decision to undertake a post-occupation audit is contingent on factors including:
- the time available to Building Commission NSW to investigate and undertake any necessary regulatory action before the expiry of the statutory limitation period under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act
- the nature and seriousness of the reported defects, and
- the availability of viable developer entities.
The initiation of any such audit or investigation remains at the discretion of Building Commission NSW.
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:
Where a serious defect has been identified 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 and in addition, in the case of a continuing offence, $33,000 for each day the offence continues. In any other case, the maximum penalty is $110,00 and in addition, in the case of a continuing offence, $11,000 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.
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.
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 the serious defects with the certifier.
The Principal certifier, once becoming aware of the prescribed non-compliance, must issue a written directions notice.
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.
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.
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 Section 60 of the Property and Stock Agents Regulation 2022 (the Regulation).
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. NSW 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.