Developers in New South Wales will be hit with a two per cent bond to cover the costs of building defects under proposed new laws designed to protect strata owners against financial loss for unsatisfactory construction.

Announcing the proposed reforms, which will apply to buildings in excess of three storeys, Fair Trading Minister Victor Dominello said owners currently have no protection in place to ensure defects are fixed other than through the court system.

“A defect bond will provide a two per cent security to enable most of those defects to be cured,” Dominello told ABC.

Throughout New South Wales, anger has been growing over increasing numbers of defects being found in high-rise buildings, with water leaks and internal and external cracking representing a common complaint.

In a University of NSW study of 1,550 strata owners in 2012, seven out of 10 reported the existence of building defects within their properties – a proportion which rises to 85 per cent for those whose buildings were constructed after the year 2000.

Chris Johnson, CEO of developer representative body the Urban Taskforce welcomed the move, saying most developers already set aside money for future repairs and that the move formalises this approach but provides more rigour in terms of how it is handled.

Lawyers, meanwhile, welcomed the approach but warned that some problems would cost in excess of two per cent to rectify.

As part of its submission to the government’s consultation process, Allens Partners suggested a similar system of quality control be used in apartments as with commercial buildings, with each stage of construction being checked by independent certifiers.

A bill is expected in October, with the bond likely to become law next year.