Kydon Segal Lawyers


How are builders and developers affected by the Strata Building Bond and Inspections Scheme?

The strata building bond and inspections scheme was introduced in NSW on 1 January 2018 and applies to all building work carried out on residential or partially-residential strata properties that are four or more storeys. The new scheme is managed by an online portal which assists to facilitate all the documents required by the new scheme.

A strata scheme is a building or collection of buildings that have been divided into lots. They are typically referred to as apartments, units, townhouses and include houses.

In NSW, any building contract entered into by a developer will need to adhere to the new strata inspection scheme. However, if the building contract for carrying out the work was entered into before 1 January 2018, the scheme will not apply.

Under the scheme, developers must lodge a building bond equal to 2 percent of the contract value of the work. This contract for the work may include demolition, excavation or professional fees. The building bond must also be lodged before the issue of the occupation certificate for the strata scheme to avoid penalty.

An application for an Occupation Certificate must be lodged through the NSW Department of Planning and Environment which must be approved so that any persons can occupy or use a new building or change the use of an existing building.
Developers are also responsible for arranging the issue and lodgement of the building bond with the Building Bond Secretary and it must be lodged before the occupation certificate has been issued.

Once the Building Bond Secretary approves the building bond, the developer must appoint a building inspector who will complete an interim inspection of the property. The building inspector must complete the inspection and upload their report to the online portal between 15 and 18 months after the occupation certificate has been issued.

After the interim report is lodged, the developer is responsible for arranging the rectification of any defects identified in the report. These defects must be rectified before the building inspector completes the final inspection of the property.

Once all defects are repaired, the developer will organise a final inspection of the building work.  The building inspector will prepare the final report and provide copies of the report to the Building Bond Secretary, developer, owners corporation and builders.

If the final report identifies that there is no defective building work, the bond will be returned to the developer. However, if the report determines that the building work contains defects, the bond will be released to The Owners Corporation so that it can be used to fix the defects identified in the final report. The remainder of the bond will be returned to the developer once it has been used to repair any building work.

If you need any advice relating to the strata building bond and inspections scheme or any other property law matter, you can contact the team here at Kydon Segal Lawyers and we will be happy to be of assistance!