Managing defects in strata schemes

Changes to the management of building defects in strata schemes start on 1 July 2020.

The changes follow amendments in the:

  • Strata Schemes Management Amendment (Building Defects Scheme) Act 2018 (the Amendment Act), and
  • Strata Schemes Management Amendment (Building Defects Scheme) Regulation 2020 (the Amendment Regulation).

The scheme applies to work to construct residential or partially residential strata properties that are four or more storeys and addresses building defects in new strata properties.

Buildings that are three storeys or under are covered by the Home Building Compensation Fund.

Under the scheme, developers must lodge a bond with us equal to two per cent of the contract price for their new multi-storey strata property. A building inspector then inspects the building to identify any defects and the bond can be used to pay the costs of rectifying those defects.

The changes to the scheme enhance our ability to verify the contract price (on which the two per cent bond is based), and clarify the role of the building inspector.

Key features of the Amendment Act

  • Developers must lodge the building bond before an application is made for an occupation certificate. Previously, it was only lodged before the occupation certificate was issued
  • Developers must give documents to the building inspector that help with their inspection.
  • There is a means for the developer and owners to agree on the amount of the building bond to be released for repairs, if they can’t agree.
  • A debt recovery mechanism enables us to recover unpaid or insufficient bonds from a developer.
  • The Secretary has new investigation and enforcement powers for the purposes of the Building Defects Scheme
  • ‘Good faith’ immunity from liability is available to protect professional associations, building inspectors, people acting under the inspector’s direction, and us.

Key features of the Amendment Regulation

  • Clarifies that to be appointed to a panel of inspectors, a person must be a natural person and not a corporation.
  • Professional associations are now required to keep and maintain a public register containing details of members of their strata inspector panel.
  • We can issue guidelines to professional associations that place conditions on the conduct of building inspectors and must be published on their website.
  • ‘Contract  price’ is clarified to include applicable contracts whether ‘paid or payable’ as at the date of issue of the occupation certificate, to include unpaid accounts in the calculation.
  • Penalty notice offence provisions are included for a range of offences under the Strata Schemes Management Act 2015 and the Strata Schemes Management Regulation 2016.
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