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In an
article published in December 2016, I outlined some of the key
features of the new Building Defect Bond Scheme (the Scheme)
introduced under the new Strata Schemes Management Act 2015 (NSW).
The Scheme requires (amongst other things) developers to lodge a
bond with NSW Fair Trading that is equal to 2% of the contract
price for construction of residential and mixed use high rise
strata buildings.
The Scheme was to apply to building works carried out on new
residential and mixed use high rise strata buildings from 1 July
2017, and in instances where building works are exempt from
requiring Home Owners Warranty Insurance.
However, the Electronic Transactions Legislation Amendment
(Government Transactions) Bill 2017 (NSW) introduced into the
NSW Legislative Council on 24 May 2017, appears to have
deferred the proposed commencement of the Scheme until 1
July, 2018. The explanation provided for the deferment of
the commencement date (as contained in the Bill's second
reading) include:
"This amendment acknowledges
that a number of issues have arisen, which mean that it is prudent
to delay commencement of the scheme. Since 2016 Standards Australia
has been working with a group of industry experts to develop a new
national standard known as AS4349.2 – Group titled
properties. The standard is important as it will form part of the
defect inspection report that is applied by the scheme.
Unfortunately, the standard is not complete and unlikely to be
finalised by Standards Australia until after July 2017.
Furthermore, over the past five
months NSW Fair Trading has been engaging with peak bodies in the
legal, strata and building sectors to prepare for the scheme. NSW
Fair Trading acknowledges stakeholders' continued support for
the scheme but also notes feedback that the July 2017 commencement
date would not afford some participants sufficient time to develop
their supporting processes and procedures. The amendments will mean
that the scheme will only apply to construction contracts signed or
work that commences from 1 January 2018."
Subject to the passing of the Bill and any further deferments,
the Scheme will only apply to construction contracts signed (or
where there is no contract and building work commences) from 1
January, 2018.
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.