Developers Note: Building defect bond starting 1 July 2017 - Changes to Strata Laws

Published 18 Aug 2016
Louis Andreatta

Maintaining the building's condition

The new building defect bond scheme will start on 1 July 2017. This start date will enable:

• strata buildings to be inspected for defects against the new Australian Standard, which will be introduced as the standard for inspections of group title buildings

• the necessary time for industry and stakeholders to prepare for this important change.

This reform introduces mandatory defect inspection reports and a building bond. The developer will also need to prepare a maintenance schedule, to be tabled at the first AGM of a new scheme to inform owners about their maintenance obligations.

These changes will increase builder and developer accountability, enable defects to be identified and fixed early, and prolong the life of the building.

How the process will work

The building bond will be for the construction of strata buildings over three stories high. Developers will be required to lodge a 2% bond for the final contract price of the building, as a form of security to fix any defective work.

Developers will need to pay to engage an independent building inspector to provide defect inspection reports. A first report is due between 15 and 18 months after the completion of the building. The final report must be provided between 21 months and no later than 2 years after the building work is completed.

The owners corporation must agree to the appointment. If there is no agreement or the developer ceases to trade after the building work is complete, Fair Trading will arrange for an inspector to be appointed. If the defects are not rectified, the building bond will be used to carry out the repairs. If there are no defects or they are rectified, the bond will be returned to the developer.