This article discusses the recently released NSW building defects report: Broken Promises, Blame Games and Balconies.
A new report, commissioned by the Office of the Building Commissioner (OBC) as part of the Construct NSW reform strategy, examines customers’ experience purchasing newly constructed apartments in NSW.
Specifically, it focuses on managing defects in the development known as Otto 2, involving various parties such as the developer, builder, owners corporation, and consultants. The case study highlights the intervention of the OBC using powers under the Residential Apartment Buildings (Compliance and Enforcement Powers Act) 2020, the insolvency of the builder, and the legal proceedings related to defects disputes. Despite challenges in obtaining participation, the study emphasises the vulnerability of apartment owners and the need for transparency in defects history.
The report discusses ongoing litigation and the potential for reforms to improve outcomes for apartment owners, recognising the prevalence of building disputes in NSW. The complex nature of the challenges and the importance of addressing the litigation culture are emphasised.
In Part 3 of the report, various suggestions and recommendations were gathered from interviews with stakeholders regarding regulatory reforms and actions that could lead to improved management of defects in apartment buildings. The report categorised these suggestions into several key areas:
- Statutory Limitations on Bringing Actions: Participants highlighted the two-year time limit for bringing actions for minor defects as inadequate, leading to more litigation and unresolved issues. Suggestions included removing or suspending the time limit if a complaint has been lodged or until the strata bond scheme process is completed. Simplifying limitation periods and clarifying the scope of duty of care reforms were also proposed.
- Dispute Resolution: Stakeholders emphasised the need for timely resolution by involving reputable independent adjudicators in the process. Lack of access to qualified experts and adequate resources for tribunals and courts were identified as challenges to effective dispute resolution.
- Making Developers Accountable: Defining the term ‘developer’ in legislation to ensure all relevant parties are held responsible was emphasised. Proposed amendments aimed to capture key parties involved in the development process. However, concerns were raised regarding entities that purchased assets from developers and provided services post-construction.
- Regulatory Responses to Insolvency Risk: The report acknowledged the challenge of addressing the consequences of insolvency events within existing regulatory frameworks. Anti-phoenixing provisions were discussed, which operate after the insolvency event and apply to licensed entities. The proposed reforms in NSW aimed to strengthen anti-phoenixing laws by requiring registered building practitioners to avoid engaging in intentional phoenix activity and by introducing personal statutory duties for directors.
- Effectiveness of the Residential Apartment Buildings (Compliance and Enforcement Powers) Act (RAB Act): The report highlighted the positive impact of the RAB Act on improving industry practices and enabling joint inspections. Use of RAB Act powers as a circuit breaker to costly litigation was emphasised, supporting the need for robust and effective powers to support Project Intervene.
- The Strata Bond Scheme: Participants expressed doubts about the scheme’s effectiveness in improving outcomes for apartment owners. Criticisms included inadequate bond amounts, short timeframes, complex processes, and concerns about the quality of experts involved. Recent reforms exempting projects with latent defects insurance and proposed extensions to the overall timeframe were mentioned.
In conclusion, the report provides an overview of the suggestions and feedback received from participants regarding regulatory reforms and actions that could influence better outcomes in managing defects in apartment buildings. It highlights the impact of previous reforms in NSW, identifies areas of improvement, and discusses potential changes to address the identified issues.
The full report conducted by Bronwyn Weir, the Managing Director of Weir Legal and consulting, can be accessed here: Broken Promises, Blame Games and Balconies
This post appears in Strata News #652.
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Read next:
- NSW: Project Intervene FAQs as deadline extended 30 Nov 2023
- NAT: Changing the landscape of consumer protection (Project Intervene)
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