By Scott Laycock, Partner

A Bill has been introduced to NSW Parliament this month to postpone the commencement of the building defect rectification and bond scheme from 1 July 2017 to 1 January 2018.

The postponement of the building defect bond scheme appears to be due to the delay in preparation of the new national standard (AS4349.2 – Group titled properties) which will form part of the defect inspection report under the scheme.

In addition to the above delay to the AS4349.2, it has been noted by NSW Fair Trading that public feedback on the 1 July 2017 commencement date has revealed industry concerns that participants have not been provided with enough time to develop their supporting processes and procedures prior to the commencement date of 1 July 2017.

We expect that formal notice of the postponement will be issued by NSW Parliament in the coming weeks.

To recap, the building defect bond scheme, introduced under the Strata Schemes Management Act 2015, will apply to all contracts for residential (or part residential) works entered into after 1 July 2017 (or in light of the above, potentially 1 January 2018) if the development is not covered under the Home Building Compensation Fund.

The building defect bond scheme will require developers to lodge a bond of 2% of the contract price with the Department of Finance, Services and Innovation prior to the issue of occupation certificates to cover the costs of defect rectification works that are identified in the final inspection report to be procured under the new scheme.

As a result of the new scheme, developers will need to ensure that building contracts are drafted to ensure that obligations under the Strata Schemes Management Act 2015 are appropriately captured and that developers, being those directly responsible for compliance with the reformed strata scheme regulations, are adequately protected in light of the extended term of defects liability introduced by the Act.