News & Insights

Imagine receiving a knock on your door one day, by a stranger demanding that you drop everything and immediately leave your home because your unit block was facing imminent collapse. Unfortunately this nightmare became a reality for the residents of Opal Tower in Sydney’s Olympic Park after loud cracking noises were heard; sparking fear and angst amongst residents and causing widespread concern community wide.

Building defects are relatively common in apartment buildings. Research conducted by UNSW City Future Research Centre in 2012 found that 85% of buildings completed post-2000 had differing degrees of defects that were reported by owners of strata properties.

So, what rights do you have if you find yourself, either as a strata owner or tenant, in a situation similar to the residents of Opal Tower?

Strata Owners

In New South Wales the Home Building Act provides statutory warranty periods in relation to defects.

The date of the building contract and the nature of the defect will determine which statutory warranty period applies. For instance, a building contract that was entered into before 1 February 2012 generally has a statutory warranty period of seven years. A building contract that was entered into after 1 February 2012 however, has a statutory warranty period of six years for major defects and two years for all other defects.

Should a defect become apparent in the last six months of the statutory warranty period applicable, the owner has a further six months from when they first become aware of the defect to enforce the statutory warranty.

If you find that you are still within your statutory warranty period, strata owners (generally via the Owners Corporation) are entitled to request the builder or developer carry out rectification works for all or any defect/s discovered.

This process usually involves investigation, negotiation, and where necessary, seeking orders from the NSW Civil and Administrative Tribunal to compel the builder to rectify the defects in instances of failed negotiation.

Since strata reforms were introduced in 2016, safety checks were set in place requiring Owners Corporations to consider building defects and rectification works at each annual general meeting (AGM) until the expiry of the warranty period. This means that AGM agendas must include a motion regarding building defects and rectification. Care needs to be taken to ensure that the Owners Corporation is aware of when cut-off dates apply to ensure that its statutory rights are preserved.

From experience, there is generally an air of uncertainty regarding the applicable warranty period that applies to different types of defects. It is therefore recommended that Owners Corporations obtain legal advice and ascertain their applicable cut-off date as early as possible.

Tenants

Renters of a property that is destroyed or rendered wholly or partly uninhabitable are allowed to issue an immediate termination notice to the landlord and terminate their lease agreement, or terminate at a future date.

No rent will be payable from the day they move out, and any rent paid in advance to the landlord (or via the agent) must be fully refunded.

Despite this, should a tenant wish to keep the lease agreement on foot then the tenant can negotiate with their landlord (or the agent) regarding alternative accommodation options and/or seek a rent reduction.

Legislative Outcome

The NSW Government has decided to overhaul the building and construction sector with a suite of proposed reforms on the way multi-storey buildings are to be built and regulated following community outrage at the Opal Tower debacle.

The Shergold Weir report (Report) prepared on 30 April 2018 contained 24 recommendations to address the effectiveness of compliance and enforcement systems for the building and construction industry in Australia.

The State Government has been criticised for the time it took to respond to the Report, and has only recently said, following the Opal Tower incident, that it will support a majority of the Report’s recommendations, including the proposed appointment of a Building Commissioner who will oversee and act as the consolidated building regulator in NSW.

Checks will be completed on every party involved in the construction process, from the design of the first draft, to ensuring that all builders are registered and professionally qualified.

Should these proposals prove effective, tough new laws will be introduced to ensure that buildings to be constructed meet strictly with Australian building standards.

If you find yourself in any of the above situations and would like further information, please do not hesitate to contact the Macpherson Kelley property team who will be more than happy to answer any queries you may have.