Strata building bond and inspections scheme
The Strata building bond and inspections scheme applies to building work carried out on residential or partially-residential (mixed use) strata properties that are four or more storeys. It takes effect when:
- a developer and builder enter into a contract from 1 January 2018, or
- where there is no written contract, building work commences from 1 January 2018.
The scheme includes the lodgement of a building bond and mandatory defect inspections and reports.
Developers must lodge a building bond with NSW Fair Trading (the Building Bond Secretary) equal to 2 percent of the contract price.
Strata building bond and inspections scheme online portal
Developers need to register to use the strata building bond and inspections scheme online portal. They can register to use the portal any time after the project starts, and update details and documents as they become available.
The portal will give each project a unique identifier number which must be included in the building bond by the issuing institution.
The portal is used for select areas in the strata building bond and inspections scheme.
1. Bond lodgement
Building bond – preparation
From 1 January 2018, when a developer enters into a contract with a builder for building work on a residential (including mixed use) strata scheme of four or more storeys (strata building), they need to lodge a building bond equal to 2 percent of the contract value of the work.
The developer (not the builder) is responsible for arranging the issue and lodgement of the building bond with the Building Bond Secretary. The building bond can be a bank guarantee or bond and must contain the unique identifier number issued by the online portal. The building bond must be lodged before the occupation certificate is issued for any part of a building affected by the work. A penalty may apply if a developer does not lodge the building bond with the Building Bond Secretary before the occupation certificate is issued.
Building bond - lodgement
Once registered, the developer needs to login and upload the following information, documents and payment to the portal before the Building Bond Secretary can consider and approve the bond:
- a scanned copy of the building bond Instrument
- a lodgement fee of $1,500
- complete the lodgement form (the ‘Project’ screens within the portal is the lodgement form and allfields must be completed), including:
- the strata plan number
- the street address of the building
- the name and address of the principal certifying authority for any building work
- a mailing address for the developer
- a mailing address for the owners corporation for the strata scheme
- The Regulations should be referred to for the requisite documents to be uploaded, however the following documents for the project are indicative only:
- a copy of any documents relevant to determine the contract price used to calculate the bond amount
- a copy of the building contract or contracts for the relevant work
- a copy of specifications for the building work, and any variations
- a copy of any written warranties relating to the building work
- a copy of any schedule of non-conforming work relating to the building work
- a copy of all ‘issued for construction’ and ‘as-built’ drawings and specifications relating to the building work
- a copy of any schedule of approved samples relating to the building work
- a copy of any development consent or other consents, approvals or certificates issued under the Environmental Planning and Assessment Act 1979 and relating to the building work
- a copy of any alternative solutions and fire engineering reports, and the applicable assessment and approval by the principal certifying authority, relating to the building work
- a copy of any design certificates relating to the building work
- a copy of Building Code of Australia compliance certificates by each subcontractor for any part of the building work carried out by the subcontractor
- a copy of any inspection report obtained by the developer or builder relating to the building work.
After the Building Bond Secretary verifies, receipts the original building bond and approves the building bond process in the portal, the developer can move to the next stage. The secretary’s process times are included in the document Building bond guidelines and schedule (DOCX, 213.41 KB).
Tribunal orders - contract price and access to a strata scheme
A developer can apply to the NSW Civil and Administrative Tribunal, for an order to get access to the strata building or to allow the building inspector and/or builder access to the lot or any other part of the scheme for an inspection (interim or final), or the amount of the contract price (if the contract price was provided by someone other than themselves).
For further details on the Tribunal orders, refer to key terms above
2. Inspector appointment
A developer needs to appoint a building inspector (the inspector) to complete an interim inspection and produce a report. The inspector must be appointed within 12 months after the occupation certificate is issued, if the initial period of an owners corporation of a strata scheme is completed within that time. The initial period is when the owners corporation changes from being the original owner of the land (i.e. the developer) to the actual owners of the lots. Go to the starting the owners corporation page for more information.
The inspector must be a member of a strata inspector panel.
The Strata Inspector Panel Guidelines (DOCX, 306.07 KB) helps developers appoint an inspector, and the Strata Inspector Panel Secretary's process (DOCX, 328.1 KB) helps the Building Bond Secretary appoint an inspector.
A developer must select a qualified person from the Strata inspector panel, available on the portal.
Once the developer chooses an inspector, they need to add the inspector details to the project in the portal. The portal will notify the building inspector of the nomination. The developer must disclose any connection or association with the building inspector in the portal. The proposed building inspector must also make a disclosure.
The portal will email the owners corporation about the proposed building inspector and the disclosures (if any). The developer can only appoint a building inspector if the owners corporation approves the appointment through the portal. If approved, the developer appoints the building inspector through the portal which will let the Building Bond Secretary, the owners corporation and the building inspector know.
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 an inspector. If, for any reason, the developer fails to successfully appoint a building inspector within 12 months, they must let the Building Bond Secretary know through the portal within 21 days after the end of 12 months. The Building Bond Secretary will then appoint an inspector through the portal and notify the developer. The developer must pay all inspector costs, even when the inspector is appointed by the Building Bond Secretary.
3. Interim inspection and report
The building inspector must do the interim inspection and upload a report to the portal between 15 and 18 months after the occupation certificate is issued. The portal will let the developer, builder and the owners corporation know that the report is available to download.
If there is no defective building work identified in the interim report, the developer can apply through the portal to the Building Bond Secretary to not appoint/arrange the final inspection/report. In this case, the interim report becomes the final report.
Review the Secretary’s decision to require or not require a final inspection and report
A developer, an owners corporation, and owner of a strata scheme lot or the builder who carried out building work in a strata scheme, can apply to the Building Bond Secretary to review the Secretary’s decision to appoint (or not) a building inspector to carry out a final inspection and provide a final report
For further details on the application process, refer to key terms above
4. Rectify defective building work
After the interim report is lodged, any defective building work must be fixed, normally between 18 and 21 months after the occupation certificate for the project is issued and before the final inspection starts. The developer is responsible for arranging with their builder and the rectification of any defective building work. If the original builder is not available, the developer can arrange for another builder to do the work.
The builder must give at least 14 days’ written notice to the owners corporation, the developer, the owner and any occupant that they need to enter the lot. The builder can issue these notifications through the portal. After providing proper notice, the builder can enter the lot only at a time that is reasonable, or at a time agreed with the owner or occupant of the lot. A person cannot unreasonably refuse a builder access to any part of the strata scheme if the builder has given proper notice.
5. Final inspection and report
Within 18 months after the occupation certificate is issued, the developer must:
- arrange for the building inspector who prepared the interim inspection report to do a final inspection and report on the building work. The developer must notify the Building Bond Secretary of the arrangement through the portal within 14 days of making the arrangement.
- if one of the following circumstances occurs, the Building Bond Secretary will appoint a new building inspector at the developer’s expense:
- the original building inspector is not available and the developer notifies the Building Bond Secretary through the portal within 14 days after becoming aware that they are not available, or
- the developer applies through the portal to the Building Bond Secretary to appoint an inspector, or
- the Building Bond Secretary becomes aware that the developer has not complied with the requirement to appoint a building inspector for a final inspection.
The Building Bond Secretary will notify the developer and the owners corporation through the portal as soon as practicable after a new building inspector is appointed. The building inspector must do the final inspection and upload their report to the portal between 21 and 24 months after the occupation certificate is issued.
6. Paying the building bond
No defective building work identified
If there are no defects identified in the final report, the bond is released in full to the developer via the issuer of the bond.
Defective building work identified in final report
Two step process:
Step 1: All or part of the building bond can be claimed or released by the Building Bond Secretary to pay to the owners corporation:
- to meet the costs to rectify defective building work identified in the final report, if the report identifies the defective building work
- where both the owners corporation and developer consent and agree to apply to the Building Bond Secretary for payment of the bond.
The owners corporation and the developer can apply to the Building Bond Secretary for an agreed amount to rectify identified building work no later than 14 days before the last day that the building bond must be claimed or released (whichever is later). The final date to claim or release the strata building bond is:
- two years after the date the building work covered by the bond is completed, or
- within 60 days after the final report on the building work is submitted to the Building Bond Secretary by the building inspector through the portal (where the Building Bond Secretary appoints the building inspector).
Step 2: If the owners corporation and the developer do not agree on the amount to be paid, the Building Bond Secretary will nominate a suitable person to work out the amount. The cost of that suitable person must be paid equally by the owners corporation and the developer.
The developer must take any necessary steps to enable the Building Bond Secretary to claim or release an amount of building bond given by the developer and required to be paid under the Strata building bond and inspection scheme.
If the developer fails to comply with the above, they may be subject to a penalty.
The Building Bond Secretary can refuse to claim or release an amount, or reduce the amount payable, if they believe that the developer or the builder responsible for defective building work was unreasonably refused access to the strata scheme to fix the work.
7. Completing the process
The Secretary will notify the owners corporation and the developer of any proposed payment via the portal. The Secretary must not pay the whole or part of an amount secured by a building bond unless they’ve given at least 14 days written notice to the owners corporation and the developer of the strata scheme of the proposed payment.
If an application to review a decision to pay the whole or part of an amount secured by a building bond is made in accordance with the application process, the amount is not to be paid until the application for the review is determined or withdrawn.
Review a decision on a building bond claim
A developer can apply to the Building Bond Secretary to review the decision that all or part of a building bond can be claimed or released for payment to an owners corporation, developer or other person.
For further details on the application process, refer to key terms above.