Apartment buyers holding out for a hero, says MP

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The job of fixing the construction industry is too big for  just one person and NSW needs a standalone building commission, not just a single commissioner, to fix the state’s construction industry Greens MP David Shoebridge.

And apartment owners have called on the goverment to close the loopholes that allow the developers of sub-standard buildings to shut up shop before they have to repair defects, and even “phoenix” into new companies intent on doing the same thing.

According to a story in the Sydney Morning Herald, the creation of an “independent statutory body” led by the building commissioner with “broad powers”  is a key recommendation in a new report from a parliamentary inquiry, released on Wednesday.

The government appointed David Chandler as building commissioner in August after the failures and evacuations in the Mascot and Opal towers and other cases of apartment blocks being deemed unsafe or unfit for habitation.

“No one individual can have the effect needed to drive home these reforms,” Mr Shoebridge said. “It wouldn’t matter if you have a building commissioner in a superhero cape, one person cannot do the job.”

Meanwhile the Owners Corproation Network (OCN), has issued a qualified welcome to Government amendments proposed to the Design & Building Practitioners Bill 2019 currently being considered by the NSW Parliament, saying they still want action on “disposable” developers and phoenixing.

Disposable or single-use companies are often set up by developers with the intention of deliberately going into liquidation after the last unit is sold.  When the same directors appear with another off-the-peg company, ready to pull the same tricks again, that’s called phoenixing.

However, a spokesperson for the OCN, the largest organisation run by apartment owners for apartment owners, says the amendments to the Bill proposed this week “begin the vital process of providing much improved consumer protection for people buying new apartments”.

The OCN says the proposed changes to the Bill, tabled in response to concerns raised by them and other stakeholders, also improve the overall operation of the Bill in better regulating the NSW building industry, and that he Government deserves credit for its response.

“The Statutory Duty of Care proposals, in their revised form, more effectively deliver on promises made by Government before the State election and are most welcome” said OCN Chairman Philip Gall.

“They restore some much needed building industry accountability to its consumers to the benefit of tens of thousands of new apartment owners” he says.

However, the OCN chaiorman said he recognised that this Bill was just the beginning and there was much more work to be done to clean up the “deeply ingrained issues” with new apartment construction.

“For example, $2 companies disappearing before building defects are rectified is still a big problem,” Mr Gall explained. “The effectiveness of the new legislation depends on the yet-to-be-drafted regulations.”

The Owners Corporation Network also wants to have loopholes in the building defect warranties offered under the Home Building Act to be closed, specifically the issues around single-use $2 companies set up specifically to manage the development then be liquidated before the developer is liable for defects.

“OCN is disappointed the opportunity to restore this aspect of consumer protection has been missed this time around,” syas Mr Gall. “However, this disappointment is tempered by the Government’s public commitment today to address shortcomings in statutory warranties soon”.

Despite the new legislation, the OCN is still urging caution when buying new apartments, particularly off the plan.

“In time we want building quality to improve and have robust financial entities, such as insurance companies, stand behind world class warranties provided to all new apartment owners,” said Mr Gall.

The OCN press release also contained the following background information:

The Design & Building Practitioners Bill 2019 provides for:
• The establishment of regulations to help implement recommendations of the Building Confidence Report provided to the nation’s Building Ministers in 2018
• Once established the regulations will:
– Determine which types of buildings and building ‘design element’ are to be subject to the regulations
– Require certain design and building practitioners to provide declarations that designs and construction comply with defined standards
– Require registration of design and building practitioners
– Set up the scope of auditing and enforcement powers
• Re-establishing ‘Duty of Care’ protections to consumers that should have always applied to apartment owners

The compulsory home building insurance for residential apartment buildings over three storeys was removed in 2003. This means that a licenced builder is not required to insure the project.

It is common for developers and builders to create special purpose companies for each project and to put the company into administration to avoid liability for building defects. This and the absence of home building insurance for buildings over three levels results in the full costs of defect rectification falling on
unsuspecting new apartment owners.
The global standard for building warranties is 10 years for major defects. NSW provides a 2 year warranty for “minor defects”, and a 6 year warranty for “major defects”. However, a major defect means:
“(a) a defect in a major element of a building that is attributable to defective design, defective or faulty workmanship, defective materials, or a failure to comply with the structural performance requirements of the National Construction Code (or any combination of these), and that causes, or is likely to cause:
(i) the inability to inhabit or use the building (or part of the building) for its intended purpose, or
(ii) the destruction of the building or any part of the building, or
(iii) a threat of collapse of the building or any part of the building”
This results in limited consumer protection for new apartment owners for defects identified only two years after construction, which can still be costly and disruptive to home life.
The proposed Statutory Duty of Care provisions in the Bill is a meaningful step towards addressing these material shortcomings in consumer protection for new apartment owners.

One Reply to “Apartment buyers holding out for a hero, says MP”

  1. Avatar Jimmy-T says:

    This is now being discussed in the Flat Chat Forum

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