On 19 January 2024, the Strata Schemes Management Amendment Regulation 2024 (Regulation) commenced. The Regulation made three changes to the Strata Building Bond & Inspections Scheme, more colloquially known as the building bond scheme. We set out a brief outline of these changes below.
Build-to-rent housing
The Regulation inserts a new Clause 44A to the Strata Schemes Management Regulation 2016 (NSW) (SSMR).
This clause exempts certain build-to-rent projects from the building bond scheme. To qualify, the project must be:
- building work for a build-to-rent property
- carried out under a Development Consent that complies with section 71 of the State Environmental Planning Policy (Housing) 2021
- a development which also qualifies for a reduction of land value for the purposes of calculating land tax under section 9E of the Land Tax Management Act 1956 (LTMA).
Notably, to qualify for this exemption from the building bond scheme, the project requires a significant portion of the labour force carrying out the works to be drawn from disadvantaged classes of workers. These classes of workers include apprentices, long-term unemployed workers, workers with barriers to employment such as disability and Aboriginal jobseekers (see section 9E(2)(c) of the LTMA).
Clause 44A aims to make low-income housing projects more attractive to developers, with an additional policy focus of supporting workforce entry and labour force depth in the construction industry.
Change in cutover date for the increase in the building bond
The Regulation also amends the cutover date for the building bond increase from 2 per cent to 3 per cent from 1 February 2024 to 1 July 2024.
The amended clause 54 of the SSMR now reads:
"54 Amount of building bond
For the Act, section 207(2) and (4), the prescribed percentage is
as follows –
(a) for a building bond given before 1 July 2024 – 2%,
(b) for a building bond given on or after 1 July 2024 –
3%."
Cancellation of the building bond
Finally, the Regulation introduces clause 55AA to the SSMR, which covers situations where the Secretary may release the building bond back to a developer.
The three situations where this can occur is where the:
- final inspection report does not identify any defective building work
- report only identifies defects that fall outside of the qualifications under section 209 of the Strata Schemes Management Act 2016 (SSMA)
- secretary is satisfied that it is appropriate to cancel the building bond.
It is somewhat unclear which defects would fall outside of section 209 of the SSMA, as defects that constitute a breach of statutory warranty under Part 2C of the Home Building Act 1989 are already captured.
Context
By deferring the percentage increase in the building bond, developers are given breathing room during tricky market conditions, whilst the drive towards decennial liability insurance is maintained. The exemption for build-to-rent is long term play to support broader policy goals to address the housing crisis and create employment opportunities for disadvantaged workers.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.
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