Strata building bond and inspections scheme

Under this scheme, from 1 January 2018 developers of new residential strata buildings (4 storeys and higher) are required to pay a building bond to NSW Fair Trading equal to 2 percent of the building contract price. After two years, this building bond may be used to pay for any identified rectification work if the developer has failed to do so. This page explains the process.

The content below is general in nature and shouldn't be relied upon to substitute legal advice.

The general process

  1. The developer registers their project in the SBBIS e-portal (up until 31 August 2020) or the NSW Planning Portal from 1 September 2020. The building bond is lodged with Fair Trading before an application is made for the occupation certificate (building bond lodgement)
  2. Within 12 months after building work is finished, the developer must appoint a building inspector (Inspector appointment).
  3. Between 15 to 18 months after the building work is finished, this building inspector will conduct a first inspection of the strata property, prepare an interim report on any defects and provide the report to relevant people (Interim inspection and report).
  4. Between 18 to 21 months after building work is finished the developer needs to rectify any identified defects (rectify defective building work).
  5. Between 21 to 24 months after finishing the building work the final inspection is done and final report provided (final inspection and report).
  6. If any defects are identified (remain not rectified), the cost to rectify the defective building work must be determined (determining the cost to rectify defective building work).
  7. Once the cost is determined, the building bond will be used to help pay for the rectification work. However, if the final report doesn’t identify any defects, the building bond will be returned to the developer (paying the building bond).
  8. Any money left over will then be returned to the developer . The process should be completed between 2 to 3 years after the building work was initially finished (Completion).

For more information on creating an ePortal account go to NSW Planning Portal Quick Reference Guide

The detailed process

This process map diagram will help you understand each stage in the scheme.

You might find it helpful to have it with you while you read the 8 stages below.

Stage 1: Building bond lodgement

This stage primarily involves - the developer, and the Secretary

The developer (not the builder) is responsible for obtaining the building bond and lodging it with the Secretary (NSW Fair Trading).

The building bond can be a bank guarantee or ‘bond’ and must contain the project number issued by the SBBIS ePortal or the reference number issued by the NSW Planning Portal.

For example:

  • the SBBIS ePortal – the project number will be in the following format:PN-0000000##
  • for the NSW Planning Portal – the reference number will be in the following format: SB-2020-##

The time it takes to get a building bond from an approved issuer may vary, so this process should start as early as possible.

Although the amount secured by the building bond is calculated later - at a time just before the developer makes application for an occupation certificate, it may assist minimising possible delays to obtain your project number from the SBBIS ePortal or reference number from the NSW Planning Portal and provide it to the approved issuer as soon as possible.

What you need to register your project in either of the ePortals

To register your project in either of the ePortals you will need to know:

  • the street address of the building
  • the developer’s name, address, email, telephone number and contact name
  • the builder’s name, licence number, address, email and telephone number
  • the building class, building use, number of storeys and residential units of the development

Developers registered a project in the SBBIS ePortal (prior to 1 September 2020) go to SBBIS ePortal

Developers required to register a project after 1 September 2020 go to the NSW Planning Portal

You will need these documents:

  1. a copy of the building bond
  2. a copy of any document relevant to determine the contract price to calculate the building bond amount including, if applicable, the quantity surveyor’s cost report if there is no written contract or the developer and builder are connected)
  3. a copy of the contract or contracts between the developer and the builder
  4. a copy of specifications and any variations (including any “issued for construction” and “as-built” drawings and specifications and particulars of approved alternative solutions to meet the performance requirements of the Building Code of Australia)
  5. a copy of any written warranties
  6. a copy of any schedule of samples (being samples of fixtures, fittings, materials and finishes) approved by the developer for use in the building work
  7. a copy of any development consents, approvals or certificates granted or issued under the Environmental Planning and Assessment Act 1979
  8. in the case of building work involving an alternative solution in respect of a fire safety requirement under the Building Code of Australia – a copy of any report prepared by or on behalf of a fire safety practitioner in relation to the alternative solution that was required in connection with an application for a certificate under the Environmental Planning and Assessment Act 1979
  9. a copy of any certificates relating to the design of the building work that were required for or in connection with an application for a development consent, approval or certificate under the Environmental Planning and Assessment Act 1979
  10. a copy of any report obtained by the developer or builder relating to the inspection of the building work

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

The Secretary may request, by written notice, any other documents or information to substantiate the contract price.

Don’t forget that even though you’ll upload an electronic copy of the building bond, you still need to have the original delivered to Fair Trading by one of the following:

  • Courier:

    SBBIS: Strata building bond and inspections scheme, NSW Fair Trading
    Attention: Manager SBBIS
    4 Parramatta Square, 12 Darcy Street Parramatta NSW 2150, or
  • Express post:

    SBBIS: Strata building bond and inspections scheme, NSW Fair Trading
    Attention: Manager SBBIS
    PO BOX 972, Parramatta NSW 2124, or

You'll need to pay a $1500 lodgement fee through either the SBBIS ePortal or the NSW Planning Portal depending which ePortal you have registered your project.

We will then consider the developer’s request and you will be informed via email within 10 business days.

If more information is needed you’ll be notified by email.

We will then consider the developer’s request and you will be informed via email within 10 business days.  If any further information is required, you’ll be notified by email.

For more information on this stage read these documents:

NSW Planning Portal Quick Reference Guide

User guide for developers for SBBIS e-portal & share drive

Developers Information manual

Building bond guidelines


Stage 2: Inspector appointment

This stage primarily involves – the developer, the building inspector, the owners corporation, the Secretary

A developer must appoint a building inspector within 12 months of the issue of any occupation certificate (OC) which allows people to occupy the building – whether with conditions or interim OC, if the initial period of an owners corporation of a strata scheme ends within that 12 months.

The initial period ends when the owners corporation changes from being the original owner of the land (eg the developer) to the actual owners of the lots. For more information on the initial period, go to the starting the owners corporation page.

Note: The Secretary will arrange the building inspector if one is not appointed by the developer within 12 months of the issue of the occupation certificate.

A building inspector can only carry out inspections and produce reports for the Strata building bond and inspections scheme if they are a member of a strata inspector panel (refer to the ‘key terms’ section below).

Once the developer has selected their building inspector, they must be approved by the owners corporation. To do this:

  1. developer emails the owners corporation and provides information about that building inspector (the Secretary has developed a written notice)
  2. the owners corporation calls a general meeting to consider the proposed inspector and any disclosures from the developer and/or the proposed building inspector
  3. the owners corporation must pass a resolution to approve or refuse the appointment of the building inspector. The general meeting resolution is determined by a simple majority. A developer or lessor of a leasehold strata scheme cannot vote (or exercise a proxy vote)
  4. the owners corporation must provide notice to the developer and the Secretary (by email) 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 an inspector.

Failing to agree on an inspector

If the developer fails to successfully appoint a building inspector within 12 months, they must tell the Secretary by email within 21 days. The Secretary will then arrange 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, even when the inspector is arranged by the Secretary. There is a service fee if the Secretary arranges the building inspector.

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 (the Secretary has developed a written notice).

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.

For more information on this stage, read these guidelines:

Or read these information manuals:


Stage 3: Interim inspection and report

This stage involves - the building inspector, the developer, the builder, the owners corporation, the Secretary

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.

The building inspector must give at least 14 days written notice to the owners corporation and any owner / occupier of any affected lot (eg apartment) if they plan to enter.

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.

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

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 by visual inspection and use of equipment/techniques that do not involve destructive testing.  The inspection can include removing any object designed to be moved/opened.

It’s important all defective building work be identified and recorded now.The final report cannot contain any defective building work not reported in the interim report.

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 give a copy of the interim report to the Secretary, owners corporation, developer and builder responsible for defective building work, within 14 days after completing the report and before 18 months after the occupation certificate was issued.

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, the interim report becomes the final report.  The building bond can then be returned to the issuer, two years after the building work was completed.

The developer must, within 28 days of appointing the building inspector, provide the following documents to the building inspector:

  • a document that identifies any building defects of which the developer is aware in the building work, including any building defects considered at the first annual general meeting of the owners corporation, and the documents listed under Stage 1 – Lodgement above (except the building bond).

The developer may protect/redact commercial in-confidence materials other than those details required to carry out the inspection before giving them to the building inspector.

For more information on this stage, read this document:


Stage 4: Rectifying defective building work

This stage involves - the developer, the builder, the owners corporation, the affected lot owner

Correcting any defective work identified in the interim report is the responsibility of the developer, who will liaise with the builder. If the original builder is not available, the developer must arrange for another builder to do the work.

Rectifying defective work can occur at any time after the building work is completed. But if the defective work was identified in the interim report, it should be rectified between 18 and 21 months after the occupation certificate was issued and before the final inspection.

If the builder needs to enter the affected lot (eg apartment), they must give at least 14 days’ written notice to the owners corporation, the developer, the lot owner and the occupier.

The builder may enter the lot only at a time that is reasonable, or at a time agreed with the owner or occupier. A person cannot unreasonably refuse access if the builder has given required notice.

If you need more information on this stage, read this document:


Stage 5: Final inspection and report

This stage involves – the developer, the building inspector, the owners corporation, the builder, the Secretary

Arranging the building inspector

The developer must arrange for the same building inspector who prepared the interim report to carry out the final inspection and provide the final report.  They must then advise the Secretary of this within 14 days.

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

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, even when the inspector is arranged by the Secretary. There is a service fee payable by the developer when the Secretary arranges the building inspector.

Final inspection

The final inspection must be done 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 determine whether the defective building work identified in the interim report has been rectified.

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

If the building inspector needs to enter any lot, for example an apartment, they must give the owners corporation and any owner/occupier 14 days notice.

All parties are required to provide reasonable access and assistance and not to obstruct or hinder a building inspector.

Final report

The building inspector will complete 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 work identified in the interim report, and
  • specify how any outstanding defective building work should be rectified.

Reminder: The final report cannot contain defective building work not identified in the interim report (new matters).

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

The building inspector must give a copy of the completed final report to the Secretary, developer, owners corporation and builder responsible for the defective work within 14 days after completing it and before 24 months after the issue of the occupation certificate.

If there is no defective work identified in the final report, the Secretary releases the building bond in full (see stage 7).

If defective work is identified in the final report, the cost to rectify it will then be determined (see stage 6).

For more information on this stage, read this document:


Stage 6: Determining the cost to rectify defective building work

This stage involves the developer, the owners corporation, an appropriately qualified person, and the Secretary

If there is defective building work identified in the final report, the cost to rectify that work must be determined. This can happen in two ways:

Step 1

The developer and the owners corporation reach an agreement regarding the cost to rectify the defective building work. They both provide a ‘deed of agreement’ and make application to the Secretary to release the agreed amount from the building bond, within 30 days  of receiving the final report.

If the deed of agreement is not received within the 30 days, the Secretary will move to step 2.

Step 2

If the developer and the owners corporation cannot reach agreement regarding the cost to rectify the defective building work, the Secretary will arrange for an appropriately qualified person to determine the cost to rectify the defective building work.

This amount will be released from the building bond to pay for the cost to rectify the defective building work.

The cost for arranging this person will be shared equally between the developer and owners corporation.

For more information on this stage, read these documents:


Stage 7: Paying the building bond

This stage involves the developer, the owners corporation, the builder, and the Secretary

Releasing the building bond can happen in these circumstances:

  1. With consent of the developer and owners corporation at any time between two and three years after the date of building completion.
  2. If no defects were found in the interim report and the developer successfully applied to waive the requirement of a final report, the interim report becomes the final report and the building bond will be returned within 90 days of the final report. The building bond will be returned to the approved issuer.
  3. If no defects are found in the final report, the building bond will be released within 90 days after the final report is provided to the Secretary by the building inspector. The building bond will be returned to the approved issuer.
  4. Defective building work is identified in the final report (as per stage 5) and will be paid for from the building bond.  This happens between two and three years after the date of building completion. If the cost to rectify the defective building work is more than the building bond, the whole amount is paid to the owners corporation.

The Secretary will provide the owners corporation, the developer and the builder 14 days written notice of any proposed payment from the building bond.

The Secretary may refuse to release the building bond to the owners corporation if the Secretary is satisfied that the developer or builder was unreasonably refused access to the building to rectify the defective building work.


Stage 8: Completion

This stage involves the owners corporation, the developer, and the Secretary

The owners corporation must use any money it receives from the building bond to rectify the defective building work identified in the final report within a reasonable time.

The owners corporation must give the developer written notice of the completion of the rectification of the defective building work.

After the defective building work is completed, the owners corporation must return to the developer any leftover building bond.

Time from start to completion

Excluding the time it might take the owners corporation to rectify any defects mentioned in the final report, this whole process should be completed within 3 years from the date of any occupation certificate.

These events can affect that timeline:

  1. Applications for extensions: the developer, owners corporation or building inspector, may have made application to the Secretary to vary the times for reports and other matters.
  2. Reviewable decisions: some decisions by the Secretary are reviewable decisions. This may result in the timeline being extended.
  3. 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.

Further information

Contacting us

During any stage of the process you can email us at stratabond@customerservice.nsw.gov.au.

Applications for review of a decision

An application for review of the Secretary’s decision must be made within 14 days after notice of the decision has been given.

You can apply to review a decision if you are the:

  • developer
  • owners corporation
  • owner of a lot in the strata scheme
  • builder who carried out building work or who is responsible for defective building work

The following decisions of the Secretary are reviewable decisions:

  • a decision to appoint a building inspector to carry out a final report
  • a determination by the Secretary that a developer is not required to arrange for a final report
  • a decision to vary the period within which an interim report or final report is to be provided, or other action is to be done
  • a decision that the whole or part of a building bond may be claimed or realised for payment to an owners corporation, developer or other person.

A decision by the Secretary is not reviewable if the amount secured by the building bond has already been paid in accordance with the Secretary’s decision.

If an application to review a decision to pay the whole or part of the building bond is made, the amount is not to be paid until the application for the review is determined or withdrawn.

The application must be made in writing and signed by the applicant. It must specify the decision to be reviewed and the reasons for the application along with any extra information and why that information was not previously provided, and an email address where that decision will be sent. Email your review application to revdec@customerservice.nsw.gov.au.

For more information see section 213 of the Strata Schemes Management Act 2015 and clause 56 of the Strata Schemes Management Regulation 2016

NSW Civil and Administrative Tribunal (Tribunal) orders

Regarding access:

  • The Tribunal (on application) may make an order requiring the occupier of a lot (or any other person) to allow access for the purpose of inspection or rectifying defective building work.
  • An application may be made by an owners corporation, the developer, a building inspector or a builder.

Regarding contract price:

  • The Tribunal (on application) may make an order specifying the amount of the contract price of building work - to determine the amount of a building bond. If there are other incidental proceedings being dealt with by a Court, then the application must be made to the Supreme Court of NSW.
  • An application may be made by an owners corporation, the developer, or the Secretary. A determination under this section of the amount of the contract price of building work does not bind a court or tribunal in any other proceedings.

For more information see section 211 of the Strata Schemes Management Act 2015.

Record keeping

All information and documents relating the building bond will be stored in accordance with NSW Government record keeping policy.

Key terms

The content below is general in nature and should not be relied upon.

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.

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

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.

For more information see Sections 190 and 191 of the Strata Schemes Management Act 2015.

Approved issuer

The building bond must be issued from an authorised deposit-taking institution or a general insurer authorised to conduct new or renewal insurance business, who are regulated by the Australian Prudential Regulation Authority (APRA).

The issuing authority must be listed on the:

Contract price

Generally, the contract price is the total price paid under all the applicable contracts for the building work as at a time just before the developer makes application for any occupation certificate (OC) that allows people to occupy the building – whether with conditions or interim OC. It also includes all variations, additions, and GST.

This includes but isn't limited to:

  • construction and fit out costs (not including appliance and prime cost items)
  • demolition and site preparation
  • excavation
  • car parking
  • costs for the common property that is included in the property plan, including landscaping, pools, fencing and gates
  • professional fees, and
  • taxes applied in the calculation of the as-built construction.

If there is no written contract for the building work, or the parties to the building contract are connected persons (for example where the developer is also the builder), the contract price for building work is to be the price set out in a cost report (see below) prepared by a quantity surveyor who is a member of the Australian Institute of Quantity Surveyors or the Royal Institution of Chartered Surveyors, and is not connected to the developer or the builder.

For more information see Part 11 of the Strata Schemes Management Act 2015; Part 8 of the Strata Schemes Management Regulation 2016.

Cost report

When there is no written contract for the building work (for example where the developer is also the builder), or the parties to the building contract are connected, the contract price is the price set out in a cost report prepared by a quantity surveyor.

The cost report must be prepared by a quantity surveyor who is a member of the Australian Institute of Quantity Surveyors or the Royal Institution of Chartered Surveyors and is not connected to the developer or the builder, or a bank, or other person, providing finance for the building work.

The cost report prepared by the quantity surveyor must include:

  • all work that is conducted in relation to the contract, as list above under contract price, and
  • a certificate by the quantity surveyor that they have inspected the as-built drawings and specifications for the strata plan.

For more information see Clause 50 Strata Schemes Management Regulation 2016.

Professional fees

Professional fees as listed in Clause 50(3)(f) of the Strata Schemes Management Regulation 2016, include but are not limited to costs associated with developing design drawings for the preparation of the development application such as:

(a) fees “involved in” the actual construction and co-ordination of construction and/or

(b) fees incurred as preliminary to construction or co-ordination of construction, being the fees for the as-built drawings and specifications for the strata plan.

The Secretary

The Secretary is either the Commissioner for Fair Trading or the Secretary of the Department of Customer Service, in accordance with section 4 of the Strata Schemes Management Act 2015.

For more information refer to Section 4 of the Strata Schemes Management Act 2015

Strata inspector panel (SIP)

A building inspector must be a member of a strata inspector panel. Inclusion on a strata inspector panel can only be provided by an authorised professional association, as listed in the Strata Schemes Management Regulation 2016.

A strata inspector panel may be established by any of the following:

  • the Housing Industry Association Limited
  • the Master Builders Association of New South Wales Pty Ltd
  • the Australian Institute of Building
  • Australian Institute of Building Surveyors
  • the Australian Institute of Building Consultants Pty Ltd
  • the Australian Society of Building Consultants Incorporated
  • the Institute of Building Consultants Inc
  • Engineers Australia Pty Limited
  • the Association of Accredited Certifiers Incorporated
  • the Australian Institute of Quantity Surveyors Ltd
  • RICS Australasia Pty Ltd

Each association 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 the details and experience of each building inspector, including their contact details.

If you need more information on strata inspector panels read this document:

Written notice

A written notice includes email notifications.

The Strata building bond and inspections scheme communications is administered by electronic transmissions. Written notices for the scheme are available in soft copy and are available to download from this webpage.

Key participants can use the written notices to complete their required actions under legislation.

'the' or 'any' occupation certificate

For the purposes of the Strata building bond and inspections scheme, ‘the’ or ‘any’ occupation certificate issued for the strata scheme refers to the first occupation certificate (OC) issued which allows people to occupy the building – whether with conditions or interim OC.

Also, refer to section 3C of the Home Building Act 1989.

Other legislative terms:

Building workConnected personDefective building workDeveloper
Occupational certificate (OC)Interim reportFinal reportOwners corporation
Residential building work  
 
Next NSW Planning Portal for projects from 1 Sept 2020