The cracked panel inside Sydney's Opal Tower has not only brought about talk of new legislation from the NSW Government, but also highlighted a common predicament for apartment owners in the state.
If anything can be taken away from Sydney’s ongoing Opal Tower saga, it is that there is more than one side to the story.
Questions have been asked to and from developers, builders, and owners in the wake of the cracked panel which prompted the Christmas Eve evacuation of the building.
While the ensuing investigation has drawn intense media scrutiny, finding defects is not an uncommon scenario for apartment owners in NSW.
Research conducted by UNSW City Futures Research Centre in 2012 found 72 per cent of apartment buildings in NSW had defects, as reported by owners.
Further to this, 85 per cent of buildings completed after the year 2000 had defects reported by their owners
According to the report, the most common defects reported by owners in apartment blocks to be internal water leaks (42 per cent), cracking to internal or external structures (42 per cent), water penetration from outside (40 per cent), guttering faults (25 per cent), defective roof coverings (23 per cent), defective plumbing (22 per cent), and tiling problems (20 per cent).
For owner corporations in NSW, the course of action after discovering defects can be dictated by the size of the building.
Buildings three stories or under are protected by the Home Building Compensation Fund, which requires licensed contractors undertaking residential work valued at $20,000 to take out insurance cover. The policy covers repair costs for major defects claimable for six years, and non-major defects claimable for a period of up to two years.
In Queensland, owners are encouraged seek Home Warranty Insurance through the Queensland Building and Construction Commission, while in Victoria, Domestic Building Insurance is offered through the Victorian Managed Insurance Authority.
At the beginning of 2018, the NSW Government introduced the Strata Building Bond and Inspections Scheme to provide similar cover for buildings that are four stories and over.
Under the scheme, building contracts for residential or partially residential properties created after January 1, 2018 need to include a building bond by the developer and mandatory defect inspections and reports on the development by an independent building inspector.
For owners not covered by either of these schemes, as in the case of the Opal Tower, the process of repairing defects is not as straightforward.
Building contracts entered in to after 2012 have a statutory warranty period of six years for major defects and two years for other defects. The statutory warranty period for building contracts entered into before 2012 is seven years.
Reporting defects
All common property defects within strata buildings are reported to the strata manager, who then passes them onto the builder,
Internal lot defects are reported directly to the builder, which can be done by the real estate agent on the owner’s behalf if the property is leased out.
NSW Property Owners Association president John Gilmovich said in the case of the Opal Tower, it was up to the owners corporation to seek revenue from the builder.
“If we are talking defects that have not only affected one apartment, but forced an evacuation of a property where a common area is used, the owners corporation would be seeking revenue from the original builder or developer,” he said.
“It can be that the developer goes to the builder, who then goes to the tradies, with everything going back down that channel.”
Contacting the Department of Fair Trading
Apartment owners can make a formal complaint to the Department of Fair Trading if the builder refuses to have defects rectified, or has not rectified them to an acceptable standard.
A complaint about common property defects is to be lodged by the Strata Manager, on behalf of the Owners Corporation.
Once the department receives the complaint, it organises for an inspector to attend the property and examine the work under dispute.
He may issue a rectification order, or decide the builder is not responsible for the defect.
Mr Gilmovich said the department were “always kept pretty busy on this front”.
“Given more than 80 per cent of building are known to have defects, there is always plenty for them to do,” he said.
Taking legal action
If the builder/contractor fails to comply with a Rectification order from a Fair Trading Inspector, the Owners Corporation (for common property defects) or the lot owner (for lot owner defects) will need to proceed with legal action through the NSW Civil and Administrative Tribunal against the builder.
The public scrutinary involved with court proceedings mean that body corporates may instead choose to fix the defects themselves.
Mr Gilmovich said while court was often viewed as the “worst case scenario” for apartment owners, it was also fairly common within NSW.
“Obviously the preference for most owners would be to keep the matter out of court, because of the legal costs involved,” he said.
“However, if the original developer is still registered and has given a builder’s warranty, owners have every right to seek remedy this way”.
Sources: Westside Strata Management, NSW Department of Fair Trading
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