Last December, the High Court confirmed that developers and builders cannot delegate their duty of care, meaning they’re ultimately responsible, even if as subcontractors did the substandard work, for example. Learn more about this case, which tested the Design and Building Practitioners Act 2020 (NSW).This ruling has national implications for insurance and legal risk. If you’re a builder or developer, ensure you review your contracts, processes, and insurance protections. Property owners should be aware of who is accountable when things go wrong.
Regulations are Tightening
The NSW Building Legislation Amendment Act 2023 introduced sweeping reforms to improve construction oversight. It redefines who is considered a ‘developer’, expands obligations for building practitioners, and strengthens regulatory powers.
For SMEs involved in property, this means increased scrutiny on project documentation, more emphasis on evidence of compliance, and fewer loopholes if things go awry.
How to Lower Your Risk
As well as working with trusted contractors and suppliers, there are proactive steps you can take to reduce the risk of construction defects:
- Quality Assurance: Implement robust internal QA processes, including site inspections, checklists, and sign-offs
- Inspect: Organise independent defect inspections at key build stages
- Documentation and Communication: Keep detailed records of design, approvals, inspections, and amendments
- Invest in Latent Defects Insurance (LDI) (for NSW): This type of policy protects against hidden structural issues for up to 10 years after completion. It could be mandated across Australia
- Technical Audits: Use these as part of LDI qualification to catch defects before handover
- Ongoing Training: Be informed about changing building codes, standards, and best practices
- Clarify Statutory Warranty Periods: Understand the warranty periods – six years for major defects, two years for minor defects, with a 10-year long-stop under the Environmental Planning and Assessment Act
- Dispute Resolution: Familiarise yourself with mediation, tribunals, and courts in defect disputes regarding defect disputes and the procedures for rectifying defects in your contacts.
Another way to lower your risk is to consult with us as your risk advisor for a comprehensive review. Think about creating a checklist of questions to ask about defect cover and emerging legal risks.
When Things Go Wrong, The Impacts Linger
Consider what happened to the residents of Sydney’s Mascot Towers. After evacuating in 2019 due to cracking and structural concerns, many owners are still facing financial losses, legal battles, and stalled remediation efforts. The total cost is expected to exceed $10 million.
It’s a cautionary tale of how quickly small defects can escalate.
What it Means for Your Insurance
Construction defects can take years to emerge. However, when they do, the financial and legal consequences are immediate. Whether you’re developing new builds or managing existing ones, ensure your insurance reflects the true risks involved.
As your broker, we can help you review your current policy, explore coverage for structural and latent risks, and check your protections align with changing laws and industry expectations. We are also here to streamline the claims management process.
Article Supplied by OneAffiniti
Photo by Isara Photovs
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