New Rule Requires NSW Developers to Pay a Building Bond

workers in a construction site

The New South Wales government has introduced a new regulation that would help buyers to avoid purchasing units from poorly constructed strata developments.

Matt Kean, NSW Minister for Better Regulation, said that the Strata Building Bond and Inspections Scheme would require property developers in the state to pay a building bond to NSW Fair Trading. The amount would be equal to the 2 per cent of a company’s contract price with the agency, according to Kean.

Preventive Measure

The scheme serves as a preventive measure against real estate developers that neglect their responsibility from “dodgy or unfinished work,” Kean said. Hence, companies would need to be more selective on how they source construction materials, such as making sure that they only buy concrete reinforcing mesh from reputable suppliers.

NSW Fair Trading launched the building bond after several consumer complaints against companies, which allegedly cut corners during the initial construction phase. The new policy would also aim to reduce delays in resolving building defects, as well as limiting time and money spent on litigation.

Higher Home Prices

Higher home prices serve as another reason why developers need to be extra sure of building sturdy properties. Data from the Australian Bureau of Statistics show that the country’s 10 million homes hit a total value of $6.9 trillion in 2017, up by almost $93 billion.

The price increase includes a 5 per cent growth in eight capital cities, led by a 13.1 per cent increase in Hobart. Since a building’s quality has a major impact to its property value, it only makes sense for companies to be more mindful of potential defects.

It remains to be seen whether or not the building bond will finally solve the problem of poorly built strata developments, yet it represents a step in the right direction. What is your strategy for building quality projects?