Lessons from Opal Tower: How to prevent unexpected costs from building defects

When building defects come to light, property owners are usually the ones who are hardest hit. Since your property is your asset and responsibility, it’s important for you to know how you can save on costs and what kind of options are available to you

Building defects may happen for any number of reasons and at any time. Sydney’s Opal Tower incident highlights some of the existing loopholes in the construction industry’s compliance process and has property owners in jitters.

Even as experts investigate the causes and state governments debate legislative changes, it is the property owners who usually have to deal with huge costs from property damage, building renovations and maintenance delays. Let’s look at how you can prevent unexpected costs from building defects in your strata property.

Here are PICA Group’s top 4 tips on how to prevent unexpected costs from building defects:

1. Look out for defects and have them inspected
2. Stay compliant and legally clear
3. Know your legislative rights
4. Protect your property with insurance

Look out for defects and have them inspected

A recent report by Shergold and Weir called Building Confidence claims that many high-rises have been hastily constructed and have been non-compliant with Australian Standards at some point. There are a range of issues related to cladding, water clogging, mould, fire safety, unsound roofs, improper drainage, unregulated swimming pools and so on.

You should be aware of the different kinds of defects that may be present in your building and what kind of risks they may pose.

Some of the more superficial issues such as painting, flooring and tiling may be possible to manage without huge costs being incurred. In some cases, parts of the property such as swimming pools that need to be redesigned as per state regulations may not affect the structure and stability of the building per se. However, certain problems such as cladding or drainage systems that arise from inherent design and construction flaws may call for a complete overhaul at times.

PICA Group tip
Make sure to keep an eye out for defects and inform your committee about any defects you have identified so you and your building remain safe.

Stay compliant and legally clear

Non-compliance can happen at any stage right from development and planning to building, pre- and post-building inspection, to certification and subsequent maintenance, if:

• There are gaps and inadequacies in existing laws of the land
• The regulations around design and development certifications are not followed
• Inferior building material are used without safety-standard checks and warranty
• There is a dearth of competent manpower and decision makers
• Certifiers, surveyors and inspectors are not accredited or unbiased
• Reports submitted are inaccurate, incomplete or inconsistent
• Complaints are mishandled, and claims are not met

These are only some of the common cases leading to non-compliance. Sometimes, a combination of these factors may lead to non-compliance of your strata property.

PICA Group tip
Make sure all parties involved in the development, management and maintenance are compliant at all times. You should keep track of government announcements and deadlines to ensure registrations, and conduct inspections and certifications in a timely manner. It is also important to keep all your certificates updated and handy so that you are not inconvenienced in case of accidents.

Know your legislative rights

The New South Wales government has made certain provisions to help property owners:

1. 2% bond and inspection scheme:

According to NSW’s Strata Schemes Management Act 2015(Act), your developer is required to allocate 2% of the contract price as bond before the building work begins. If the interim and final inspection reports reveal defects, the owners corporations can use the bond money to have these defects corrected. If no defects are found upon inspection within first two years of occupancy, the developer may reclaim this bond money.

1. Statutory warranty period:

As per NSW government regulations, if you have entered a contract before February 2012, you can claim compensation from your builder and developer for any big defects found within 6 years. If you have entered the contract after February 2012, you have 7 years within which you can claim compensation.

PICA Group tip
If your developer or builder does not respond to your claim during the statutory warranty period, you can take the help of NSW Fair trading to solve disputes.

Protect your property with insurance

All said and done, you must have adequate insurance cover to protect your property from accidents. Most insurance providers will take into consideration a variety of factors while evaluating if your building is insurable, and if yes, for how much. Things such as the age of your building, quality of material used in construction, its maintenance history, nature and severity of defects, etc. are some of the factors that will affect their decision making regarding insurance cover, premium and excess.

PICA Group tip
Your insurance provider may need certain information and documentation from you to evaluate your building for defects and determine what type of insurance cover you may need and how much it may cost you. Make sure you secure a copy of the required documents from your committee and keep this information handy.

If you’d like to find out more on building compliance for your strata property, download your free Community Living guide. Or for a consultation to review your common property insurance by our CommunitySure insurance team, click here.