The new Building Bond and Inspection Scheme which falls under the Strata Schemes Management Act 2015 (NSW) requires developers of strata buildings to lodge a building bond with NSW Fair Trading for the purpose of remedying any building defects efficiently. In order to maintain faith in the quality of new high-rise strata blocks, the scheme applies to new residential and mixed use strata buildings and renovations that are 4-storeys or more – those not covered by the Home Building Compensation Fund.
Construction contracts entered into on or after 1 January 2018 will be subject to the scheme. Where there is no contract, the scheme will apply to construction works that commence from this date.
Under the scheme, 2% of the building contract price in the form of a bank guarantee or bond will be uploaded by the developer to the proposed online portal along with:
- a lodgement form;
- supporting documents and information; and
- an administration fee
Developers will also be required to source an independent building inspector who will inspect the works for any issues and provide reports to the Owners Corporation, developer, builder and Fair Trading to that effect. The owner's corporation must firstly approve the nominated building inspector, if it is refused or the developer fails to nominate one altogether NSW Fair Trading will appoint one.
The building inspector will conduct inspections of the works between 15 and 18 months after the building work is completed and again after and between 21 and 24 months. If there are any defects, the cost to rectify them as agreed by both the developer and owners corporation will be released from the bond. Any remaining bond money may be released to the developer no less than 2 years after completion of the works. It is important to note, all costs of the building inspector is to be paid by the developer.
More updates regarding the practical aspects of the scheme will be provided by NSW Fair Trading leading up to its commencement on 1 January 2018 it would be prudent for developers to enter into building contracts before the new year to avoid the operation of the Scheme.
Strata Scheme By-Laws Review
In a step towards modernising strata scheme management, strata schemes are required to have reviewed their strata by-laws by 30 November 2017.
Any changes to the by-laws must be passed by a special resolution at a general meeting, meaning that at least 75% of votes must be in favour of the by-law. The Registrar General's Office must then be informed of any amendment to by-laws, which can be completed online at Land and Property Information.
To assist in this process, the Strata Schemes Management Regulation 2016 includes model by-laws. In setting their own by-laws, the owners corporation or strata scheme committee may choose to wholly adopt the model by-laws or simply refer to them for direction and guidance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
