There’s now a new date for the implementation of the much touted reforms to the NSW strata legislation. Instead of July 1, the 90 amendments to the legislation which aim to reduce red tape, and help strata communities avoid disputes will now take effect from November 30, 2016.
But one key reform, the building defects bond scheme, has been deferred until the middle of next year. It appears the issues surrounding its implementation are currently in the "too hard" basket.
An important part of the scheme is the appointment of building inspectors, which is being introduced to prevent building defects from going unnoticed until after statutory warranty periods are over. Developers or the strata scheme will be required to arrange for building inspections between 12 to 18 months after completion of works.
There must be complete transparency around the appointment of inspector to prove he has no connection with the developer. The developer is also responsible for all costs of obtaining an inspection and report.
On the face of it, under the new regulations, the owners corporation appears to have the upper hand. Under Part 11 of the Act, the developer of a strata scheme is not permitted to appoint a building inspector under Section 194 to carry out an inspection and to report on building work unless it is approved by the owners corporation by a resolution at a general meeting.
The owners corporation may refuse to approve the appointment of a building inspector on any grounds. However, under Section 196, the Secretary of the Department of Finance, Services and Innovation will appoint a building inspector if one has not been arranged to prepare an interim report, and this appointment is not required to be approved by the owners corporation.
There were a number of submissions about the reforms which focused on the owners corporation’s power to refuse the appointment of a building inspector, with the explanation that this will cause disputes and litigation, which in turn may increase costs and delays. The Property Council of Australia, in its submission on the Draft Strata Schemes Development Bill, warned that it may encourage owners corporations to reject a nominated building inspector in the hope that the next one nominated might adopt a more owners corporation-friendly approach to defects.
The Property Council also raises the issue of whether the industry will have the capacity to satisfy demand and that needs to be considered when determining the classes of persons prescribed to be qualified to be appointed as a building inspector.
In its submission, the Urban Development Institute of Australia (UDIA) NSW highlighted the cost of the bond and the associated inspection reports together with the accreditation of the inspectors as a principal concern.
However, there were virtually no submissions that question the type of inspector who should be appointed. UDIA NSW noted that the suitability of inspectors is of concern to the industry and the establishment of a strata inspection panel is not an adequate solution and no qualification oversight has been built in.
And that is where the problem lies. Who should be qualified to be appointed as a building inspector and capable of determining flawed building work?
Section 193 defines building inspectors as “a person appointed for the purposes of this Part as a building inspector for building work” who “is qualified to be appointed as a building inspector only if the person is a member of a class of persons prescribed by the regulations for the purposes of this section.”
Part 8 of the Strata Schemes Management Regulation 2016 specifies that a building inspector is “a person who is a member of a strata inspection panel established by any of the following bodies:
(a) The Housing Industry Association,
(b) The Master Builders Association of New South Wales,
(c) The Australian Institute of Building,
(d) The Australian Institute of Building Surveyors,
(e) The Australian Institute of Building Consultants,
(f) Engineers Australia,
(g) The Australian Institute of Architects,
(h) The Association of Accredited Certifiers.”
Whilst this further provides a condition for the appointment of an engineer, it doesn't address the issue of engaging an engineer licensed and trained in a specific discipline to inspect and provide a report in other areas (for instance, a structural engineer providing a report on areas where a fire engineer is best suited.)
This issue also creates the concern of the liability of the engineer. Will the engineer put a disclaimer in the report to reduce liability? Should this be allowed to happen? Should the engineer be held responsible for areas in the report where he/she is not licensed/trained in?
This is ill thought out legislation. You wouldn’t engage an orthopaedic surgeon to perform a surgery on your heart, so why would you allow a structural engineer to opine on a water-related issue? Postponing the implementation of the scheme until next year buys time, but the question remains will there be a workable solution?