The name is Bond... Strata Bond

14 SEP 2018

 

As of the 1 January 2018, developers entering into a contract with a builder for work on a residential (including mixed use) strata scheme of 4 storeys or more, must lodge a building bond equal to 2% of the contract value of the work. The 2% bond is calculated on the final contract price for all applicable building contracts on completion of construction and must be lodged before an occupation certificate is issued, not at the start of the construction. Where there is no written contract for the building work, or the parties to the building contract are connected persons, the contract price is determined by a quantity surveyor who must not be connected to the developer or the builder.

The developer (not the builder) is responsible for lodging the building bond with the Building Bond Secretary before an occupation certificate is issued for any part of a building affected by the work.

A building bond can be obtained from an authorised deposit-taking institution (ADI), or general insurer that is authorised to conduct new or renewal insurance business in Australia. If a building bond is not lodged with the Building Bond Secretary before the occupation certificate is issued, penalties apply. 

The Developer will need to appoint a building inspector within 12 months after the occupation certificate is issued if the initial period of an owners corporation of a strata scheme is completed within that time. The initial period starts when the strata plan is registered with the Registrar-General and ends when one-third of the unit entitlements have been sold.

The strata building inspector must do an interim inspection between 15 and 18 months after the occupation certificate is issued and a final inspection between 21 and 24 months after the occupation certificate is issued. If there is no defective building work identified in the interim report, the developer can apply to the Building Bond Secretary for a determination that a final inspection/report is not required. In this case, the interim report becomes the final report.

All or part of the building bond may be claimed by the Building Bond Secretary to pay to the owners corporation to meet the costs to rectify defective building work identified in the final report. The cost to rectify identified building work must be agreed by the developer and the owners corporation. The owners corporation and the developer may apply to the Building Bond Secretary for an agreed amount to rectify identified building work no later than 14 days before the last day that the building bond must be claimed or realised (whichever is later).

The final date to claim or realise the building bond is:

  1. 2 years after the date the building work covered by the bond is completed, or
  2. within 60 days after the final report on the building work is submitted to the Building Bond Secretary by the building inspector.

For more information about your obligations and other amendments introduced through the Strata Schemes Management Act 2015 and Strata Schemes Management Regulation 2016, please contact our Property Team.

For more information on the above, please contact Peter Crittenden or Ben Wong on (02) 4626 5077.

The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.

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