NSW Fair Trading has announced the introduction of changes to strata laws which are to commence on 30 November 2016.
The reformed strata laws can be found in the Strata Schemes Development Act 2015 and the Strata Schemes Management Act 2015.
As part of the new strata laws, the Building Bond Scheme will commence on 1 July 2017. The aim of the scheme is to have the rectification of defective building work by a developer guaranteed.
Currently, buildings over three storeys are exempt from acquiring insurance under section 96A of the Home Building Act 1989 which means purchasers can be left with defective housing and possible financial hardship. The Building Bond Scheme endeavours to avoid this situation by having the developer pay a bond to the Office of Finance equal to 2% of the total price of the building works. This will provide purchasers with assurance of the defective works being rectified.
Developers must also appoint a building inspector to provide 2 reports identifying the defects in the developer’s building work.
The interim report must be conducted 15-18 months after building work has been completed. In the interim report the inspector must identify any defective work as well as detail the cause of the defective work.
Between 21-24 months following completion of the building work, the developer must arrange for the same inspector to prepare the final report. In this report the inspector must identify:
- Defects in the interim report that were not rectified; and
- Any further defects caused by the rectification works.
Due to the new changes, developers should review their construction contracts to ensure the contracts have sufficient provisions in relation to the defects liability period and the contractor’s security.
Contractors will find a longer defects liability period and a greater period of time for the retention of security in their contracts.
If you have any questions, please do not hesitate to contact our Conveyancing team on (02) 9728 3366.