As 2026 unfolds, NSW developers and building industry professionals are facing a set of important building regulatory reforms designed to strike a balance between improved safety and quality outcomes and practical implementation timelines.
In 2025, the NSW Government announced amendments to several building regulations. These reforms are particularly relevant for building practitioners, particularly regarding professional indemnity insurance exemptions.
These adjustments give the industry more time to prepare. This article outlines the key regulatory changes developers should understand for 2026, explains what is required, and clearly distinguishes the practical implications for developers and owners corporations.
Professional indemnity insurance (PII) is required for registered building, design, and principal design practitioners under the Design and Building Practitioners Act 2021 (DBP Act) when carrying out regulated building work. However, it is important to note that this requirement will often also apply to other registered professionals performing regulated services, as a result of their statutory duty of care.
This is especially important in strata developments, where defects can be costly and affect many owners simultaneously. It typically responds to claims alleging that a professional (designer, engineer, consultant, builder-as-practitioner) failed to exercise reasonable care and skill, resulting in loss. It provides protection against negligent or defective work by helping cover the cost of:
Under the DBP Act, registered building practitioners are required to hold PII that meets prescribed regulatory standards. This was introduced to provide financial protection to help cover the cost of legal defence and compensation for defective work.
While PII plays an essential role in risk management, the government has recognised challenges in obtaining affordable, compliant coverage at scale – particularly given the heightened risk profile of residential construction. As a result, a temporary exemption has been introduced, allowing registered building practitioners to defer holding full PII until 30 June 2026. This extension gives firms more time to source appropriate insurance products and adjust their risk management strategies before the mandate takes effect on 1 July 2026.
This change marks a significant step towards improving accountability and consumer protection in the building industry. Practitioners should act now to review their insurance arrangements, engage with brokers, and ensure they are prepared well ahead of the deadline.
The Design and Building Practitioners Act 2021 (DBP Act) also outlines minimum standards when selecting a PII policy. This means that building practitioners may need to demonstrate that they’ve assessed the adequacy of cover, such as:
Different businesses face different risks, so a one-size-fits-all approach won’t work. It’s best practice to seek independent advice from an insurance broker or legal professional to confirm the amount and type of cover you need.
While developers are not directly required to hold PII under the DBP Act, these reforms affect procurement, contracts, and project risk management. Failure to engage practitioners with adequate PII could lead to project delays, increased costs, and reputational risk if defects arise and insurance does not respond. Developers will need to:
Owners corporations benefit from stronger insurance requirements because they increase the likelihood of recovering costs if defects occur. Verified insurance also provides greater confidence at handover and during the first AGM. However, there may be some limits:
At PICA Group, our developer services go beyond legislative compliance. Each quarter, we support new communities through practical, on‑the‑ground engagement, including:
These touchpoints help reduce early confusion, improve owner confidence, and support smoother transitions from development to community living.
With more than 185,000 lots under management, PICA Group’s specialist property developer services team provide practical guidance based on best practice expertise.
These reforms significantly raise the bar for risk management in building projects. While these extensions offer short-term relief, they do not signal a retreat from reform. Instead, they reflect a pragmatic approach to implementation while maintaining the long-term objective of stronger building standards and clearer accountability. By prioritising compliance and transparency, stakeholders can reduce exposure to defects and facilitate smoother project delivery and handover.
For developers, early verification of professional indemnity insurance and integration of compliance into procurement and contracts are essential to avoid delays, cost overruns, and reputational damage. For owners corporations, stronger insurance requirements offer greater confidence at handover and improved prospects for defect recovery, though they are not a complete safeguard.
This article is edited by Lauren Shaw Regional General Manager and Licensee-in-Charge on February 2026.
