Prevalence of Building Defects Put Apartment Buyers at Risk in Sydney, Australia

About 300 people were evacuated from Sydney’s Opal Tower on Christmas Eve 2018 amid fears it would collapse. Screenshot/Google Maps

Over half of Sydney’s apartments are likely to have at least one type of defect a joint three-year study by two top Australian universities has revealed.

According to the report “Cracks in the Compact City” released on Oct. 14 by the University of New South Wales and the University of Technology Sydney, 51 percent of 635 sampled multi-unit strata titled (MUST) developments built from 2007 to 2017 have at least one type of defect. An additional 28 percent have at least three different defects and 12 percent have ten defects.

Among the common problems noted by the researchers were water leaks (42 percent of samples), cracking (26 percent) and flaws in the fire safety systems (17 percent).

The study also noted that the median of costs estimates and ordered payouts to fix the defects ranged between  $500,000 to $14.3 million, according to NSW case law and Home Building Compensation Fund (HBCF) data.

This aligns with a survey of strata managers released earlier by the NSW Building Commissioner, which found four in ten recently completed apartment buildings have “some form of major defects” costing an average of $322,000 per building to fix.

But the study’s authors noted that they think these estimates are conservative.

“Because it is so difficult to obtain reliable information on defects in strata, this means buyers often cannot be sure whether a building has defects, whether they have been fixed, and whether owners might face financial, emotional and safety impacts later,” the study said.

The study also argues that the government’s efforts to regulate the construction industry and adequately address building defects is currently under pressure as well.

“The need for more detailed reporting to government, and better data management by government, is a recurring theme in recent reports into building quality, both in NSW and nationally,” the report said.

The prevalence of defects and information breakdowns, which “ reinforce each other,” also point to a system that “fall to pressures for speed and reduced costs”, as well as  “the dominant deregulatory ethos that has prevailed in government since the 1990s”.

NSW has been working to address these issues since Opal Tower and Mascot Towers evacuation in 2018 and 2019.

The efforts have seen the installation of the Office of the Building Commissioner (OBC) in mid-2019, which was given sweeping new powers to intervene where necessary, including prohibiting the issuance of preoccupation certificates to defective buildings.

In a statement on Oct. 6, NSW Building Commissioner David Chandler encouraged apartment owners to turn to NSW Fair Trading to address building issues.

“Too often we’re seeing owners’ corporations dealing with the issues themselves by engaging legal and advisory services that cost huge sums of money, or worse, trying to sell the problem on to the next buyer without the appropriate disclosures,” he said.

Chandler said reporting defects should be the first thing that consumers do and Fair Trading has improved its way of tackling building issues.

“Fair Trading will draw upon its new inspectorate to help identify the serious defects and can issue developers and builders with Building Work Rectification Orders which are publicly listed and carry big penalties for non-compliance.”

According to the data provided by OBC, there are currently over 83,000 strata schemes in NSW that provide housing to around 15 percent of the population – more than 1.2 million residents.