Proposed New System on Rectifying Building Defects - Imposing Inspection Reports and Building Bonds on Developers

Top Quote The bill seems to also be a reaction from a recent report by the University of New South Wales that there are defects in about 85% of apartment buildings built since 2000. End Quote
  • (1888PressRelease) September 29, 2015 - As part of the NSW Government's proposed reforms to strata laws, a new system on rectifying building defects will be implemented to protect unit and home owners.

    Under the Strata Schemes Management Bill 2015, developers will be required to:
    1. have the building work inspected by a building inspector; and
    2. lodge a building bond a security for building defects. The rate of the bond is at 2 percent of the contract price for the building work.

    The draft bill, according to Minister for Innovation and Better Regulation Victor Dominello, aims to guarantee owners that building defects appearing in the first two years will be fixed other than taking it to the court. The proposed reforms will affect developers of strata buildings greater than three storeys high in New South Wales. The bill covers all residential building works that are exempt from the home building compensation insurance requirements under the Home Building Act 1989 or buildings used for mixed use purposes that include residential purposes.

    Common defects identified included shifting foundations, wall cracks and tiling faults.

    Inspection Reports
    The draft bill requires the developer to have the building work inspected by a building inspector approved by the owner corporation. Building inspectors must be appointed not later than 12 months after the completion of the work. If the developer and owner corporation do not agree with the appointment of building inspector, the Chief Executive of the Office of Finance and Services will arrange the appointment.

    An interim report prepared by the building inspectors must be provided not later than 18 months after the completion of the work to the developer and owner corporation. The Chief Executive must arrange a final inspection not later than 2 years after the completion of the work. The developer will be responsible for all the expenses that will incur to comply with this requirement.

    Building Bonds
    The draft bill also requires the developer to lodge a building bond as a security to fix any defective work identified in the final inspection of the building inspectors. The building bond is in the amount of 2 per cent of the contract price for the building work.

    The balance thereof or the whole building bond, if no defects are reported, must be paid out or refunded to the developer 2 years after the completion of the building work or within 60 days of the final inspection report given to the developer, whichever occurs later.

    The bill is scheduled to be introduced to the Parliament in October and is expected to be implemented in 2016.

    About the Author
    John Dela Cruz is a specialist building and construction lawyer who works with small builders and commercial contractors. John is passionate about helping small builders and commercial contractors build sustainable businesses. As well as being a lawyer, John is the Founder and CEO of Small Builders, Building Software. John holds numerous qualifications and memberships including being a member of the Master Builders Association of NSW.

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