Unit owners beware new home defect act

Concerns: NSW researcher Hazel Easthope said many significant common problems that could cost hundreds of thousands of dollars to fix were unlikely to be covered under the new laws. Picture: Louie Douvis
Concerns: NSW researcher Hazel Easthope said many significant common problems that could cost hundreds of thousands of dollars to fix were unlikely to be covered under the new laws. Picture: Louie Douvis

APARTMENT owner Peter Davis has been locked in a battle with his building's developers for years and warns new laws that have just come into force will cause an "even worse hell for home owners than we've been through".

Mr Davis and his wife bought an apartment in a new block on Sydney's upper north shore seven years ago, only to pay tens of thousands in legal fees to fix construction defects that required replastering the pool, a new ventilation system and fireproofing problems discovered last year.

"We [the owners' corporation] have paid millions in legal fees and expert reports that would stand up in court," Mr Davis said.

"Under the new laws, we would have had to pay for the repairs ourselves. These new laws are inappropriate."

Owners of new apartments will get two years rather than six years to get developers to foot the bill for building defects under the Home Amendment Act.

A Fair Trading NSW spokesman said the new laws, which passed last September and came into effect January 15, were designed to strengthen the consumer protections and address problems in the construction industry by changing the licensing system for tradespeople.

These will increase penalties for practitioners and companies with a bad track record and change payment structures to ensure fewer major defects.

Home owners will be able to access the previous six-year warranty only in relation to flaws that put the building or property at risk of falling down or becoming uninhabitable. The definition for "major defect" is new in the act. But the peak body representing strata owners described the new defect rules as "draconian" and told Fairfax Media the changes would have serious and far-reaching consequences because many problems take years to emerge.

"Apartment owners are in for a nasty shock when they discover problems from Thursday and learn the government has left them pretty much on their own," said Owners Corporation Network executive officer Karen Stiles.

"Right now, I could not in good conscience recommend buying into a new building.

"Once owners and lenders understand the enormity of these changes, the interest in new properties will plummet and that will impact the construction industry."

Building defects are remarkably common; the University of NSW City Futures Research Centre found in 2012 more than 85 per cent of apartment blocks built since 2000 had defects. The most common were internal water damage, water penetrating from the outside and fire safety shortcuts.

These defects will now only be covered by the six-year warranty if they are also designated as major defect.

Lead UNSW researcher Hazel Easthope said many significant common problems that could cost hundreds of thousands of dollars to fix were unlikely to be covered under the new laws.

"These are very serious defects but it can take years before the owner becomes aware of the issue," Dr Easthope said.

"What may appear to be a hairline crack in two years can be a major problem in five. When you factor in how long it can take for owners corporations to get organised, two years is not much time at all."

Fair Trading deals with about 8000 complaints about residential buildings each year.

A Fair Trading spokesman said the act offered an integrated package of laws for business and consumers by being more specific and flexible.

"Importantly, the new laws will provide greater protection for consumers and offer clarity about rights and responsibilities of builders' liabilities, particularly in relation to defects," the spokesman said.

Urban Development Institute of Australia NSW chief executive Stephen Albin said the new act included commonsense changes that were good news for the construction industry and consumers.

"Defects are unavoidable, they'll always happen, but these laws will help put more integrity into the system and cut down on major defects by empowering qualified tradespeople," Mr Albin said.

More than 3 million Australians live in apartment blocks and 1 million more are expected to move into apartment blocks within the next 10 years.

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