The NSW Building Commissioner recently issued a prohibition order against a development in Parramatta which prohibited the issue of an occupation certificate until the order was revoked. The order was issued because rectification work had not adequately addressed the serious defects identified in inspections carried out by officers of the NSW Department of Customer Service in 2020.

The order has been in force for over 10 months and is causing significant issues for the project and the developer, and represents a prime example of the consequences of non-compliance with the Design and Building Practitioners Act 2020 (NSW) (DBP Act) and the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) (RAB Act).

Aside from delays, prohibition orders can have many financial implications on builders, developers and their financiers such as causing them to breach the covenants and cause additional costs, trigger liability of builders for liquidated damages under building contracts, allow purchasers of off-the-plan apartments to rescind their sale contracts if the occupation certificate hasn’t been issued by the sunset date under those contracts, and perhaps most importantly, can affect the reputation of the developer and the project itself.

Directors and individuals involved in management can be penalised up to $330 000 for corporations and $110 000 for individuals for each breach under various Acts such as the DBP Act, the Home Building Act 1989 (NSW) and the Building Product Safety Act 2017 (NSW).

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