For building inspectors

Strata building bond and inspections scheme

The Strata building bond and inspections scheme (The Scheme) commenced on 1 January 2018.

It applies to building work for building contracts entered into from 1 January 2018, or if there is no contract, it applies to building work commenced from this date.

Developers are required to lodge a building bond that is 2% of the contract price for the building work, with NSW Fair Trading (the Secretary). The building bond secures funds (up to the amount of the bond) to pay for the costs of rectifying defective building work.

Building work means, building work that is carried out on a residential or partly residential (mixed-use) strata building, that is four or more storeys. The building work must also be carried out for the purposes of, or contemporaneously with, the registration of a strata plan or a strata plan of subdivision of a development lot.

Mixed use purpose could be, for example, a development that includes a combination of residential, retail, commercial, hotel, but it must include residential.

The Scheme does not apply to building work if the work is subject to the requirements to obtain insurance under Part 6 of the Home Building Act 1989 (Home building compensation cover). For example, the building is three storeys or less.

Stages of The Scheme

Summary of the key requirements for building inspectors

The following is a summary of the key requirements for the building inspector. More detail is explained below.

  • Be included on a strata inspector panel of an authorised professional association,
  • Disclose to the owners corporation any connected persons interest with a developer,
  • Carry out building inspections and provide reports

Key terms

For more information about the key terms, please refer to the Key Terms section on the Strata building bond and inspections scheme  page.

How will the Scheme be administered?

The Strata building bond and inspections scheme is administered by an online portal (the portal), and is used for stage one of the Scheme – Building bond lodgement.

The developer must provide the details of the strata scheme in the portal. This includes uploading the mandatory documents, as required under legislation. These are the documents that are required to be provided by the developer to the building inspector.

The building inspector is not required to register in the portal.

Email communications

The Strata building bond and inspections scheme is administered by electronic communications. All correspondence required for the Scheme will be via email.

For the building inspector, their email address will be collected by the developer or the Secretary when they are proposed as the building inspector to the owners corporation.

Written notices suite

For stages 2 to 8 of the Scheme, the Secretary will provide a package of all written notices required under legislation to the proposed and appointed building inspectors. The written notices will be emailed by the Secretary after the bond lodgement has been approved by the Secretary in the portal.

The written notices suite may be prepopulated for the building inspector, using the information provided by the developer or the Secretary when they are proposed as their building inspector to the owners corporation. These written notices can be used by the building inspectors to complete their obligations under the Scheme.

Strata building bond and inspections scheme process

The following is a general overview of what is required within each stage of the Strata building bond and inspections scheme.

Building inspectors guide to comply with legislative requirements

Important: The guideline below has been simplified and for full obligations and mandatory requirements, reference should be made to legislation and Secretary’s guidelines.

1. Building bond lodgement

Stage one does not directly affect the building inspector. For further details, refer to the Strata building bond and inspections scheme  page.

2. Inspector appointment

A developer is required to appoint a building inspector to complete the interim and final inspections and the interim and final reports.

Appointing the building inspector: interim inspection

The building inspector must be appointed within 12 months of any occupation certificate (OC) which allows people to occupy the building – whether conditional or interim OC for the development.

A building inspector can be proposed and appointed to carry out inspections and produce reports for the Strata building bond and inspections scheme, if they are a member of a strata inspector panel (SIP).

Strata inspector panels

The building inspector must be a member of a strata inspector panel (SIP).

A strata inspector panel can only be provided by an authorised professional association, as listed in clause 45 of the Strata Schemes Management Regulation 2016. A strata inspector panel (SIP) may be established by any of the following:

(a)  the Housing Industry Association

(b)  the Master Builders Association of New South Wales

(c)  the Australian Institute of Building

(d)  the Australian Institute of Building Surveyors

(e)  the Australian Institute of Building Consultants

(f)  the Institute of Building Consultants Inc

(g)  Engineers Australia

(h)  the Australian Institute of Architects

(i)  the Association of Accredited Certifiers.

To access the webpages of the authorised professional associations above, please refer to the Strata inspections panel on the Strata building bond and inspections scheme page.

A person who wants to be included on a strata inspector panel (SIP), should make enquiries with their membership body, if they are listed above, or contact one of the above authorised professional associations.

Each association will have their own processes and criteria to determine if a person is competent and qualified to perform building inspections and produce reports for the purposes of the Scheme. That professional association will determine if the qualified person will be included on their SIP.

Inclusion on a SIP means that an authorised professional association has determined the qualified person is competent to perform building inspections and produce reports for this Scheme.

Selecting the building inspector

Each SIP will have a register of members who are qualified to be building inspectors for the purposes of the Scheme. This register will be available on each association’s website and contain details and experience of each building inspector, including their contact details.

The developer will select a building inspector from one of the SIP’s and will make their due diligence enquiries with that building inspector.

The developer and building inspector will negotiate their cost agreement for performing the inspections and reports. Consideration should be given to whether the building inspector needs to engage any specialists, if any part of the inspection process is outside the competencies of the building inspector and secondary inspectors will be required. The inspection agreement is between the developer and the building inspector only.

Once satisfied with the selection of their building inspector, the developer must propose  them to the owners corporation.

A building inspector:

  • has a duty to act impartially the course of carrying out the functions of a building inspector, and
  • does not represent the interests of the developer when undertaking their functions as a building inspector.

Appointing the building inspector

The developer can only appoint a building inspector if the owners corporation approves the appointment.

The owners corporation must provide written notice by email to the developer and the Secretary within 14 days of approving or refusing the appointment of the building inspector.

If the owners corporation rejects the proposed building inspector, the developer has the option to repeat the process until either the 12 months expires or the owners corporation approves a building inspector.

The Secretary has published a guideline regarding the appointment of building inspectors by developers and owners corporations (DOCX, 306.07 KB).

If, for any reason, the developer fails to successfully appoint a building inspector within 12 months, they must provide written notice to the Secretary by email within 21 days after the end of the 12 months. The Secretary will then arrange the appointment of a building inspector and notify the developer and owners corporation.

If the Secretary arranges the appointment of the building inspector, the approval of the owners corporation is not required.

The developer must pay all inspector costs, such as the costs of obtaining an inspection and report, even when the inspector is arranged by the Secretary. Additional costs include the Secretary’s service fee to arrange the building inspector.

The developer and building inspector will negotiate their cost agreement for performing this inspection and report. The parties to the inspection agreement are the developer and building inspector only.

Objection by an owner of a strata scheme lot

An individual owner of a strata scheme lot may object to the owners corporation approval of a building inspector, for any reason. The individual owner must lodge their objection with the Secretary within 14 days after the owners corporation approves the appointment. A written notice is available for this requirement.

The Secretary will consider the objection and if appropriate in the circumstances arrange the appointment of another building inspector. The Secretary will give written notice of the appointment to the developer and owners corporation. If the decision is to not appoint an alternative building inspector, the Secretary will notify those concerned of the decision, by email.

The Secretary has published a guideline regarding the process to appoint building inspectors by the Secretary (DOCX, 328.1 KB).

Appointing the building inspector: final inspection

Within 18 months of the issue of any occupation certificate (OC) which allows people to occupy the building – whether conditional or interim OC, the developer will arrange for the same building inspector who prepared the interim report to carry out the final inspection and provide the final report. This arrangement is required later in the process and is explained at stage 5 below.

3. Interim inspection and report

Preparing for the interim inspection and report

The interim inspection and report must be completed between 15 and 18 months after the issue of any occupation certificate (OC) which allows people to occupy the building – whether conditional or interim OC.

Once appointed, the building inspector may commence a desk audit and other procedures before going on site to conduct the interim inspection.

For any work that the building inspector cannot do, they can engage specialists/experts for assistance. These additional specialist/expert reports, must be included as part of the interim report.

The building inspector should request from the developer, the following information and a copy of the following documents.

Information:

  • the strata plan number (if available)
  • the street address of the building
  • the name and address of the principal certifying authority for any building work
  • developer, including:
  • address for service
  • email address for service, and
  • owners corporation for the strata scheme (if initial owner or new owners), including:
  • address for service and
  • an email address for service

Documents:

If there are multiple versions of any document, the version in existence at the time just prior to application for occupation certificate should be requested:

  • any document relevant to determine the contract price to calculate the amount secured by the building bond (including the quantity surveyor’s cost report, if applicable)
  • the contract or contracts for the building work to substantiate the contract price between the developer and the building
  • specifications and any variations for the building work
  • any written warranties relating to the building work
  • any approved alternative solutions to meet the performance requirements of the BCA and any schedule of work that is non-conforming
  • all ‘issued for construction’ and ‘as-built’ drawings and specifications relating to the building work
  • any schedule of samples (fixtures, fittings, materials and finishes) relating to the building work
  • any development consents, approvals or certificates granted or issued under the Environmental Planning and Assessment Act 1979 and relating to the building work
  • any report regarding alternative solutions for a fire safety requirement under the BCA required with an application for a certificate under the Environmental Planning and Assessment Act 1979
  • any certificates relating to the design of the building work that were required for development consent, approval or certificate under the Environmental Planning and Assessment Act 1979
  • any report obtained by the developer or builder relating to the inspection of the building work
  • Building Code of Australia compliance certificates by each subcontractor for any part of the building work carried out by the subcontractor
  • any other information or documents in support of your bond lodgement or information or documents required by the Secretary.

The developer can protect/redact commercial in-confidence materials from the above documents before giving them to the building inspector.

Carrying out the interim inspection

The building inspector carries out their first inspection - the interim inspection, between 15 and 18 months after the issue of the occupation certificate. The building inspector must attend the site to perform the interim inspection.

The interim inspection is carried out to identify any defective building work for the strata scheme.

The building inspector will arrange with the owners corporation a suitable time to attend the property to conduct the interim inspection of the strata scheme.

The building inspector must give at least 14 days written notice to the owners corporation and any owner or occupier of any affected lot of their intention to enter any part of the parcel of the strata scheme.

The owners corporation, any person who has exclusive use of common property, a strata managing agent, building manager or manager of the common property, and any owner or occupier of a lot, are required to provide reasonable access and assistance and not to obstruct or hinder a building inspector.

Providing the interim report

The building inspector will also complete a report, known as the interim report, between 15 and 18 months after the occupation certificate is issued.

The interim report records the identified defective building work (if any), and if reasonably practicable, identify the cause of that defective building work. The building inspections do not provide a level of compliance, but do identify defective building work, to which Part 11 of the Strata Schemes Management Act 2015 applies.

Defective building work is to be identified at the time the interim inspection is performed. The final report must not contain matters that relate to defective building work not identified in the interim report, other than arising from rectification of defective building work identified in the interim report.

Destructive and/or invasive testing is not required for the purpose of this Scheme.

Defective building work is to be identified by visual inspection and use of equipment/techniques that do not involve destructive testing. The inspection is to include the removal of any object designed to be moved/opened whether or not it requires a specialist to remove/open any object. It includes any test whereby the object or assembly can be returned to its prior state without the replacement by a new component.

A secondary inspector should perform inspections outside of the appointed building inspector’s skillset. Any additional specialist/expert reports, must be included as part of the interim report.

The building inspector must produce the interim report in the form approved by the Secretary. The Secretary has published a guideline and a combined interim and final inspection report of the building inspector (DOCX, 252.53 KB).

The building inspector must give a copy of the interim report to the Secretary, owners corporation, developer and builder (responsible for defective building work identified in the report) no more than 14 days after completing the report and before 18 months after the issue of the occupation certificate.

If there is no defective building work identified in the interim report, the developer can apply to the Secretary that a final report is not required.

If the application is approved by the Secretary, the interim report becomes the final report and the building inspector will not have to undertake the final inspection and report.

4. Rectify defective building work

Although the rectification of defective building work does not directly affect the building inspector, the following information and timeline is provided.

Rectification of defective building work may occur at any time after the completion of building work. However, if the interim report has identified defective building work, the rectification period is likely to be between 18 and 21 months after the issue of the occupation certificate, but before the final inspection starts.

The developer is responsible for arranging with their builder the rectification of the identified defective building work recorded in the interim report of the building inspector.

If the original builder is not available, the developer is required to arrange for another builder to do the rectification work.

5. Final inspection

The final inspection and report stage covers two points in time after the issue of any occupation certificate (OC) which allows people to occupy the building – whether conditional or interim OC:

  1. within 18 months – appointment of the building inspector, and
  2. between 21 and 24 months – carrying out of the inspection and production of the report.

  1. Within 18 months after the issue of the occupation certificate

    Appointing the building inspector: final inspection

    The developer will arrange for the same building inspector who prepared the interim report to carry out the final inspection and provide the final report.

    The developer must give the Secretary written notice of the arrangement within 14 days after making the arrangement.

    If the original building inspector is not available, the developer must give the Secretary written notice of this, within 14 days after becoming aware that they are not available.

    The Secretary will appoint the building inspector when:

    • the original building inspector who prepared the interim report is not available,
    • the developer applies by email to the Secretary to appoint an inspector, or
    • the Secretary becomes aware that the developer has not complied with the requirement to appoint a building inspector for the final inspection.

    If the Secretary appoints the building inspector, the approval of the owners corporation is not required.

    The developer must pay for all building inspector costs, such as the costs of obtaining an inspection and report, even when the inspector is appointed by the Secretary. This includes the Secretary’s service fee to appoint the building inspector.

    The Secretary has published a guideline regarding the appointment of building inspectors by the Secretary (DOCX, 328.1 KB).

  2. Between 21 and 24 months after the issue of the occupation certificate

Carrying out the final inspection

The final inspection must be conducted between 21 and 24 months after the occupation certificate is issued. The building inspector must attend the site to perform the final inspection.

This inspection is to inspect whether the defective building work identified in the interim report has been rectified.

The building inspector will arrange with the owners corporation a suitable time to attend the parcel to conduct the final inspection of the strata scheme.

The building inspector must give at least 14 days written notice to the owners corporation and any owner or occupier of any affected lot of their intention to enter any part of the parcel of the strata scheme to conduct the final inspection.

The owners corporation, any person who has exclusive use of common property, a strata managing agent, building manager or manager of the common property, and any owner or occupier of a lot, are required to provide reasonable access and assistance and not to obstruct or hinder a building inspector.

Final report

The building inspector will also complete their report, known as the final report between 21 and 24 months after the issue of the occupation certificate.

The final report will record:

  • any defective building work identified in the interim report that has not been rectified,
  • identify any defective building work arising from the rectification of defective building work previously identified in the interim report, and
  • specify how the defective building work identified in the report should be rectified.

The final report must not contain matters that relate to defective building work not identified in the interim report.

The building inspector must produce the final report in the form approved by the Secretary.

The Secretary has published a guideline and a combined interim and final inspection report of the building inspector (DOCX, 252.53 KB).

The building inspector must give a copy of the final report to the Secretary, developer, owners corporation and builder (responsible for the defective building work identified in the report) no more than 14 days after completing the report and before 24 months after the issue of the occupation certificate.

6. Determining the cost to rectify defective building work

Stage six does not directly affect the building inspector. For further details, refer to the Strata building bond and inspections scheme page.

7. Paying the building bond

Stage seven does not directly affect the building inspector. For further details, refer to the Strata building bond and inspections scheme page.

8. Completing the process

The process should complete not more than 3 years after the date of issue of any occupation certificate (OC) which allows people to occupy the building – whether conditional or interim OC for the building to which it applies.

Variation of time requests

The developer, owners corporation or building inspector, may have made application to the Secretary to vary the times for reports and other matters. This may result in the length of the Scheme being extended.

Reviewable decisions

Certain decisions of the Secretary are reviewable decisions. This may result in the length of the Scheme being extended. Reviewable decisions are included under key terms.

Tribunal orders (NCAT)

A developer, the Secretary or the owners corporation can apply to the NSW Civil and Administrative Tribunal for an order specifying the contract price for building work to determine the amount to be secured by a building bond. This may result in the amount of the building bond, provided by the developer, being varied.

Feedback

During any stage or at the completion of the process, the contact person for each participant in the Scheme may provide feedback by email to stratabond@finance.nsw.gov.au.

Closing the process

Once the administration of the Scheme is complete, the information and documents relating the building bond will be stored in accordance with NSW Government record keeping policy.

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