NSW is the first jurisdiction in Australia to introduce a new insurance product that offers 10 years’ protection for buyers of residential apartments.
Minister for Fair Trading Victor Dominello said the NSW Department of Customer Service has accepted the application to offer decennial liability insurance as a form of security under the Strata Building Bond and Inspections Scheme.
Decennial liability insurance provides those living in residential apartment buildings with comprehensive consumer protection for building defects caused by substandard design and building work. It also provides an insurance safety net for consumers that is currently lacking in residential apartment buildings.
The introduction of decennial liability insurance in NSW will provide owners of residential apartment buildings with greater consumer protections in the event of major defects. Given the nature of the costs associated with remedying such defects, policy limits under a decennial liability insurance scheme are likely to be considerably higher than existing policy limits in the NSW construction industry.
For example, the owners of the Opal Tower Building at Sydney Olympic Park ($170 Million) face more than $17 million of rectification costs relating to cracking, and the Mascot Towers’ owners have a repair bill that could be around $53 million.
A recent financial review article found that 80% of new unit owners have structural problems with newly built apartment buildings, and most residential property insurance policies exclude cover for building defects, and damage caused by building defects.
Since 2018 developers have been required to lodge a Strata Building Bond as part of the scheme with NSW Fair Trading that is 2% of the relevant contract value to pay for rectification costs of any defective works that are uncovered for up to 24 months after construction has been completed.