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Consumer trust in New South Wales' building and construction industry has been eroded following a series of widely-publicised defects issues in apartment buildings. However, industry reforms are paving the way for improvements to the quality of residential apartment buildings. In a recent move that could significantly reduce legal disputes between developers, builders, and owners’ corporations—especially for the construction of apartments, the NSW government has amended the Strata Schemes Management Act 2015 (NSW) to enable the purchase of Decennial Liability Insurance in place of a building bond.
DLI, also known as Latent Defects Insurance, protects building owners from serious defects that may arise in a building within ten years of its construction. NSW is the first Australian state to offer DLI. While DLI is optional in place of a building bond, it is a useful solution that provides:
Financial protection against unforeseen major defects: Even the most careful and experienced builders can encounter structural issues with a building after construction. DLI can protect builders from the financial consequences of these defects, including the cost of repairs and legal fees. In turn, this can help protect their investment and reputation.
Improved marketability of the property: Buyers and lenders are more likely to invest in a property that has been constructed by a builder with DLI, as it demonstrates that the builder is committed to developing high-quality properties.
New South Wales has been leading the way in building regulation reform in recent years, with a view to improving consumer confidence and ensuring a high standard of construction is maintained. The introduction of DLI as a viable alternative to the current building bond scheme is part of this process.
In August 2022 the Decennial Liability Insurance Ministerial Advisory Panel provided their key recommendations to the government, advising their preferred model going forward is mandatory DLI insurance in place of the current building bond. The NSW government later issued a Regulatory Impact Statement affirming this position and engaged in industry consultation which ended on 28 July 2023. Any resulting legislative changes are slated to commence on 1 January 2024.
It is important to note that the availability and specifics of DLI solutions may vary depending on the insurer and the specific product being offered. Please reach out directly or talk to a representative of Honan Insurance Group to discuss your specific needs.
National Client Manager
Complex Claims Manager
