Join me as I discuss current issues and innovations relating to finance and property and how these may affect you, the property investor and developer.
Each episode features a special guest, we have a casual discussion in my guest’s field of expertise while enjoying one of my favourite pastimes, which is Gourmet French cooking at home in my kitchen.
Episode 1 – July 2021
Special Guest Samuel Star, Director of Archi-QS Quantity Surveyors, Architects, and Project Managers
Topic of Interest SBBIS - The Strata Building Bond and Inspections Scheme
Who it may affect property developers, builders, strata corporations and individual residential strata lot owners
This episode’s dish Cassoulet de Chastelnaudary (French Baked Beans with Duck and Pork)
Topic Overview
The Strata Building Bond and Inspections Scheme (“SBBIS”) came about as a result of recommendations made in the report of Professor Peter Shergold AC and Ms Bronwyn Weir titled, “Building Confidence: effectiveness of compliance and enforcement systems for the building and construction industry across Australia” (Oct. 2017).
The scheme provides a structured program for the identification & rectification of building work defects according to a program of eight time-critical stages within two phases to be completed within a set timeline with penalties for non-compliance.
In essence, the SBBIS is a consumer protection innovation. It was implemented to clean up the controversy-plagued building industry and ensure the safety of residents who live in and have invested in strata units by:
Improving the quality of the medium-high density residential buildings and reducing defects
Underwriting the rectification of building defects
Protecting the most vulnerable customer (consumer protection) and restoring public confidence
Under this scheme, developers of new Class-2 residential (and mixed use) strata buildings, ie; that are 4 storeys and higher are required to pay a building defect bond, calculated at 2% of a project’s final development cost, to NSW Department of Fair Trading, thereby adding another layer of protection to consumers by providing money to cover the cost of rectifying early defects.
The Strata Building Bond and Inspections Scheme came into effect in NSW on 1st January 2018 and was amended in July 2020 and again in July 2021. It puts the onus on the Developer to comply or face financial penalties and delays in achieving Occupation Certificate which may jointly or severally significantly adversely affect a project’s feasibility, a project’s completion, presales contracts and their sunset dates, the continuation of project funding, and even trigger defaults under credit contracts and subsequent mortgagee recovery action.
In this episode of In JP’s Kitchen, with the focus being on Developers, the new SBBIS is explored with an outline of what this new innovation means and, while it is a positive innovation for the industry, how it may quite seriously affect the feasibility of Class-2 building projects and potentially adversely affect the developers of those projects.