Insurance against defects in residential buildings in NSW has largely been a creature of legislation, in either ‘state as insurer’ or ‘state as regulator’ schemes. Think back to HPA 4, the BSC/FTAC, HWI (and the BIG Corp indemnity), through to the current iteration, HBCF.
Over that time the schemes have drifted to insurance of last resort. The current ‘state as insurer’ scheme recognises the limitations of the market and the gradual exit of participants in the HWI market after the collapse of HIH and FAI, but doesn’t apply to residential strata buildings of more than 3 storeys.
In the current climate of reform (think: the strata building bond scheme under the Strata Schemes Management Act 2015 (NSW) (SSMA), the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) and the Design and Buildings Practitioners Act 2020 (NSW)) the market has imported the idea of decennial liability insurance as an additional offering.
What may have started as a potential selling point for developers (if that truly adds value in a market where product is distinguished on its physical features and location, and the purchasing decision is an emotional one) has, by virtue of a Bill passed on Monday, become an alternative to developers providing a building bond under the SSMA.
DLI is a type of insurance policy taken out by a developer or builder to insure against defects in a completed building. As the name ‘decennial’ implies, it provides coverage for a period of no less than 10 years from completion of the building.
The policy is designed to cover all costs that may be incurred by an owner if latent structural defects are discovered in the building, or in the event the building completely or partially collapses. The beneficiaries are the future owners of the building.
DLI will enhance the current protections afforded to purchasers of new residential apartments, by establishing a greater safety net than the strata building bond under the SSMA, although it is not necessarily confined to the apartment sector.
Currently set at 2% for a 2 year period, strata building bonds have seen criticism for only applying to residential strata buildings that have a rise in storeys of more than 3, and for creating pool funds that can be inadequate to rectify major defects.
A key advantage of DLI is that it is assessed and applied on a strict liability basis. This means that fault does not need to be established for the policy to be triggered, only that the kind of damage covered by the policy has occurred. This allows owners to access the necessary funds to rectify defects quickly, as well as cover any associated losses.
The market has been offering DLI since July 2022.
In the background, the NSW Government has been considering how DLI can form part of the regulation of residential building work in NSW. The establishment of the Decennial Liability Insurance Ministerial Advisory Panel (the Panel) for the introduction of a DLI scheme in NSW was announced in October 2021.
The Panel consisted of various leaders across the development, building, insurance and finance sectors. Its purpose was to assess whether the industry can create and sustain a better insurance safety net for high rise residential strata buildings in NSW.
In August 2022 the Panel reported on its research, with the findings being made public in October 2022. The report provided four findings and three recommendations for the NSW Government to consider regardless of its approach to the DLI market. The four findings were that:
What the Panel means by a ‘mature DLI market’ is one that:
The Panel’s three recommendations were:
These findings and recommendations paint a picture for builders and developers that, while the NSW Government will continue to develop its support structures for consumers, it will not be, to the detriment of builder and developers, on a first resort basis.
Additionally, the Panel proposed its two potential models for implementing a DLI scheme into NSW:
Both models reinforce the necessity of a mature DLI market for the scheme to succeed in NSW. Whether this is coerced through a mandatory scheme or can naturally develop within a voluntary scheme, remains to be seen.
On 12 October 2022 the Building and Other Fair Trading Legislation Amendment Bill 2022 (the Bill) was introduced.
The Bill, in part, sought to amend the SSMA by inserting a provision that would mean developers of a residential strata scheme (with a rise in storeys of more than 3) would not have to provide a strata building bond where a 10 year, strict liability decennial insurance policy is taken out for one or more properties in the scheme. Significantly, the developer is not exempted from the inspection regime under Division 2 of Part 11 of the SSMA, only from the building bond in Division 3.
The decennial insurance must be in a form acceptable to the Secretary and comply with criteria prescribed by the Regulations, neither of which appear yet to be available.
On 14 November 2022 the Bill was assented to and commenced simultaneously. This means that a form of the voluntary DLI scheme suggested by the Panel has begun in NSW.
The scheme reflects a much more gradual approach to implementing the scheme than suggested by the Panel. As a voluntary system that does not necessarily reward developers who move away from building bonds, this first implementation of the scheme appears to be a test of the willingness of the industry to adopt DLI.
It remains to be seen whether DLI will be regarded by the purchasers as a point of difference or a ‘must have’ when buying off the plan, bearing in mind of course their perception of future demand for properties with DLI, when they come to sell.
Absent consumer led demand or a mandatory/preferred scheme, it will be difficult for the market to reach maturity, unless of course the pricing is advantageous or DLI offers other advantages, such as the absence of director guarantees.
Authors: Christine Jones & Daniel Fane
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The Owners – Strata Plan No 16857 v Hyman [2022] NSWCATAP 358
APPEAL – from interlocutory order of Consumer and Commercial Division – privilege attaching to expert report – whether dominant purpose of report was draft for consultation or lodgment in the Tribunal.
Civil and Administrative Tribunal Act 2013 (NSW); Evidence Act 2015 (NSW).
Hanave Pty Ltd v Wine Nomad Pty Ltd; Wine Nomad Pty Ltd v Hanave Pty Ltd (No 2) [2022] NSWCATAP 361
PRACTICE AND PROCEDURE – s 63 Civil and Administrative Tribunal Act 2013 – power to correct for accidental error or omission – whether appropriate where no submissions and/or factual finding made in substantive appeal concerning making an order for payment of money.
COSTS – operation of r 38 and r 38A of the Civil and Administrative Tribunal Rules 2014 – meaning of “proceedings” – meaning of “amount claimed or in dispute” – application of rule to proceedings where there are two applications, one in the nature of a cross-application – relevance of issues raised in cross-application to determine what, if any, amount is in dispute in the primary proceedings.
Agricultural Tenancies Act 1990 (NSW); Civil and Administrative Tribunal Act 2013 (NSW); Civil and Administrative Tribunal Rules 2014 (NSW); Civil Procedure Act 2005 (NSW); Consumer, Trader and Tenancy Tribunal Act 2001 (NSW) (repealed); Home Building Act 1989 (NSW); Residential Tenancies Act 2010 (NSW); Residential Tenancies Regulation 2019 (NSW); Retail Leases Act 1994 (NSW); Supreme Court Act 1970 (NSW).
Baserite Constructions Pty Ltd v Tanios [2022] NSWCATAP 347
BUILDING AND CONSTRUCTION – Home Building Act 1989 (NSW) – agreement to rectify – whether new contract – breach of contract –Jurisdiction of Tribunal – s 48K (7) Home Building Act 1989 – breach of contract – assessment of damages.
BUILDING AND CONSTRUCTION – Home Building Act 1989 (NSW) – settlement of proceedings – consent work orders – Jurisdiction of Tribunal – limitation period s 48K (7) Home Building Act 1989 – major defects – whether consent orders within jurisdiction – renewal of proceedings Sch. 4 Cl. 8 Civil and Administrative Tribunal Act 2013.
Civil and Administrative Tribunal Act 2013 (NSW); Civil and Administrative Tribunal Regulation 2014 (NSW); Civil and Administrative Tribunal Rules 2014 (NSW); Home Building Act 1989 (NSW); Legal Profession Uniform Law Application Act 2014 (NSW); Home Building Regulation 2014 (NSW).
Alzaaim v Commissioner for Fair Trading [2022] NSWCATOD 139
ADMINISTRATIVE REVIEW – registration under the Design and Building Practitioners Act 2020 (NSW) – cancellation of registration as design practitioner in classes of drainage, fire systems (detection and alarm systems), vertical transportation, mechanical engineering – whether Applicant meets qualifications criteria in Design and Building Practitioners Regulation 2021 (NSW).
Administrative Decisions Review Act 1997 (NSW); Civil and Administrative Tribunal Act 2013 (NSW); Design and Building Practitioners Act 2020 (NSW); Design and Building Practitioners Regulation 2021 (NSW).
Boughton v Masterton Homes Pty Ltd [2022] NSWSC 1556
CIVIL PROCEDURE – cross-claims – application by builder to file cross-claim against engineer – principles at [15]-[16] – engineering problem identified from outset – defendant identified engineer as concurrent wrongdoer two years’ earlier – inadequate explanation for delay – granting leave would result in substantial delay – leave refused.
Home Building Act 1989 (NSW).
Cheung v Talal [2022] NSWCATAP 352
APPEAL – application to admit further evidence refused – leave to appeal refused – service by post of notice of hearing on party sufficient – no obligation on Tribunal to serve notice of hearing by email – no denial of procedural fairness by proceeding with hearing when absent party served by post – no error on a question of law.
LAND LAW – strata titles – noise and vibration affecting lots below – acoustic standard established by By-laws discussed – lot owner’s evidence of subjective experience of noise and vibration corroborated by expert reports – orders made for rectification.
Civil and Administrative Tribunal Act 2013; Civil and Administrative Tribunal Rules 2014; Strata Schemes Management Act 2015; Protection of the Environment Operations Act 1997.
Owners Strata Plan 95562 v City Wide Maintenance and Construction Pty Ltd [2022] NSWSC 1509
CORPORATIONS – voluntary winding up – practice and procedure – leave to continue proceedings in circumstances where final hearing is one week away.
Corporations Act 2001 (Cth); Home Building Act 1989 (NSW).
Aboss v Hafeez [2022] NSWCATAP 345
LEASES AND TENANCIES – Residential Tenancies Act 2010 (NSW) – premises not subject to occupation certificate and not legally able to be occupied at commencement of tenancy – premises nevertheless fit for habitation within meaning of s 52 of Act.
Australian Consumer Law (NSW); Civil and Administrative Tribunal Act 2013 (NSW); Civil and Administrative Tribunal Rules 2014 (NSW); Environmental Planning and Assessment Act 1979 (NSW); Home Building Act 1989 (NSW); Residential Tenancies Act 2010 (NSW); Residential Tenancies Regulation 2019 (NSW).
Royal Flair Caravans Pty Ltd v Kylie Ryan Productions Pty Ltd (No 2) [2022] NSWCATAP 341
COSTS – special circumstances not required – application of general rule that costs follow the event – appellant successful on appeal but not on significant new issue raised on appeal concerning jurisdiction of the Tribunal – discount of appeal costs awarded to appellant in the circumstances.
Civil and Administrative Tribunal Act 2013 (NSW).
White v McClellan [2022] NSWCATAP 340
APPEALS – Home Building Act 1989 – decision against the weight of evidence – assessment of compensation
Civil and Administrative Tribunal Act 2013; Civil and Administrative Tribunal Rules 2014; Home Building Act 1989.
Hassos v Beechwood Homes (NSW) Pty Limited [2022] NSWCATCD 121
BUILDING and CONSTRUCTION.
Home Building Act 1989; Civil and Administrative Tribunal Act 2013.
Gorczyski v W & FT Osmo Pty Ltd [2022] NSWSC 1517
PROCEDURE – Parties – joinder of parties – plaintiff filed notice of motion seeking to join concurrent wrongdoer in the proceedings – ss 34, 38 Civil Liability Act – application to Amend Statement of Claim – ss 64, 65 Civil Procedure Act – limitation issues – Notice of Motion dismissed.
Civil Liability Act 2002 (NSW); Civil Procedure Act 2005 (NSW); Limitation Act 1969 (NSW).
Kakoz v G Storm Group Pty Ltd [2022] NSWCATCD 119
BUILDING AND CONSTRUCTION – date of practical completion of works – jurisdiction.
Civil and Administrative Tribunal Act 2013 (NSW); Home Building Act 1989 (NSW).
Potts v Commissioner for Fair Trading [2022] NSWCATOD 142
HOME BUILDING – contractor licence – whether fit and proper person – criminal convictions – rehabilitation – parole – candor.
Administrative Decisions Review Act 1997 (NSW); Civil and Administrative Tribunal Act 2013 (NSW); Drug Misuse and Trafficking Act 1985 (NSW); Home Building Act 1989 (NSW); Licensing and Registration (Uniform Procedures) Act 2002 (NSW); Motor Vehicle Repairs Act 1980 (NSW); Property, Stock and Business Agents Act 2002 (NSW); Weapons Prohibition Act 1998 (NSW).
The Owners – Strata Plan No. 61285 v Taylor (No.2) [2022] NSWCATCD 118
LAND LAW – Strata title – Civil Penalty – contravention of Tribunal order – s 247A Strata Schemes Management Act 2015 – assessment of penalty – deterrence – relevant considerations – relevance of maximum penalty when assessing appropriate penalty – payment of penalty – whether penalty payable to applicant, the Crown or some other person – power of the Tribunal to direct to whom the penalty is to be paid.
Design and Building Practitioners Act 2020 (NSW); Building Practitioners Regulation 2021 (NSW); Civil and Administrative Tribunal Act 2013 (NSW); Evidence Act 1995 (NSW); Fair Work Act 2009 (Cth); Home Building Act 1989 (NSW); Strata Schemes Management Act 1996 (NSW); Strata Schemes Management Act 2015 (NSW).
McLeod v Commissioner for Fair Trading [2022] NSWCATAD 349
Administrative Decisions Review Act 1997; Home Building Act 1989; Licensing and Registration (Uniform Procedures) Act 2002.
Kaltoum v Commissioner for Fair Trading [2022] NSWCATOD 138
OCCUPATIONAL LICENSING – building practitioner – whether Applicant has the qualifications, skills, knowledge and experience to carry out the work for which the Applicant is seeking registration.
Administrative Decisions Review Act 1997 (NSW); Design and Building Practitioners Act 2020 (NSW); Design and Building Practitioners Regulation 2021 (NSW).
Sillitoe v Commissioner for Fair Trading [2022] NSWCATOD 135
HOME Building Act – whether evidence establishes a wide range of building construction work experience – whether experience relevant industry experience – individual contractor licence – general building work – whether evidence that work performed can be verified by witnesses who are not supervisors.
Administrative Decisions Review Act 1997; Civil and Administrative Tribunal Act 2013; Home Building Act 1989; Licensing and Registration (Uniform Procedures) Act 2002.
Regulations and other miscellaneous instruments
Environmental Planning and Assessment Amendment (Bee Keeping and Grazing) Regulation 2022 – published LW 4 November 2022
Environmental Planning and Assessment Amendment (Snowy 2.0 and Transmission Project) Order 2022 – published LW 4 November 2022
Environmental Planning and Assessment Amendment (Wagga Wagga Activation Precinct) Regulation 2022 – published LW 4 November 2022
Greater Cities Commission Regulation 2022 published LW 4 November 2022
Environmental Planning Instruments
Byron Local Environmental Plan 2014 (Map Amendment No 3) – published LW 11 November 2022
Camden Local Environmental Plan 2010 (Amendment No 51) – published LW 11 November 2022
Cumberland Local Environmental Plan 2021 (Map Amendment No 2) – published LW November 2022
Liverpool Local Environmental Plan 2008 (Amendment No 91) – published LW 11 November 2022
Queanbeyan-Palerang Regional Local Environmental Plan 2022 (Amendment No 2) – published LW 11 November 2022
Shoalhaven Local Environment Plan 2014 (Map Amendment No 8) – published LW 11 November 2022
Sydney Local Environmental Plan (Green Square Town Centre—Stage 2) 2013 (Amendment No 4) – published LW 11 November 2022
Sydney Local Environmental Plan 2012 (Amendment No 82) – published LW 11 November 2022
Sydney Local Environmental Plan 2012 (Amendment No 83) – published LW 11 November 2022
Tamworth Regional Local Environmental Plan 2010 (Amendment No 24) – published LW 11 November 2022
Clarence Valley Local Environmental Plan 2011 (Amendment No 51) – published LW 4 November 2022
Hornsby Local Environment Plan 2013 (Map Amendment No 2) – published LW 4 November 2022
Kempsey Local Environmental Plan 2013 (Map Amendment No 3) – published LW 4 November 2022
Parramatta Local Environmental Plan 2011 (Map Amendment No 5) – published LW 4 November 2022
Shoalhaven Local Environmental Plan 2014 (Map Amendment No 6) – published LW 4 November 2022
State Environmental Planning Policy (Transport and Infrastructure) Amendment (Bee Keeping and Grazing) 2022 – published LW 4 November 2022
Wingecarribee Local Environmental Plan 2010 (Amendment No 65) – published LW 4 November 2022
Woollahra Local Environmental Plan 2014 (Amendment No 28) (2022-666) – published LW 4 November 2022
Bills introduced by the Government
Aboriginal Land Rights Amendment Bill 2022
Environmental Planning and Assessment Amendment (Private Native Forestry) Bill 2022
Bills revised following amendment in Committee
Building and Other Fair Trading Legislation Amendment Bill 2022
Bills passed by both Houses of Parliament
Building and Other Fair Trading Legislation Amendment Bill 2022
Cth Legislation
Bills
Defence Home Ownership Assistance Scheme Amendment Bill 2022- 2 November 2022
Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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