What do I need to know about the building bond scheme?
Posted 20 May 2024
Category: Building Defects, eBooks
Builders and developers of new multi-storey buildings (defined as two or more separate dwellings which exceed three storeys in height) are exempt from having to obtain insurance under the Home Building Compensation Fund (Home Owners Warranty Insurance) under the NSW Home Building Act 1989.
This has led to circumstances, where owners of multi-storey buildings were unable to claim against the insurers, even if the defects are discovered within the statutory warranty period, when the builder or developer dies, goes missing, or becomes insolvent.
Division 3 (sections 207-211) of the SSMA introduced a building bond scheme for new multi-storey buildings from 1 January 2018.
The defect bond scheme applies to contracts for building works in the construction of new residential or part-residential (mix used) strata buildings entered into after 1January 2018 and where there is no contract, building works in the construction of new strata buildings commenced on or after 1 January 2018.
The building bond must be provided prior to the issue of an occupation certificate. The amount of the building bond is to be 2% of the contract price of the building work. This sum is adjusted accordingly if the developer only performed part of the building work.
The owners corporation is able to claim the costs of rectification from the bond if the final occupation report identifies building defects, or if the owners corporation makes an application to the Department of Fair Trading with the consent of the developer.
However, the scheme is not faultless and Bannermans Lawyers are able to assist owners rights to claim from the builders and developers before the expiry of the statutory warranty period under the NSW Home Building Act 1989 if they suspect any discrepancies and cannot agree to rectify the defects.
These issues are further explored in our article Update On The 2% Bond Scheme.
This is an extract from our Bannermans Building Defects Guide – Part 1.
To access more FAQ'S on Building Defects fill in the below form to download our Bannermans Building Defects Guide – Part 1 for free.
