The Strata Schemes Management Amendment (Building Defects Scheme) Bill 2018 was assented to in September 2018 and should come into effect later this year once proclaimed. It proposes changes to be made to the strata building bond and inspections scheme, under part 11 of the Strata Schemes Management Act 2015 (“the Act”). The amendments mainly affect Developers who will need to be more vigilant in their dealings with building bonds, as Fair Trading’s investigative powers and the applicable penalty units are increased.

Under the scheme, developers of residential and mixed-use high-rise strata buildings of four storeys or more must pay a bond equivalent to 2% of the building’s contract price to NSW Fair Trading. The bond is to be available to rectify any defective building work identified in the inspection process specified under the Act. The proposed amendments seek to enhance the powers of Fair Trading so that they can verify the contract building price and clarify the role of the building inspector.

The anticipated amendments are:

1. Developers must lodge a building bond before applying for the occupation certificate, previously they could do this at any time;
2. The owners corporation and the developer must agree on the amount to be released from the bond to meet the costs of fixing identified defects. The Secretary will decide if the parties cannot agree;
3. Investigative powers for Fair Trading so they can verify the amount of the contract price or building bond. Such powers include new entry to premises and search warrant powers;
4. An increase in the maximum penalty for developers failing to lodge the bond from 200 penalty units ($22,000) to 10,000 penalty units ($1.1m);
5. Make it an offence for developers to provide false and misleading information to the Secretary in relation to the contract price or the building bond; and
6. Introduce a “good faith” liability protection for building inspectors, and the professional associations that appointed them, excluding them from liability for anything done in “good faith” when conducting an inspection.

Under these amendments vendors and buyers of strata lots may have greater protection where developers have been misleading or failed to lodge a building bond on time.

The NSW Government is also considering making changes to Part 8 of the Strata Schemes Management Regulation 2016, however the draft amendments have not yet been made available for public release.

Contact Peter McNamara at CML Lawyers for more information about the Strata Building Bond Scheme.