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New laws mean investors must take 'extra care'

16 January 2015 Staff Reporter

New laws have come into effect this week that reduce apartment owners’ rights in the event of building defects. 

This follows the High Court’s recent ruling that the owners corporation of a Chatswood apartment building could not sue a major developer for alleged defects. 

Aviate Group’s Neil Smoli said the landscape for off-the-plan investors is changing and it has never been more important to seek expert advice before signing on the dotted line.

Under the NSW Home Building Amendment Act, which takes effect today, changes to the warranty a builder must provide for a new development are redefined and the distinction between structural and non-structural defects has been abolished. 


A six-year warranty period now applies to new buildings in the event of a major defect; otherwise, only a two-year period applies. A major defect is defined as a threat of collapse, an issue with structural performance or something that makes the building uninhabitable.

Aviate Group said this means that unless the defect is major, as defined by the new legislation, after two years the builder is able to wash their hands of any issues with the development. 

Mr Smoli said this obviously leaves purchasers in a potentially precarious position.

“Investing in property is typically seen as low risk but it’s only low risk if you take all the necessary precautions and undertake the proper due diligence prior to investing,” Mr Smoli said.

“Limiting the ability of purchasers to take action against builders for defects means the need to work only with builders and developers with a proven track record is vital. The company responsible for delivering a project must take pride in their work and be able to demonstrate that their other projects have been an enduring success.”


New laws mean investors must take 'extra care'
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