Property developers in New South Wales are advised to follow Queensland’s pre-contract planning program to avoid being caught by upcoming changes to NSW Legislation.
From July this year, developers will be required to place 2% of the project’s value in a bond against claims of building defects that appear within the first two years of the building’s life.
The ruling is contained in the Strata Schemes Management Bill 2015.
In addition, developers will be required to present a maintenance schedule at the first AGM, and to fund a defects report to be performed within 12 to 18 months of the building hand-over.
This represents a major change to current practice and it has been designed to offer greater consumer protection.
“There is a lot of concern in the industry as a result of these changes,” said Priscilla Hyde, General Manager of SSKB Developer Consultancy.
“The 2% bond represents a significant investment which may put some projects in jeopardy if developers cannot get a bank guarantee.
“This is why we’re recommending developers be proactive and invest in independent, third party maintenance forecasts and building defect reports before the legislation makes them mandatory.”
Queensland’s stringent disclosure laws make a good model for developers to follow and if actively promoted during the sales period could also provide a marketing advantage, she said.
“Queensland has a rigorous disclosure requirement which encourages projects to be delivered as disclosed with variations kept to a minimum to ensure contracts are not put at risk,” said Priscilla. “This gives certainty and confidence to intending purchasers, which may mean the difference between a sale contract being signed or not.
“Investing in the pre-contract phase can draw out any on-site issues and also account in the budgets for the Defect Report can deal with any identified issues up front, often while tradies are still onsite.
“So there are advantages for developers to follow a similar pre-contract planning regime to Queensland’s even if not contractually required to.”
SSKB Developer Consultancy has extensive experience in assisting developers in Queensland, Victoria and New South Wales and consultants are available to answer questions.