The claim game – detecting defects is just the beginning


You’ve just bought into a new apartment block and cracks have started to appear, or the roof leaks when it rains, or the fire safety measures wouldn’t stop a tea candle … what do you do?

Given all the different legislation in all the different states, your next step can be summed up in two phrases: Call a good strata lawyer and do it now.

Here’s your problem. For buildings more than three storeys high – the upper limit beyond which home building (construction) – insurance is not required by law, in most legislatures.

And the block should be less than six years old because that’s when the statutory liability of the afore-mentioned developers for major defects runs out.

In this situation, it’s up to the owners collectively to pursue the developers and builders.  No one else is going to do it for you.

There are legal and technical differences from state to state that make it impossible to Tecommend a simple, blanket course of action.

However, strata legislation in NSW demands that the agenda of the initial AGM of a strata scheme must have an item about arranging a defects survey. Similar regulations are proposed in the current strata law changes being considered for Victoria.

So your strata committee’s first task is to commission an independent surveyor to give the building a thorough health check.

While that’s going on, you might want to get your own personal survey done on fixtures and fittings, remembering that non-major defects must be claimed within two years.

In both cases, you want to hire someone who has a track record that you can check with previous clients.

And you certainly don’t want your owners corp to do a one-off defects deal where the developer will pay a lump sum in exchange for an agreement that you won’t pursue any defects that appear later.

Having received the report from the surveyor, your committee and probably your strata manager, would approach the developer and say, here are the defects, we need you to fix them or at least pay for them to be fixed.

There are three basic potential outcomes here.  In one, the developer says okay, fair enough, I’ll fix it.  In NSW they may even pay for it, at least in part, out of the two percent defects bond.

Alternatively, assuming the developer is reluctant, the sums involved may be so small that it would cost less for the owners corporation just to fix the defects, than take it to court.

Finally, the potential bills may be so great that the developers will fight tooth and nail to avoid having to remedy the defects. This, to be frank, is a nightmare scenario.

But there is no option to do nothing. In most states, the only body that has a legal obligation to repair and maintain a strata building is the owners corporation (body corporate).

As we said, there are variations from state to state.  In Victoria, building work has to be good for 10 years and in NSW proposed “duty of care” legislation could offer the same level of coverage.

But ultimately, it all comes down to how willing the developer is to fix things – and, to be fair, some will happily do so to protect their reputations.

Otherwise, we can only repeat the advice we offered initially. Talk to an experienced strata lawyer who has run a number of defects cases with at least a 75 per cent success rate.  And do it now.

This column first appeared in the Australian Financial Review.



One Reply to “The claim game – detecting defects is just the beginning”

  1. Jimmy-T says:

    This is now being discussed in the Flat Chat Forum

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