Who is responsible for building faults in NSW? Continuing on from last month’s article, we now cover the laws and responsibilities in NSW.

See previous article

State	Time from for Structural defects
New South Wales	Notify the builder of a major defect as soon as you become aware of it within 6 years of the occupation certificate.

CURRENT STATE OF PLAY

NSW

Engineers Australia says that it is the ‘price and program’ culture which dominates the building industry today which leads to poor building practices. It cites a Federal Government report (2012) that estimates that 85% of strata units in NSW are defective at completion.

Types of Defects
Defect	A defect must result from defective design, defective or faulty workmanship, defective materials, or a failure to comply with the structural performance requirements of the National Construction Code.
Minor Defect	A Defect but not a Major Defect; Covered for 2 years after completion of construction;
Major Defect	Contracts signed < 1/2/2012 – Covered for 7 years after completion of construction Contracts signed > 1/2/2012 – Covered for 6 years after completion of construction 2 Step Process to identify if a major defect Step 1 Does it affect a major element of the building? Major elements include something that effects the stability or structure of the building: Waterproofing Fire Services Foundations Footings Walls Roofs Beams Columns Step 2 What are the Potential consequences Causes part or all of building to be uninhabitable or unable to be used for intended purpose Could result in collapse or destruction of building or part thereof

The following table supplied by NSW Fair Trading highlights that some improvements in the major causes of defects has occurred in 2014/15.

However the three main causes of complaints from Strata Schemes are Waterproofing, Fire Safety and Structural defects.

Changes to NSW Strata Law

Major changes to strata law affecting building faults are expected to be implemented by mid-2016. These include:

• A building bond of 2% of the contracted price of the building, for construction of strata building over 3 stores to be lodged for building defects rectification works
• Developer to prepare a maintenance schedule to inform owners about their maintenance responsibilities to be submitted at the first AGM
• Process for the early identification of defects
  • Developers to engage an independent building inspector to conduct defect report at the developer’s cost between 12 and 18 months after completion of building
  • Owners Corporation to agree to the appointment
  • If developer ceases to trade or no agreement is reached on the building inspector, Fair Trading will arrange for inspector to be appointed

Effect on NSW Strata Schemes of New Laws

1. The bond of 2% of the construction cost will generally be insufficient to pay for major defects in buildings. But it is a start with some money set aside for defect rectification.
2. The need for a Maintenance Plan is critical. However, this will then place pressure on Owners Corporations and Committees to stop treating defects and maintenance requirements with disdain. The committees MUST ensure that maintenance works are completed as scheduled. This will tend to give the builder a “way out” of fixing defects if the Owners Corporation does not follow through with regular maintenance. An example of where the Owners Corporation will suffer:
   • Powder Coated steelwork generally requires cleaning each 6 months.
   • When Powder Coated steel rusts due to poor quality and becomes a structural issue, the Owners Corporation will pay for all replacements if they had not completed the cleaning as per the maintenance schedule.
   • Much more money will need to be expended early in the life of the building to pay for regular maintenance.
3. The Owners Corporation will need to take advice as to the professionalism, experience, and impartiality of the proposed building inspector selected by the developer for the 12 to 18 defect report.
4. Owners Corporation to take defects seriously and not wait until it is too late to lodge a complaint, as shown in the case study.
5. Owners Corporation should have a professional defects report completed at 5 to 51/2 years after completion to identify all building defects and faults.

A GUIDE FOR OWNERS CORPORATIONS AND BODIES CORPORATE

Unfortunately in many instances, the internals of lots may experience damage from water ingress either from roof or windows without the lot owner being aware of such damage. This occurs on a regular basis due to rental units having tenants not caring about damage, or owners just not aware that “things that just don’t seem right” are in fact major defects and can cause building faults.

Sometimes it seems that until mushrooms start growing inside a unit that the issues are taken seriously.

Thus if the lot owner is not aware of the damage occurring, the OC will also be blissfully unaware that the building has serious defects.

As a general rule, Owners Corporations should follow the inspection schedule and actions listed below. Due to the complexity and the changes that Governments continue to make to the legislation, the tables have been drawn to list all options that are applicable.

Please read the first 3 lines of the tables to identify where your scheme fits. 

New South Wales
Contract Signed date:	Prior to 1/2/2012
Building completion date:	Prior to 1/7/2016
Building Age:	< 2 years old from completion of construction
Actions Required:
1   Add agenda item to AGM if held no later than 18 months after completion of construction; or Hold a Committee meeting no later than 18 months after completion of construction Do any lot owners have any defects within their lots Gain approval to engage a building professional such as QBM to inspect the complex including the internal of all lots to identify defects The warranty period for major defects is only 2 years after construction. Time is required to undertake inspections and contact the builder and developer.  2 Committee to inspect the common areas to see if they notice any obvious major defects Lot owners and committee members need to have some indication of the level of defects to make funding decisions  3 Send the list of defects obtained from lot owners to QBM for a FREE desk-top assessment of the defects to identify if any may be major defects and if a site inspection is warranted Before making funding commitments, ensure that the identified defects warrants a professional inspection.  4 Inspection of common areas and the internal of lots to identify all defects both minor and major defects OC to pay for internal lot inspections, as many major defects will only be visible from the internal of lots  5 Ring the builder and developer to notify them that defects are present on site and that a full listing is being sent. Document these calls Attempt to engage the builder and developer in a friendly manner to gain their support to rectify the defects without further legal action.  6 Send list of defects to builder for rectification via registered post to both the developer and the builder. Need a written record that the listing of defects has been sent and on what date for future legal action if required.  7 If no advice has been received from both the builder and developer, send the list of defect again with a covering letter demanding rectification of the defects within 14 days via registered post. Need a written record that attempts have been made to resolve the issues in a consultative manner for future legal action if required.  8 If no satisfactory advice has been received from both the builder and developer lodge a complaint with Fair Trading. Note: The complaint to Fair Trading must be submitted by the OC for common areas and by individual lot owners for the internal of their lots. Action must be taken within the listed time frames.
Note: if the defects result in a lot being uninhabitable or causing major disruptions to lot owners, the Owners Corporate must rectify the defects within a timely manner and commence action against the builder for cost recovery.

Building Age:	< 7 years old from completion of construction
Actions Required:
1 Add agenda item to AGM if held no later than 6 years and 6 months after completion of construction; or Hold a Committee meeting no later than 6 years and 6 months after completion of construction Do any lot owners have any defects within their lots Gain approval to engage a building professional such as QBM to inspect the complex including the internal of all lots to identify defects The warranty period for major defects is only 7 years after construction. Time is required to undertake inspections and contact the builder and developer.  2 Committee to inspect the common areas to see if they notice any obvious major defects Lot owners and committee members need to have some indication of the level of defects to make funding decisions  3 Inspection of common areas and the internal of lots to identify all defects both minor and major defects OC to pay for internal lot inspections as many major defects will only be visible from the internal of lots  4 Ring the builder and developer to notify them that defects are present on site and that a full listing is being sent. Document these calls Attempt to engage the builder and developer in a friendly manner to gain their support to rectify the defects without further legal action.  5 Send list of defects to builder for rectification via registered post to both the developer and the builder. Need a written record that the listing of defects has been sent and on what date for future legal action if required.  6 If no advice has been received from both the builder and developer, send the list of defect again with a covering letter demanding rectification of the defects within 14 days via registered post. Need a written record that attempts have been made to resolve the issues in a consultative manner for future legal action if required.  7 If no satisfactory advice has been received from both the builder and developer lodge a complaint with Fair Trading. Note: The complaint to Fair Trading must be submitted by the OC for common areas and by individual lot owners for the internal of their lots. Action must be taken within the listed time frames.
Note: if the defects result in a lot being uninhabitable or causing major disruptions to lot owners, the Owners Corporate must rectify the defects within a timely manner and commence action against the builder for cost recovery.

 

New South Wales
Contract Signed date:	After 1/2/2012
Building completion date:	Prior to 1/7/2016
Building Age:	< 2 years old from completion of construction
Actions Required:
1 Add agenda item to AGM if held no later than 18 months after completion of construction; or Hold a Committee meeting no later than 18 months after completion of construction Do any lot owners have any defects within their lots Gain approval to engage a building professional such as QBM to inspect the complex including the internal of all lots to identify defects The warranty period for minor defects is only 2 years after construction. Time is required to undertake inspections and contact the builder and developer.  2 Committee to inspect the common areas to see if they notice any obvious major defects Lot owners and committee members need to have some indication of the level of defects to make funding decisions  3 Send the list of defects obtained from lot owners to QBM for a FREE desk-top assessment of the defects to identify if any may be major defects and if a site inspection is warranted Before making funding commitments, ensure that the identified defects warrants a professional inspection.  4 Inspection of common areas and the internal of lots to identify all defects both minor and major defects OC to pay for internal lot inspections, as many major defects will only be visible from the internal of lots  5 Ring the builder and developer to notify them that defects are present on site and that a full listing is being sent. Document these calls Attempt to engage the builder and developer in a friendly manner to gain their support to rectify the defects without further legal action.  6 Send list of defects to builder for rectification via registered post to both the developer and the builder. Need a written record that the listing of defects has been sent and on what date for future legal action if required.  7 If no advice has been received from both the builder and developer, send the list of defect again with a covering letter demanding rectification of the defects within 14 days via registered post. Need a written record that attempts have been made to resolve the issues in a consultative manner for future legal action if required.  8 If no satisfactory advice has been received from both the builder and developer lodge a complaint with Fair Trading. Note: The complaint to Fair Trading must be submitted by the OC for common areas and by individual lot owners for the internal of their lots. Action must be taken within the listed time frames.
Note: if the defects result in a lot being uninhabitable or causing major disruptions to lot owners, the Owners Corporate must rectify the defects within a timely manner and commence action against the builder for cost recovery.

Building Age:	< 6 years old from completion of construction
Actions Required:
1 Add agenda item to AGM if held no later than 5 years and 6 months after completion of construction; or Hold a Committee meeting no later than 5 years and 6 months after completion of construction Do any lot owners have any defects within their lots Gain approval to engage a building professional such as QBM to inspect the complex including the internal of all lots to identify defects The warranty period for major defects is only 6 years after construction. Time is required to undertake inspections and contact the builder and developer.  2 Committee to inspect the common areas to see if they notice any obvious major defects Lot owners and committee members need to have some indication of the level of defects to make funding decisions  3 Inspection of common areas and the internal of lots to identify all defects both minor and major defects OC to pay for internal lot inspections as many major defects will only be visible from the internal of lots  4 Ring the builder and developer to notify them that defects are present on site and that a full listing is being sent. Document these calls Attempt to engage the builder and developer in a friendly manner to gain their support to rectify the defects without further legal action.  5 Send list of defects to builder for rectification via registered post to both the developer and the builder. Need a written record that the listing of defects has been sent and on what date for future legal action if required.  6 If no advice has been received from both the builder and developer, send the list of defect again with a covering letter demanding rectification of the defects within 14 days via registered post. Need a written record that attempts have been made to resolve the issues in a consultative manner for future legal action if required.  7 If no satisfactory advice has been received from both the builder and developer lodge a complaint with Fair Trading. Note: The complaint to Fair Trading must be submitted by the OC for common areas and by individual lot owners for the internal of their lots. Action must be taken within the listed time frames.
Note: if the defects result in a lot being uninhabitable or causing major disruptions to lot owners, the Owners Corporate must rectify the defects within a timely manner and commence action against the builder for cost recovery.

SUMMARY

The issue of building defects or building faults can be very emotive for lot owners. But if the emotion is taken out and a professional company is engaged to identify defects and liaise with the builder, satisfactory outcomes can be achieved without legal recourse.

QBM has been inspecting buildings for many years and conducting Building Warranty reports for the past 15 years.

We have an enviable record of identifying not only the defects but the causes behind the defects. With such solid evidence, we have achieved great success for Owners Corporations in having defects or building faults rectified by builders.

The “Take Away” from this article is that Lot Owners, Owners Corporations and Bodies Corporate need to take building defects seriously and don’t waste time in the identification of such defects. Strict time frames are in place and failure to notify of defects may void all builder’s warranties.

ABOUT QBM

Quality Building Management (QBM) formed by Donald Pitt, has been an active professional within the Building and Strata Industries since 1970.

QBM have completed Builder’s Warranty inspections to numerous Strata complexes, and have been successful in the majority of cases in having the builder return to site for rectification works.

Specialising in everything to keep Commercial, Industrial and Residential Complexes safe and legally compliant, QBM provides the full range of Asbestos, Fire and Building inspections, reporting and training services for Property Owners and Managers, as well as Real Estate Agents.

By doing all the required services and investing in systems and our people, we can confidently give cost saving guarantees where you will save money.

Contact us today to find out more!