Section 37 of the Design and Building Practitioners Act 2020 imposes a non-delegable, non-contractable duty of care on every person who carries out construction work in NSW. The duty runs for 10 years from the Occupation Certificate date and extends to current and future owners.
For NSW developers delivering Class 2 residential construction, this statutory framework converts builder selection from a price-driven procurement exercise into a 10-year liability allocation decision.
Registration status alone does not determine the quality of a developer’s 10-year recourse; documentation systems, financial stability, and delivery model structure carry equal weight.
What Section 37 Changed About Builder Liability in NSW
Section 37 of the DBP Act creates a statutory duty of care owed by every person who carries out construction work to every current and subsequent owner of the building. The duty requires practitioners to exercise reasonable care to avoid economic loss from defects.
Three features distinguish Section 37 from prior common-law positions. The duty cannot be delegated to subcontractors. No head contract clause can exclude it. The High Court confirmed in Pafburn Pty Limited v The Owners – Strata Plan No 84674 [2024] HCA 49 that proportionate liability under the Civil Liability Act 2002 does not apply.
The duty operates retrospectively. Work completed before the Act commenced on 1 July 2021 sits within the Section 37 exposure window, provided the building was less than 10 years old at commencement. Owners and owners’ corporations hold a direct cause of action for 10 years from the Occupation Certificate date.
Why Builder Selection Is Now a Liability Decision
Section 37 converts builder selection from a procurement exercise into a 10-year liability allocation decision for NSW developers. The registered Building Practitioner who signs the building compliance declaration carries personal liability regardless of subcontractor arrangements.
Three commercial consequences follow. Professional indemnity insurance terms for design practitioners have tightened, with declarations on marginal designs refused more frequently. Builder selection now functions as a liability-sharing decision; a solvent registered Building Practitioner represents genuine recourse where a phoenix entity does not. Documentation quality during construction has become a contested asset, because declaration records form the evidence base for any future Section 37 claim.
Before the DBP Act commenced, NSW developers selected builders primarily on price, programme, and capability. Post-2021, every dimension of builder selection carries Section 37 consequences that did not exist under the prior framework established by the Shergold Weir report recommendations following the Opal Tower and Mascot Towers defect events.
Five Risk Factors the DBP Act Forces Developers to Evaluate
Five measurable risk factors separate genuine Section 37 protection from an empty guarantee.
1- Registration Status
The head contractor must hold registered Building Practitioner status under the DBP Act, separate from a general contractor licence under the Home Building Act 1989. Building companies engaged as principal contractors must hold body corporate registration and nominate a director or employee who holds individual registration to issue the building compliance declaration. Verification runs through the Service NSW portal, with Building Commission NSW as the approving authority.
The qualified pool is shrinking. Multiple registered practitioners have exited the Class 2 space due to compliance burden, making verification and selection more critical for NSW developers.
2- Professional Indemnity Insurance
PI insurance becomes mandatory for all registered practitioners from 1 July 2026. Coverage scope and declaration willingness are evaluation factors. A practitioner who refuses to declare on specific designs signals PI insurance constraints that the developer must assess before contract execution.
3- Financial Stability
A Section 37 cause of action is worthless if the builder who signed the building compliance declaration no longer exists as a legal entity. The phoenix entity pattern, where a builder completes a project, obtains the Occupation Certificate, liquidates the entity, and re-establishes under a new company, converts 10 years of statutory protection into an unenforceable claim. ASIC registration history, corporate structure, and operating continuity form part of the solvency screening.
4- Documentation System Capability
Declaration records lodged on the NSW Planning Portal form the primary evidence base for any future Section 37 claim. Four compliance documents must reach the Portal at defined points: regulated designs, design compliance declarations, variation declarations, and the building compliance declaration.
The variation declaration window is one day for building elements and performance solutions. Gaps in lodgement create exposure. ISO-aligned systems with structured variation tracking and digital declaration management provide a verifiable compliance trail. Informal documentation practices do not.
5- Delivery Model Structure
The builder’s delivery model determines who controls variation response, who signs compliance declarations, and where accountability sits when a Section 37 claim surfaces.
In a director-led model, the person who signs the building compliance declaration oversees construction daily. Declaration integrity connects directly to delivery oversight. In a handoff-based model, declaration signing and construction oversight are separated by organisational layers.
Early Contractor Involvement before design lock reduces variation declaration frequency during construction. A builder engaged during design identifies performance solution choices before they enter regulated designs lodged on the NSW Planning Portal. Design and Construct delivery with an integrated builder and consultant team reduces handover gaps that historically caused late-stage declaration failures on Class 2 projects.
Tau Constructions completed the Ace Hotel Sydney, an 18-level, 264-room, 5-star hotel in Surry Hills, through integrated design-and-construct delivery. The 499 Kent Street project (223-room, 5-star hotel, Sydney) is an active ECI engagement demonstrating pre-construction risk reduction on a complex Class 2–adjacent scope.
Class 3 and 9c Expansion from 1 July 2026
From 1 July 2026, alteration and repair work on existing Class 3 and 9c buildings falls within the DBP Act. Class 3 covers hotels, motels, boarding houses, and backpackers’ accommodation. Class 9c covers residential care facilities.
Developers planning hotel refurbishments, motel upgrades, or residential care renovations must verify project scope against the expanded obligations before contract execution. Builder selection risk now extends to live environment delivery on operating hospitality and aged care venues, adding operational complexity beyond new-build Class 2 obligations.
Frequently Asked Questions
How do I verify a builder’s registration under the DBP Act?
Registration verification runs through the Service NSW portal. Confirm the builder holds registered Building Practitioner status, not a general contractor licence alone. Building Commission NSW approves and maintains the register.
Can a head contract clause limit Section 37 exposure?
No. Section 37 cannot be contracted out. No clause in a head contract, sub-contract, or consultant appointment limits the duty. Pafburn [2024] HCA 49 confirmed proportionate liability is unavailable.
How does Early Contractor Involvement reduce declaration risk?
ECI engagement before design lock identifies performance solution choices and constructability issues before they enter regulated designs. Fewer design changes during construction means fewer variation declarations and fewer declaration failure points that create Section 37 exposure.
Builder Selection as Risk Allocation Under the DBP Act
Builder selection under the DBP Act is governed by registration, solvency, documentation capability, PI insurance, and delivery model, not by price alone. Each factor determines the enforceability of the developer’s 10-year Section 37 recourse.
Tau Constructions delivers Class 2 projects under NSW Licence 321977C through a director-led delivery model. The Director who signs the building compliance declaration oversees construction from Early Contractor Involvement through to Occupation Certificate, Tier 1 standards, boutique attention.
Contact the Tau team to discuss builder selection, ECI engagement, or DBP Act compliance on your next Class 2 project.
