Strata Building Defects

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I recently was invited to speak at a conference for the Australian College of Strata Lawyers in relation to the current situation with building defects in Queensland.

There have been recent changes in Queensland that impact on Bodies Corporate and also on construction of the buildings that form Bodies Corporate.

Firstly, and as a result of obvious safety concerns over combustible cladding following the Grenfell Tower fire in London, the Queensland Government put in place a process by which the “owner” of private buildings had to fill in a checklist of sorts.  For the purposes of the legislation, the owner of a building included Bodies Corporate.  The dates for the first three stages of completing the checklist have now passed but in essence, a building that was basically any building three storeys or over in Queensland had to be registered and complete the checklist.  If Part 1 of the checklist indicated that it was necessary, the owner or the Body Corporate had to engage an industry professional and complete the statement that comprised Part 2 of the checklist.

Following that, if necessary and the Body Corporate or the owner was required to move on to the third stage, the Body Corporate would have to note on the Safer Buildings Website the name of the Fire Engineer engaged by the Body Corporate.  The final stage, if necessary, comprises the Fire Engineer completing a Fire Safety Risk Assessment Report and this Report has to be submitted to Queensland Building and Construction Commission by, at the moment, 3rd May 2021.  This cladding issue is going to arguably have a huge impact on Bodies Corporate in that if there is combustible cladding present, the combustible cladding has to be disclosed, and this will impact possibly insurance premiums and it is also an issue of ultimately having to remove the combustible cladding.

Currently, the Queensland Government has not indicated it will provide any financial assistance for the removal of the cladding.

A second issue would be of importance to buyers of units in new buildings. In certain circumstances the Head Contractors constructing the new builds were using the retention amounts under construction contracts for their own benefit.  For example, for their own cash flow purposes, and also sometimes the Head Contractors go into liquidation and therefore, the retention is lost.  Obviously the retention should guard against defects that become apparent, and be released to the relevant Contractor when the defects liability period has ended, or the defects have been fixed.

Changes to the legislation include a requirement that the retention amounts will be held in project bank accounts for certain constructions, and this is to apply in stages for private constructions from 1 July 2020.

The Queensland Government is in the process of making Project Bank Accounts obligatory for any building contracts valued between $1 and $10 million dollars.  A “project bank account” will be a set of three trust accounts where the funds are held in Trust for Head Contractors and Sub Contractors to secure progress payments, disputed funds and retention money until they are to be paid to the Contractor.  In essence currently, any retention amounts that may be payable under a building contract are held by the Head Contractor.

Hopefully, these changes will mean that retention amounts will actually be available to fix any building defects that will be applicable during the retention period under the building contract. Of course, the amount is available to the “owner” of the building itself, but being able to fix defects early on will hopefully have a positive flow on effect for unit owners in the future.

Should you have any concerns when buying or selling a unit, particularly in relation to what disclosure has or should have been made, please contact MMLaw.

The information in this document represents general information and should not be relied on for your specific circumstances. If you require legal advice and assistance on the matters contained or associated in this document you should contact MMLaw.

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Disclaimer

The content published in this Blog is in the form of academic papers and the opinions expressed herein are generalised. The information provided is for educational purposes, not specific legal advice.

The application of any principles referred to can alter from case to case and accordingly you should seek independent legal advice in respect of your individual circumstances.

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