Inspection Reports on Strata Schemes, what you need to know

The recent amendments to the Strata Scheme Management Act 2015 (NSW) (the Act) may have significant impacts to builders, developers and owner corporations. The Act replaced the Strata Scheme Management Act 1996 and applies where a developer and a builder has entered into a contract from 1 January 2018.

When does the Act apply?

The Act applies to building works to construct residential or partially residential strata properties that are four or more storeys. If a building is three storeys or under it will be covered by the Home Building Compensation Fund (HBCF). The Act will not apply to any works that are subject to the HBCF, this means if your residential works are valued over $20,000 or if there is no contract price and the reasonable market cost of your labour and material are over $20,000 then the Act will not apply.

What are Inspection Reports?

The Act requires a mandatory defect inspect report. Following the date of completion, the developers must engage with an independent building inspector to compete an interim and final inspection and produce reports. The reports will need to be uploaded to the Strata building bond and inspection scheme online portal (the Portal).

How does an Inspector get appointed?

The developer can appoint the building inspector from an approved NSW Fair Trading Panel and that inspector will need to be approved by the owners corporation.

An inspector will need to be appointed within 12 months after the occupation certificate is issued, this is if the initial period is completed within the time. The initial period is the period when the owner corporation changes from being the original owner of the land to the actual owner of the lots. An inspector is qualified if they are a member of a strata inspector panel. Once the inspector is appointed, they are required to register as a user on the Portal.

However, it is important to note that, a developer should not appoint a building inspector if the builder inspector was at any time in the 2 years immediately before the appointment was connected with the developer.

A builder inspector is connected to a developer if the inspector:

  • Has been involved in the design of any aspect of the construction or certification of the building work; or
  • Is connected with any person who has been involved; or
  • Has a pecuniary interest in any aspect of the building work.

What happens after an inspector has been appointed?

Interim inspection

The building inspector will need to go onto the site to do the interim inspection, the building inspector will need to give 14 days written notice to the owners corporation, the owner or any occupant that they intend to enter any part of the strata scheme. The owner corporation, any person who has exclusive use of the common property, a strata management agent, building manager or manager of the common property and any owner or occupier cannot unreasonably refuse access and must provide any reasonable assistance to allow the inspection to be done.

When the inspection is done, a report will need to be uploaded to the Portal between 15-18 months after the occupation certificated has been issued. The interim report must identify any defective building work identified during the inspection. If the inspector has found any work that they cannot do, the building inspector will need to hire a specialist or experts to assist in the report.

In the event that there were no defective building work identified, the developer can apply to the Secretary of Department of Finance, Services and Innovation (the Secretary) for a pass on the interim report to become the final report.

Once the report has been uploaded to the Portal, all relevant parties will be notified and if there are any defects, the builder would then be responsible to rectify any defects that are identified. If the builder is unable to rectify the defects then the owner corporation is able to access the developer bond to rectify the defects. On more information on developer bonds, view our article here.

Final inspection

The developer will arrange for the building inspector who conducted the interim inspection and report to do the final inspection. If the original building inspector is not available the developer will need to inform the Secretary through the Portal.

The inspector will need to do the final report between 21 and 24 months after the occupation certification has been issued. As with the interim report, the building inspector must give at least 14 days written notice of their intention to enter any part of the strata scheme.

The final inspection report will need to include the following:

  • Any defects that are identified in the interim inspection report that have not been rectified;
  • Any defective building work as a result of the rectification of defective building work that have been previously identified in the interim report; and
  • How the defective building work should be rectified.

It is important to note that any defect that are included in the interim report cannot be included in the final report. Once the final report has been uploaded to the Portal, the relevant parties will be notified. Following any rectification works, any remaining funds are released to the developer. However, this may be opposed by the owner corporation.

If you have any questions in relation to the appointment of a building inspector or the inspection reports, please do not hesitate to contact Morrissey Law & Advisory.

This article was prepared by Michael Morrissey and Mary Ann Wen.

Disclaimer: This publication by Morrissey Law & Advisory is for general information and commentary only and should not be considered or relied upon as legal advice. Formal legal advice should be sought in relation to any matters or transactions that may arise in relation with communication.