Amendments to Strata Law

On 28 October 2015 the Strata Schemes Management Act 2015 was passed.

The new laws commenced on 30 November 2016. The building defects bond scheme reforms will commence on 1 July 2017.

These amendments apply to residential buildings that have a rise of more than 3 storeys which are exempt from the requirement of obtaining insurance pursuant to the Home Building Compensation Fund. These amendments apply even if the building is used for mixed purposes that includes residential purposes.

The main changes which we wish to draw to your attention are as follows:

  • A building bond for the construction of high raise strata buildings (those over three storeys in height) will maintain developer and builder accountability for their work.
  • Developers will be required to lodge a 2% bond to the Secretary of the Department of Finance, Services and Innovation in the form of a bank guarantee or bond for the contracted price of the building as a form of security to pay for any defective work before an Occupation Certificate is issued.
  • The developer will also need to prepare a maintenance schedule to be tabled at the first annual general meeting to inform the owners about their maintenance obligations.
  • A process for the early identification and rectification of defects will be implemented. This will require developers to pay to engage an independent building inspector to provide defect inspection reports. The first report is due between 15 and 18 months after the completion of the building. The final report must be provided between 21 months and no later than 2 years after the completion of the building work. The costs of the inspection and the reports are borne by the developer.
  • The Owners Corporation must agree to the appointment, if there is no agreement or the developer ceases to trade after the building work is complete, Fair Trading will arrange for an inspector to be appointed. If the defects are not rectified the building bond will be used to carry out the repairs. If there are no defects to be rectified or they are rectified, the bond will be returned to the developer 2 years after the completion of the works, or within 60 days after the final report is given to the Secretary by the building inspector whichever is the later.

Child Care Centre Owners and Building Contract Payment Disputes

On a number of occasions in the last year or so, Child Care Centre Owners in the course of having their Centre built have brought matters to us in which they have been served with payment claims under the Building and Construction Industry Security of Payment Act 1999 ("the Act") by builders.

This can be a very unfair thing for a builder to do as, usually, the Child Care Centre Owners have no idea of the importance of the the Building and Construction Industry Security of Payment Act 1999" .

What Child Care Centre Owners need to know is that if they do not take action within 10 business days they will end up being legally obliged to pay the full amount of the claim, no matter how inflated or unjustified it is, and there is no appeal.

What Child Care Centre Owners should do is to serve a payment schedule on the builder.

The payment schedule must be in writing and must identify the payment claim it is responding to.

e.g.. "We refer to your payment claim dated 23 May 2012." or "We refer to your progress claim number 6." . It should say how much of the claim you intend to pay and must indicate the reasons why you are not going to pay all or any part of it.

What should be in a payment schedule? The short answer is: everything. That is, everything which can justify your not paying the payment claim. That includes:

  1. Any significant factual circumstance such as:

    • That the work being charged for is not construction work within the meaning of the Act
    • That the work is not within the ambit of the Act being residential building work in which the Owners reside or intend to reside (This may apply where the childcare centre is also the owner's residence)
    • That the payment claim is being served more than 12 months after the last work was performed on the project.
    • That the work is not adequately identified
    • That the claim is premature under the contract
    • That the work has a lesser value than that claimed by the builder
    • That the Child Care Centre Owners have a counter claim arising under the contract such as a claim for liquidated damages or a backcharge.
  2. That the claim of the builder in respect of delay costs is not justified:

    • in terms of the period of the delay
    • in terms of the cost of the delay
    • that the builder has not properly applied under the contract for extensions of time
    • that the builder has not properly applied under the contract for delay costs
    • that the cause of delay was not a compensable cause under the contract.

Even if you have served the builder with a payment schedule in time, you are not out of the woods yet. The builder can then have the rights and wrongs of your refusal to pay his claim determined by an adjudicator, and if a reason has not been raised in a payment schedule, you cannot rely upon that reason in an adjudication, so in the payment schedule you must raise every possible reasonable objection you can.

If you need any help in this regard, come and see us in our office or call us by clicking on the button below.

(02) 9689 3992