In response to the prevalent issue of serious defects in residential apartment buildings, the NSW Building Commissioner launched “Project Intervene.” This innovative initiative aims to address defects in recently completed and occupied residential apartments in a timely and cost-effective manner, providing an alternative to lengthy and expensive litigation. In this article, we explore the background, eligibility, process, and interaction with the courts of Project Intervene, based on the information provided in the first and second articles.
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Project Intervene has deadline extended to 30 Nov 2023
The deadline for an owners corporation to register in Project Intervene has been extended until November 30, 2023. Please see the official page on Project Intervene on the NSW Government website for more information on how to register.
Background and Purpose of Project Intervene
Over the past few years, poor-quality construction has become a common complaint among new homebuyers in NSW. The Building Commissioner noted that serious defects exist in 39% of all NSW apartment buildings, with only 4% of litigation cases successfully rectifying these issues. These defects can include non-compliance with building codes, faulty workmanship, or defective materials.
In response, Project Intervene was launched to provide Owners Corporations with a viable path to resolve defects without resorting to costly litigation. The primary purpose of Project Intervene is to facilitate a constructive dialogue between Owners Corporations and developers or builders, aiming for a resolution that rectifies the defects efficiently and minimizes the financial burden on owners.
Eligibility and Scope of Project Intervene
To participate in Project Intervene, the building must meet specific eligibility criteria. Firstly, it should be at least six years old, ensuring that any statutory warranty is still in effect. Additionally, an occupation certificate must have been issued within the last six years. The building must also be identified as having serious defects in key building elements of the common property, such as fire safety systems, waterproofing systems, structural components, building enclosure, and building services.
However, it is important to note that buildings where the developer is no longer active are currently not eligible under Project Intervene. This limitation aims to ensure that rectification responsibilities can be enforced effectively and that the developers or builders are actively involved in the process.
The Project Intervene Process
The Project Intervene process begins with lodging a complaint with NSW Fair Trading. An authorized member of the strata committee or the strata manager must submit the complaint within the specified timeframe. The complaint should provide comprehensive details about the identified defects and their impact on the building.
Once a complaint is received, the Project Intervene team assesses its eligibility. If approved, the NSW Department of Customer Service or an appointed Building Consultant conducts an inspection of the building. The inspection aims to evaluate the nature and extent of the defects, providing a basis for the subsequent rectification process.
Based on the inspection outcome, a Draft Building Work Rectification Order (BWRO) is issued to the developer. This order outlines the required rectification works and sets a framework for addressing the identified defects. If the developer agrees with the identified defects, they may enter into an undertaking to rectify them. An Undertaking Manager is then appointed to facilitate the process, ensuring effective communication and progress towards resolving the defects.
However, if no agreement is reached between the parties, the NSW Department of Customer Service issues the final BWRO. This legally obligates the developer to rectify all identified serious defects within specified timeframes. The order is enforceable, and failure to comply may result in penalties or further legal action.
The Compliance and Enforcement Powers of Project Intervene
Overall, Project Intervene authorise the regulator to issue to a developer/builder a range of work orders for fixing non-compliant building work. Project Intervene’s initial method would be to establish an agreement with the developer (or builder) regarding the serious defects detected and the necessary repair work (thus averting potentially expensive legal proceedings). However, where developers refuse to rectify the defects as identified under the Draft BRWO, Project Intervene uses the powers of Fair Trading to compel developers and builders to remedy these serious defects. This will be a legally binding obligation on the developer and builder where non-compliance can lead to penalties and further legal action. Project Intervene also ensures remediation work is completed to an appropriate standard and imposes timeframes.
However, Project Intervene does not provide a facility for awarding damages, further complicating the situation. Owners who choose to discontinue court proceedings after orders from Project Intervene have been issued may be exposed to the defendants’ costs. Additionally, owners may not be able to recover their legal, expert, and out-of-pocket costs incurred to date unless the other party consents. This highlights the importance of carefully considering the financial implications when deciding to incorporate Project Intervene into ongoing legal proceedings.
Interaction with the Courts and Legal Proceedings
A critical consideration for owners involved in ongoing legal proceedings is how Project Intervene interacts with the courts. In the case of Strata Plan 99576 v Central Construct Pty Ltd, the court addressed this issue. In this case, the Owners Corporation commenced proceedings in the Supreme Court against the builder and developer of a strata development where the proceedings having commenced in August 2021. The Owners Corporation alleged serious defects and non-compliance with the Building Code of Australia (BCA). While these proceedings were underway, the Owners Corporation sought assistance from the Department of Fair Trading regarding the defects by way of a letter sent to the Department on 14 December 2022. Fair Trading admitted the scheme into Project Intervene on January 24, 2023, and contracted Sedgwick Australia to help with the “evaluation and examination” of the strata building and to supply a specialist report. With the process of Project Intervene well underway, the builder and developer sought a 12-month stay of the court proceedings, arguing that the parallel process of Project Intervene could lead to the ‘doubling’ of costs, time and expenses and potentially compensable damages arising from this parallel process. They also argued that without the stay of the proceedings for 12 months there may likely be inconsistent findings thereby causing prejudice against the builder and developer.
However, while acknowledging the uncertainty surrounding the Project Intervene process, the court rejected their application, emphasising the Owners Corporation’s right to seek legal remedies and acknowledging the uncertainties associated with the Project Intervene process. The court recognised the risk of inconsistent findings but concluded that it should not impinge upon the owners’ right to pursue legal action. The court also noted that the Project Intervene process does not provide for damages to be awarded, further emphasizing the importance of preserving the owners’ rights in the court system.
Need for Further Guidance and Fine-tuning
Given the limited case law and complexities surrounding the interaction between Project Intervene and legal proceedings, there is a need for further guidance and pronouncements from the court. While the decision in Strata Plan 99576 v Central Construct Pty Ltd offers insights, additional cases and rulings are necessary to establish a more comprehensive framework. Clarity on matters such as potential prejudice, costs, and the court’s approach to rectification orders issued under Project Intervene would greatly benefit owners and stakeholders involved in simultaneous legal proceedings and building defects resolution under Project Intervene.
Conclusion
Project Intervene presents a promising alternative to costly and time-consuming litigation for Owners Corporations grappling with serious defects in residential apartment buildings. By understanding the eligibility, process, and interaction with the courts, owners can navigate the complex landscape more effectively. While the limited case law currently leaves some uncertainties, staying informed about new court decisions and seeking tailored legal advice will empower owners to make informed decisions and protect their rights throughout the defect resolution process.
If you are experiencing building defects in your residential apartment, PBL Law Group’s experienced strata lawyers, including Supreme Court of NSW lawyer Alex Ilkin, can provide trusted and independent legal advice to help you resolve your legal dispute.
