update on the building bond
  • December 22, 2021
  • Effective Building
  • 0

Effective Building & Consultancy

The Strata Building Bond and Inspections Scheme that commenced on 1, January 2018 applies to building work for building contracts from 1 January 2018. In the absence of a contract, it applies to building work commenced from this date. 

Developers are required to lodge a building bond that is 2% of the contract price for the building work, with NSW Fair Trading. The building bond secures funds to pay for the costs of rectifying defective building work.

The Scheme however does not apply to building work if the work is subject to the requirements to obtain insurance under Part 6 of the Home Building Act 1989. For example, the building is three storeys or less.

Timeline of Stages 1-8 in the SBBIS

Stage 1: Building bond lodgement

Stage 2: Inspector appointment

Stage 3: Interim inspection and report

Stage 4: Rectify defective building work

Stage 5: Final inspection and report

Stage 6: Determine cost of rectification

Stage 7: Paying the building bond

Stage 8: Completing the process


To Simplify this process, we have created a process map of the SBBIS to help you understand each stage in the scheme.


What is the purpose of the building bond?

The building bond is used to secure funds that may be drawn upon and used to pay for the rectification costs of any defective works identified in a final inspection report. If no defects are identified, the building bond is released in full to the developer. If defects are identified, the following steps apply in relation to disbursement of the building bond.

The parties must agree on the amount of costs needed for rectifying the defective works. Once a price has been agreed upon, the Building Bond Secretary will claim this amount from the issuer of the building bond and pay it to the Owners Corporation, or alternatively, the developer may release all or part of the building bond to the Owners Corporation directly.

If the parties cannot agree on the costs needed to rectify the defective works, the Secretary will appoint a quantity surveyor to ascertain the amount needed. The costs associated with engaging a quantity surveyor are to be paid equally by the developer and Owners Corporation.

The Secretary facilitates the release of the building bond money. Any money released must be used for the purposes of rectifying defective works identified in the final inspection report, and any money that is leftover is returned to the developer

Appointment of a Building Inspector

Within 12 months of the occupation certificate being issued, the developer is to source and appoint an independent Building Inspector. Effective Building & Consultancy is an authorised inspector for the ASBC & Strata Inspection Panel (SIP) with full approval to conduct building bond inspections. We can provide you with the information you need to understand your legal obligations under this scheme, as well as help you manage the complete process and ensure you’re legally compliant.

Inspections and Reporting

First inspection: 15 to 18 months post the completion of building work, the building inspector and Owners Corporation arrange a first inspection of the strata property. A report is then issued identifying any defective works which is then uploaded to the online portal and may be accessed by the Developer, the Owners Corporation, the Secretary, and the Builder responsible for any defective works. If no defects are identified then the building bond may be released, although not for two years from the date of completion.

If defects are identified, then the builder is responsible for the defective works and must rectify them before a final inspection takes place. If the defective works are not rectified before the final inspection, the building bond can be used to pay the associated costs of rectifying any defective works.

Final inspection: 21 to 24 months after the building work has been completed, the Building Inspector and Owners Corporation arrange a final inspection of the strata property.

During the final inspection, we will issue a report identifying whether the defects identified in the interim report have been rectified.

All costs associated with a Building Inspector are to be borne by the Developer.

For more details of Strata Building Bond & Inspections Scheme, visit
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About Elie Farah

Elie Farah is a Building Consultant with over 25 years of experience in the property industry. Elie has specialised knowledge in development acquisitions, blue-chip properties and inspections, as well as flood-affected and waterfront properties, heritage buildings, bushfire management and existing use rights.

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