Strata Law Failures in NSW: Defective Apartments and No Accountability

The Scale of the Problem

If you own an apartment in New South Wales, there is a reasonable chance your building has a serious defect. That is not hyperbole - it is what the data shows.

A 2019 survey commissioned by the NSW Government found that 85% of strata buildings constructed in the previous decade had at least one defect. A separate independent report by building consultant firm Napier & Blakeley estimated that fixing defects in NSW apartment buildings would cost over $6.2 billion. The most common problems include water ingress, fire safety failures, structural cracking, and combustible cladding - the same type that contributed to the Grenfell Tower disaster in London.

The Opal Tower crisis in 2018 and the Mascot Towers evacuation in 2019 brought this issue to national attention. Hundreds of residents were displaced overnight, some never returning to their homes. Mascot Towers owners faced special levies of up to $120,000 per apartment to fund repairs - on top of mortgages they were still paying on properties now worth a fraction of their purchase price.

How Did We Get Here?

The short answer is: decades of light-touch regulation designed to keep the construction industry happy and apartments cheap to build.

For most of this period, NSW relied on a system called private certification, where developers could hire their own building inspectors rather than using independent government inspectors. Unsurprisingly, certifiers who wanted repeat business had little incentive to fail the buildings of the developers paying their invoices. The conflict of interest was structural and obvious, yet successive NSW governments - Labor and Liberal alike - refused to fix it.

At the same time, warranty protections were systematically weakened. The Home Building Act 1989 once gave apartment owners six years to claim on structural defects. Amendments over the years chipped away at these rights, narrowed definitions, and made it harder to hold builders and developers to account. Many defects only become apparent five to seven years after construction - conveniently after the warranty window closes.

Developers also exploited corporate structures. A typical project might involve a special purpose vehicle company that is wound up once the building is complete, making it legally impossible to pursue. The individuals who made the decisions - and the profits - walk away clean.

Who Bears the Cost?

The owners. Almost always the owners.

Under current arrangements, when a building is defective and the developer is unreachable or insolvent:

• Owners corporations (the body of apartment owners) must fund repairs through special levies
• Individual owners can face bills of $50,000 to $200,000 on top of their mortgage
• Buildings with known defects are effectively unsellable, trapping residents financially
• Many owners have been unable to refinance because banks won't lend against defective buildings
• Renters face sudden displacement when buildings become uninhabitable

The people hit hardest tend to be first-home buyers and investors of modest means who purchased off the plan in good faith, often in outer-suburban growth corridors where construction was fastest and oversight thinnest.

What Has Been Done - and What Hasn't

To its credit, the NSW Government has made some moves. The Design and Building Practitioners Act 2020 introduced a new duty of care allowing owners to sue negligent builders and designers even without a direct contract. The Residential Apartment Buildings Act 2020 gave the Secretary of Fair Trading powers to intervene before occupation certificates were issued.

But critics - including strata lawyers, consumer advocates, and the owners themselves - say these reforms are too slow and too narrow.

The proposed decennial liability insurance scheme - a model that has worked well in France and other countries for decades - would require developers to hold insurance against major defects for ten years. It has been discussed, consulted on, and deferred. The construction and development lobby has fought it at every stage, and governments on both sides have obliged by moving slowly.

Why Does This Policy Persist?

Because the people who benefit from the current system are organised, well-resourced, and politically connected.

The Property Council of Australia, the Housing Industry Association, and major development companies are significant donors to both the NSW Liberal and Labor parties. The construction industry is one of the most powerful lobbies in the country. When governments talk about "cutting red tape" in housing, they often mean reducing the oversight that protects buyers - not reducing the genuine administrative burdens on small businesses.

Meanwhile, apartment owners are diffuse, diverse, and politically disorganised. They don't have a peak body with a Canberra office. They don't hold fundraising dinners. They just own apartments they can't sell and receive levy notices they can't afford.

This is a textbook case of concentrated benefits and diffuse costs. The developer profits on one building; hundreds of owners share the loss. Representative democracy, as currently practised, systematically underweights the latter.

What Would Voters Choose?

That is actually not a hard question. Poll after poll shows Australians support stronger consumer protections, mandatory warranty insurance, and real penalties for developers who build defective homes. A 2022 survey by the Owners Corporation Network found 91% of respondents supported mandatory long-term defect insurance.

The policy solutions are well understood. They exist and work in comparable countries. They are not being implemented because the people who make decisions under our current system are not accountable to the people who live in the buildings.

This is exactly the kind of issue that exposes the limits of voting once every four years for a party that takes developer money and then negotiates policy behind closed doors. If members of the public could vote directly on whether developers should carry ten-year defect insurance, the outcome would not be close.

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