A Defect Claim Knockout for Large Strata Buildings

You probably know that throughout most of Australia strata buildings over 3 storeys have not had Home Warranty Insurance covering defective original construction since 2003.


That means that they can only sue the builder (and maybe the developer) for defects under the applicable home building laws (and maybe in negligence).  Which is fine if the builder is still around and solvent.


But as this article by Adele Ferguson in SMH Domain reveals the solvency of many Australian builders is doubt.


She reports that since January more than 363 companies in the building industry have become insolvent (with more than 200 of them from New South Wales and 95 from Victoria).  And, she says 'the trend seems to be getting worse, with 30 building companies failing in March, 33 in April, 51 in May, 63 in June and a whopping 40 collapsing in the first 10 days of July'.


Whilst that's bad news for the building industry, it's even worse news for strata owners, executives and managers of buildings they built that are over 3 storeys - since their primary targets for compensation for building defects (the builders) are disappearing fast.


So, apart from the all the adverse decisions being handed down by Courts in strata defect claim cases now there's going to be even less possibilities to sue builders due to economic factors.


It makes the decision taken about 10 years ago to exclude taller strata buildings (over 3 storeys) from home warranty insurance 'last resort' protections appear to have been overly optimistic about the  financial strength and longevity of builders.  And, it leaves strata owners without fair and reasonable protections over the quality of the their buildings (again).


Maybe the NSW Office of Fair Trading will take this into account in its current review of Home Building Laws (see Repairing NSW Building Laws).  Or, am I just being hopelessly optimistic?


Francesco ...