Strata Law Reform – New Building Defect Bond Scheme

2 min read
Building Defect Bond Scheme

On 30 November 2016, significant amendments to the NSW strata laws came into effect in accordance with the Strata Scheme Management Act 2015 (NSW). This led to a significant overhaul of the strata laws which previously governed NSW. Whilst this article will not go into detail with respect to all of the changes, it will instead focus on one extensive amendment, namely the Building Defect Bond Scheme. This particular scheme did not come into effect until 1 January 2018 after previously being anticipated to commence on 1 July 2017.

What is the Building Defect Bond Scheme?

Essentially, Developers entering Construction Contracts for multi-storey residential or partially- residential strata developments that are four storeys or more in height on or after 1 January 2018 will need to pay a Building Bond to the Department of fair trading.

Under the Scheme, all developers meeting the criteria explained above have to provide a bond to the department of fair trading prior to the occupation certificate (“OC”) issuing. The bond is a building bond, totalling 2% of the contract price. once the bond is paid to the department of fair trading, it is to be held in a trust account.

Requirement for an Independent building inspector

All developers that meet the above criteria, that is entering into a contract for a multi storey residential or partially- residential strata development that is four storeys or more in height on or after 1 January 2018, will need to appoint an independent building inspector from the strata inspector panel, with the approval of the owners corporation. If no independent building inspector is appointed, the department will appoint one.

Interim Inspection

Between 15 to 18 Months after the building work is completed, the independent building inspector is to inspect the strata property and prepare an interim report identifying any defective building work.

Defects Rectification

If no defects are identified by the independent building inspector after the interim inspection, the bond may be released to the developer two years after the date of completion of the building work. If defects are identified, they must be rectified by the developer.

Second and final inspection

Between 21 to 24 months after the building work has been completed, the independent building inspector will conduct a final inspection of the strata property and prepare a final report.

Payment of building bond

If no defects are identified after the second and final inspection, the building bond may be released in full to the developer.

However, if defects still remain, the owners corporation may make a claim to the department of fair trading for the release of all or part of the building bond to pay the costs of rectification. The timeframe which the owners corporation has to do this is up to two years after the Occupation certificate is issued, or 60 days after the final report is given, whichever is later.

If there are no unsatisfied claims at the end of the two year period, the department of fair trading will, on the application of the developer, return the bond to the developer.

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Anita Bradley has been an absolute dream to deal with. Anita's conveyancing skills and knowledge knows absolutely no boundaries along with her effective communication skills which has made selling and buying a completely stress free exchange for us. We recommend PBL Law to everyone looking for outstanding service. We will definitely be returning clients.
Kushlan Aluwihare
PBL Law Group were fantastic. Anita from PBL worked with us closely during our property search and made the exchange and settlement process smooth and stress free. Highly recommended.
Gail Whitford
PBL handled my late mothers estate, they were very obliging and patient with any and all questions that we had, thank you to David , Sharon and the other staff that we dealt with, everyone was so easy to talk to and friendly .David came to the home where my Mother was living and helped her to get her will in order, Sharon helped us through the process of executing her wishes when the time came even doing a house call which was so much easier, thank you all so much
S M
I have experienced an excellent service from PBL (especially from Anita) during the sale of my recent property on Central Coast, and during the purchase of our current property in Sydney. Throughout many challengers, especially with the sale, Anita presented her very professional and knowledgeable conveyancer, positively solving all obstacles. "Above and Beyond" Award going to Anita!!! :-)
Amanda Reitzin
The five-star reviews are well-deserved. I needed a motion and a bylaw drawn up for urgent repairs of my strata unit and the AGM was in two weeks' time. My solicitor was friendly, efficient, knew what documents to ask for, and had all the paperwork prepared well within the timeframe. She also took the time to run through all the legalese and the different possible scenarios with me to make sure I understood. I am so glad to have found this firm and I will not hesitate to use their services again in future if the need arises.
Ricky Cooper
Anita is amazing! So attentive, approachable and communicates everything every step of the way. I have now bought and sold property with Anita and I cannot recommend her highly enough.
Ron Thomsen
Our Commercial Property conveyancing was handled very professionally. Anita’s experience and responsiveness was an asset in this transaction.
Trace M
I am so grateful for Anita Bradley from PBL Law Group helped me with this property settlement, she has went above beyond to ensure I understand everything because of our deafness. I will recommended Anita or their team. Thank you so much for all the hard work you have done for us.
Tricia Wheatstone
For almost 18 months I have been a client of Alex Ilkin. Alex is very knowledgeable and professional and has consistently provided me with thorough, honest and well set out advice, including steering my case through appeal proceedings. He always worked for my best interests with integrity and compassion. I recommend Alex and his team at PBL.