A Comprehensive Guide to NSW Project Intervene & Strata Defect Resolution

Introduction

Project Intervene was a New South Wales government initiative designed to help strata owners resolve serious defects in residential apartment buildings without resorting to lengthy and costly litigation. The program focused on facilitating direct resolutions between owners corporations and developers, using regulatory powers to ensure that critical defects in strata buildings were addressed efficiently.

Although registrations for Project Intervene closed on 30 November 2023, its approach to strata defect resolution remains significant for understanding how serious building issues were managed and what options are now available to strata owners facing similar challenges.

Registrations for Project Intervene are now closed

The deadline of November 30 2023 for an owners corporation to register in Project Intervene has passed. Please see the official page on Project Intervene on the NSW Government website for more information on how to register. This article will be updated as soon as there are news that Project Intervene registrations will re-open.

Interactive Tool: Find Your Defect Resolution Pathway

Understanding Project Intervene

The Background & Purpose of the Program

Project Intervene was a NSW Government initiative launched in mid-2022 to address the high rate of serious defects in new apartment buildings. The program was established after the NSW Building Commissioner noted that a significant percentage of apartment buildings had serious defects, with litigation often failing to provide a successful resolution.

The primary purpose of the program was to offer Owners Corporations a more direct and cost-effective path to resolve these issues. It was designed to provide an alternative to lengthy and expensive legal battles, facilitating a constructive dialogue between strata owners and developers to ensure defects were rectified efficiently.

Key Objectives for NSW Strata Schemes

The program aimed to hold developers and builders accountable for defective building work in newly constructed residential apartments. It used the compliance and enforcement powers under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) to achieve its goals.

The main objectives for strata schemes were to:

• Facilitate a resolution between an owners corporation and the developer or builder to remediate serious defects in a timely manner.
• Utilise the powers of the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) to compel developers and builders to fix non-compliant building work.
• Provide a pathway for strata owners to have defects rectified without the need for costly and time-consuming court proceedings.

Eligibility Criteria for Strata Buildings

Building Requirements for Your Strata Property

To qualify for Project Intervene, a strata property had to satisfy several specific building requirements. The program was not open to all residential buildings, as strict criteria were applied to determine eligibility.

The physical characteristics of the building were a primary consideration. A strata building had to meet the following conditions:

• It needed to be a Class 2 residential apartment building, which typically refers to multi-unit, multi-storey residential buildings.
• The building was required to have a height of three or more storeys, not including any levels below ground.
• An occupation certificate for the building must have been issued within the last 10 years.

Defect Status & Developer Solvency

Beyond the physical building requirements, the nature of the defects and the status of the responsible parties were also critical.

For a strata scheme to be eligible, the defects had to be classified as ‘serious’ under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW). Furthermore, these serious defects had to be located within the common property and relate to one of five key building elements:

• Fire safety systems
• Waterproofing
• The building’s structure
• The building enclosure
• Building services

A crucial factor for eligibility was that the developer or builder responsible for the construction had to be solvent and still actively trading. Buildings where the developer or builder had been de-registered or was no longer in business could not be accepted into the program, as there would be no active entity to compel to carry out the remediation work.

The Project Intervene Process for Strata Defect Resolution

Lodging a Complaint & Initial Assessment

The process for a strata scheme begins when an authorised representative of the owners corporation—such as a strata committee member or strata manager—lodges a formal complaint with NSW Fair Trading. This application needs to include comprehensive details about the building’s identified defects.

Following submission, the Project Intervene team conducts an initial review to determine the building’s eligibility for the program. This assessment typically takes around 20 business days, during which the team may contact the applicant for further information before proceeding.

Building Inspection & Negotiation

Once a strata building is deemed eligible, the NSW Department of Customer Service arranges a thorough inspection. An independent specialist is appointed to conduct a non-destructive “dip test” to identify and evaluate the extent of serious defects within the common property.

The preliminary findings from this inspection are then shared with the developer, but not with the owners corporation. From there, negotiations begin: the report forms the basis for a dialogue aimed at reaching agreement on the necessary rectification works.

The Role of Undertakings & Rectification Orders

Project Intervene utilises two primary mechanisms to ensure defects are fixed:

• Developer Undertaking: This preferred, formal and legally binding agreement sees the developer commit to a finalised list of serious defects and a timeline for remediation, thereby avoiding a formal order.
• Building Work Rectification Order (BWRO): If a developer is unwilling to enter into an undertaking or negotiations fail, the regulator can issue a BWRO. This directive compels the developer to rectify all specified serious defects within a set timeframe, with non-compliance resulting in potential penalties.

Remediation Works & Final Sign-Off

The final phase focuses on the physical repair work. Before any remediation can begin, the developer must prepare regulated designs for the necessary work. These designs have to be declared by a registered design practitioner and lodged on the NSW Planning Portal.

Subsequently, a Superintendent is jointly appointed by the developer and the regulator to oversee the on-site work, ensuring it complies with the approved designs and standards. Upon completion, the Superintendent and the Undertaking Manager provide a final sign-off, confirming that the defects have been successfully remediated.

Project Intervene’s Interaction with Legal Proceedings

Pursuing a Court Case & Project Intervene Concurrently

An owners corporation was permitted to engage with the Project Intervene program while simultaneously pursuing active legal proceedings against a developer or builder. The compliance powers used by Project Intervene, such as inspections and orders under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW), could be actioned in parallel with a court case.

This dual-track approach allowed a strata scheme to explore a non-litigious resolution without forfeiting its legal rights. However, once a developer signed a formal undertaking to fix defects through the program, the owners corporation had to choose which pathway it would ultimately follow to achieve remediation for the same set of serious defects.

Case Study Strata Plan 99576 v Central Construct Pty Ltd

The interaction between Project Intervene and the courts was tested in the case of Strata Plan 99576 v Central Construct Pty Ltd [2023] NSWSC 212. In this matter, the owners corporation had already commenced proceedings in the Supreme Court against the builder and developer for serious defects. Subsequently, the strata scheme was admitted into the Project Intervene program.

The builder and developer then applied to the court for a 12-month stay, or pause, on the legal proceedings. They argued that the parallel process under Project Intervene could lead to:

• a duplication of costs,
• inconsistent findings,
• and potential prejudice against them.

The Supreme Court ultimately rejected the application for a stay. Justice Darke determined that the owners corporation had a right to pursue its legal remedies and that the uncertainties associated with the Project Intervene process did not warrant delaying the court case.

The court acknowledged a risk of inconsistent findings but found it was not significant enough to impinge on the strata scheme’s right to legal action.

Key Legal Considerations for Your Strata Scheme

A critical factor for any strata scheme was that the Project Intervene process was designed solely for the rectification of defects. The program did not have any mechanism for awarding damages or providing financial compensation to the owners corporation.

This had significant implications for strata owners, particularly regarding costs already incurred. Important considerations included:

• No recovery of costs: Project Intervene could not order a developer to reimburse the owners corporation for expenses such as legal fees, expert reports, or other out-of-pocket costs.
• Financial risks of discontinuing legal action: If a strata scheme chose to discontinue its court case after a resolution was reached through Project Intervene, it could be exposed to paying the developer’s legal costs.
• Uncertain outcomes: As highlighted by the court, the final outcome of the Project Intervene process was attended with great uncertainty, including the timeline for completion and the possibility of appeals to the Land and Environment Court.

The Future of Strata Defect Resolution After Project Intervene

Will Project Intervene Be Re-Opened

The registration deadline for Project Intervene was initially extended but officially closed on 30 November 2023. Since its closure, there has been no official announcement from the NSW Government regarding the program’s potential re-opening.

While the initiative proved to be a significant step in addressing serious building defects, strata owners should currently operate on the basis that the program is not accepting new applications. Any future updates on the status of Project Intervene would be communicated through official government channels.

What Strata Owners Should Do Now About Defects

Although registrations for Project Intervene are closed, a clear pathway for resolving serious defects in strata buildings still exists. Owners corporations can:

• Lodge a formal complaint directly with the Building Commission NSW.
• Work with the Building Commission, which will investigate the reported issues.

The Commission retains the power to:

• Work with the strata scheme and the developer to find a solution, which may still include facilitating a developer undertaking.
• Issue a building work rectification order to compel the necessary repairs.

Conclusion

Project Intervene provided a crucial, non-litigious pathway for NSW strata schemes to resolve serious building defects by holding developers accountable through undertakings and rectification orders. Although the program is now closed, its framework highlights the regulatory powers available, and a similar resolution process continues through the Building Commission NSW.

If your strata property is facing challenges with building defects, navigating the resolution process can be complex and requires specialised legal knowledge. For trusted expertise and guidance on your options, contact the experienced strata building defect lawyers at PBL Law Group, a leading strata law firm in Sydney serving NSW, to request a consultation today.

Frequently Asked Questions