Almost four in ten newly completed apartment complexes across New South Wales have had serious defects uncovered in relation to common property, a survey of strata managers covering almost 500 buildings has found.

And only 15 percent of such defects are reported to Fair Trading NSW.

Prepared by the Office of the Building Commissioner and Strata Community Association (SCA), the research aimed to gather evidence about the prevalence and impact of serious defects within recently completed residential strata buildings.

It included a questionnaire to which strata managers who cover 492 buildings responded along with in-depth interviews of two strata managers.

Each of the buildings were completed after 1 July 2014.

All up, the survey found that serious defects had been identified on common property in 39 percent of buildings which were covered in the survey.

Of those defects which have been found, waterproofing is the most common.

Indeed, serious waterproofing defects on common property have been identified almost one in four (23 percent) of the buildings which were covered in the survey.

This is followed by defects relating to fire safety (14 percent of buildings covered), structure (9 percent), building enclosure (9 percent), key services (5 percent) and combustible cladding (5 percent).

Fig. 1 Percent of buildings in which defects have been identified

(Source: Construct NSW Research report on serious defects in recently completed strata buildings across New South Wales)

The research also found that:

• On average, owners corporations spend $331,829 per building to resolve serious defects.
• Almost exclusively, rectification costs are borne by owners. In fact, only seven buildings in the survey reported being able to recover any cost for defect rectification at all. Of these, the largest amount recovered amounted to only 65 percent of the total expenditure on defect rectification. Funds needed for rectification are commonly raised through special levies or increases in the scheme’s capital works.
• Of those defects which have been identified, more than half had not been resolved at the time of the survey. The most common method for resolving defects occurred via negotiation with the developer or builder (27 percent). Only a small portion were resolved through legal means such as court, tribunal or NSW Fair Trading rectification orders.
• Of those defects which had been rectified, around 38 percent took more than a year to resolve whilst only one quarter were resolved within less than six months. Resolution in relation to a further 11 percent of defects took between six and twelve months to complete whilst owners corporations preferred not to specify the duration on slightly more than a quarter of defects.
• The most common means by which defects were identified were independent advice (51 percent) and reports from building occupants (37 percent). Only 11 percent were uncovered through routine building inspections.

Concerningly, the report indicated that the number of defects being reported to NSW Fair Trading was extremely low.

All up, only 15 percent of serious defects which were identified on common property had been reported to the regulator.

The latest report comes as NSW is undertaking reforms to improve outcomes in design and construction of apartment buildings.

This follows significant problems with apartment defects over recent years.

For new buildings, the state is pursuing a six-pillar strategy which aims to promote greater assurance about building quality and safety.

For existing buildings, the government is changing the way defects and disputes are managed through NSW Fair Trading.

Over the past year, this has seen the agency hire new technical staff and introduce new processes for compliance and complaint handling.

(The government is also running a program to help remove combustible cladding on several hundred buildings.)

NSW Building Commissioner David Chandler encouraged owners and owners corporations to report defects to NWS Fair Trading.

“Too often we’re seeing owners’ corporations dealing with the issues themselves by engaging legal and advisory services that cost huge sums of money, or worse, trying to sell the problem on to the next buyer without the appropriate disclosures,” Chandler said.

“Over the past year, Fair Trading has hired new technical staff and introduced new processes in its compliance and complaint handling divisions so building complaints can be handled more effectively than ever before.

“We want complaints from authorised representatives of the owners – either a member of the strata committee or the appointed strata manager (reported to Fari Trading NSW to ensure clearer and better engagement. Fair Trading will draw upon its new inspectorate to help identify the serious defects and can issue developers and builders with Building Work Rectification Orders which are publicly listed and carry big penalties for non-compliance.”

SCA NSW President Chris Duggan added that there were improvements being made within the strata industry itself.

This is important in light of the growth of strata schemes, which has increased in line with a move toward multi-residential construction.

In 2016, the NSW Government introduced a range of reforms to improve the accountability and effectively with which owners corporations are managed and run.

In addition, from July, members of SCA (NSW) have been subjected to a professional standards scheme which was agreed to with the NSW government.

All members of SCA (NSW) are bound by the scheme and are required to meet the scheme’s professional standards and abide by its code of ethics.

“We firmly believe that strata communities are currently undergoing a transformation of standards as they increasingly champion the rights of residents,” Duggan said.

“These changes will better serve NSW communities along with our Professional Standards Scheme that demands a strong duty of care by strata managers.”