Major Defect Claims – NSW Strata – 2023

Defect Claims Overview

Defect Claims are a necessary evil for any new construction, while consumer protection is improved and improving in NSW, buildings and their owners are innocent bystanders in many such situations. The litigation process is costly, arduous and can take extensive periods of time. The ultimate reminder however is that it is a process that needs to be completed correctly throughout to ensure a successful claim by the owners.

Of the strata schemes constructed in the last 10 years 39% are reported to suffer from at least one form of major building defect. It is worth noting however that many defects go unreported and/or undiagnosed so the statistic could well be higher especially for buildings constructed in the most recent decade.

Owners Corporations are often the losers when it comes to building defects in their strata scheme, incurring large costs to chase builders and developers through litigation in order to get rectification works performed. Often even if successful in court however, the developers and builders liquidate the SPV (Special Project Vehicles – i.e. companies that can be shut down to eliminate ongoing liability) and leave the owners with mounting legal costs on top of the cost to rectify the defects. If such an event arises or is likely to occur the owners may be best placed to reassess their approach and determine where money is best spent from the outset.

What is a Major Defect?

Major defects have two broad parts: 
– a major defect arises where building work (or building products used) does not comply with the performance requirements of the Building Code of Australia or Australian Standards, or includes defective design or faulty workmanship. Serious defects may prevent the safe occupation or use of the building, and can cause its destruction or collapse.
– major defects occur in relation to building elements including fire safety, waterproofing, structural issues, building enclosure and building services.

How to Identify Defects?

The critical step is having an expert witness/engineer audit, identify and report on possible major defects within 6 years of a building being built. Utilising an expert witness may be the most effective option as their reports are litigation compliant should you need to escalate anything into the legal system.

It is important to understand that Valen are not expert witnesses, our role is to engage with all required consultants including legal, surveyors, engineers & other as required to formulate a comprehensive and complete case for the claim against the builder and/or developer.

How Valen can help with your Major Defect Claim

Engaging the services of a Project Manager, like Valen Project Services, can play an important role in facilitating a Major Defect Claim in your building.  Here’s an outline of the Defect Claim Process and how we can assist Owner’s Corporations and Strata Managers with this process:

  1. Coordination and Communication: Our Project Managers serve as a central point of coordination and communication between the various parties involved in the defect claim. We maintain clear communication channels among stakeholders, including the Owners, Builder, Developer, subcontractors, and legal representatives, ensuring that all parties are aware of the issues and the progress of the claim.
  2. Documentation and Evidence: Valen with support from legal experts can gather and organise all relevant project documentation, including contracts, specifications, and correspondence. To support the defect claim, Valen will collect and organise evidence related to the defects. This may involve conducting site inspections, taking photographs, reviewing construction records, examining relevant documentation, and ensuring that all necessary evidence is appropriately documented and available for the claim.
  3. Assessment and Analysis: Valen will conduct a thorough assessment of the defect claim, examining the project records, conducting site inspections, and analysing the available evidence. We then compare the actual state of the project to the agreed-upon standards and document any major defects found.
  4. Expert advice and recommendations: Valen have built a strong network of Consultants, Engineers, Expert Witnesses and Construction Lawyers who we will recommend and utilise during the defect claim process.  We collaborate with the best firms in the industry to give our clients the best possible outcomes.
  5. Mediation and Dispute Resolution: In cases where the defect claim leads to disputes between parties, we can facilitate mediation or alternative dispute resolution processes. We can help identify common ground, explore potential solutions, and assist in reaching a resolution that satisfies all parties involved.
  6. Coordination of Remedial Actions: Once the major defect claim has been established, Valen can oversee the implementation of remedial actions. This will involve engaging specialised contractors and consultants to assess and rectify the defect, managing the scheduling and coordination of repair works, and ensuring that the necessary permits and approvals are obtained.
  7. Project management expertise: Valen brings comprehensive knowledge and experience in managing projects to the defect claim process. Through application of project management principles, methodologies, and tools to assess the impact of the defects on the project’s overall objectives and develop strategies to mitigate risks and resolve the claim efficiently.

Overall, our Project Managers’ skill in planning, scheduling, cost control, and risk management can be valuable in navigating the complex nature of defect claims and reduce the time and stress spent by Owner’s Corporations and Strata Managers.

The NCAT Defect Claim Process

To file a defect claim through the New South Wales Civil and Administrative Tribunal (NCAT) in NSW, Valen Project Services can guide you through these general steps:

  1. Gather relevant information: Collect all the necessary information related to the defect claim. This includes documents, photographs, invoices, receipts, contracts, and any other evidence that supports your claim.
  2. Review the warranty or guarantee: If the defect is covered by a warranty or guarantee provided by the manufacturer or builder, review the terms and conditions to understand your rights and obligations.
  3. Attempt resolution: Prior to initiating a formal claim, it’s advisable to attempt resolving the issue through negotiation or alternative dispute resolution methods, such as mediation. This can help avoid the need for formal legal proceedings and reach a mutually agreeable solution.
  4. Lodge an application with NCAT: If informal resolution attempts fail, you can proceed with lodging an application with NCAT. Fill out the application form accurately, providing all relevant details about the defect, the parties involved, and any previous attempts at resolution. Attach supporting documents as required. There will be a filing fee associated with your claim.
  5. Serve notice to the other party: After filing your claim, you need to serve notice to the other party involved in the dispute. This allows them to respond and participate in the proceedings. Ensure you follow the proper service methods outlined by NCAT.
  6. Attend the hearing: Once all parties have been served and the matter proceeds to a hearing, attend the scheduled hearing date at the designated NCAT venue. Prepare your case by organising your evidence, witnesses, and any legal representation if desired.
  7. Present your case: At the hearing, present your case clearly and concisely. Provide evidence, call witnesses if necessary, and make arguments supporting your claim. Respond to any questions or counterarguments from the other party.
  8. Await the decision: After the hearing, the tribunal will consider the evidence presented and make a decision. This decision will be communicated to both parties in writing. It’s important to comply with any orders or directions provided by the tribunal.

It’s worth noting that specific requirements and procedures can vary depending on the nature of the defect claim, so it’s recommended to consult Valen and your legal representative for accurate and up-to-date information relevant to your situation.

Project Intervene

For a limited time (at the time of writing the scheme was scheduled to end in July 2023 with a discussed extension till 30th November 2023), the NSW Government is offering Project Intervene to work with trading developers and/or builders to do the right thing and rectify major defects while avoiding the litigation process with the intention of expediting repairs and limiting costs to the end consumer being Owners Corporations.

The NSW Government’s new strata laws aim to tackle the problem of defects in new builds. Defects inspection regimes by an independent inspector for new strata buildings are now mandatory which should help to limit substandard operations and operators of recent times.

Project intervene is a new initiative of the NSW Government to use the powers of Fair Trading to ensure developers/builders remediate serious defects. These powers permit the regulator to issue to a developer/builder a range of work orders for fixing non-compliant building work without the need to go to NCAT or above.

Who is eligible for Project Intervene?

A serious defect in a residential apartment (class 2) building must meet a three-part test. It must have: 

  1. serious defect as defined in the Residential Apartment Buildings Act, and, related to one of the building elements (common property)  
  2. a developer or a builder who is still in business 
  3. typically, an occupation certificate issued no longer than six years ago. In some circumstances we can look at a building where the occupation certificate was issued up to ten years ago. 

The program is focussing on buildings with four or more storeys as these are likely to have a higher impact on residents. 

Who is not eligible? 

The building is not eligible for Project Intervene if: 

  • the developer or the builder are no longer trading 
  • it’s a residential apartment building with three storeys or fewer
  • the building does not have any class 2 part 
  • the occupation certificate was issued more than ten years ago.