The new broom bringing confidence back to the multi-residential market

Most of us watched in disbelief as the nightly news flashed reports about the thousands of residents evacuated from their western Sydney apartment block on Christmas Eve 2018. The dire warning of a possible collapse in the Opal Tower came after several residents reported hearing loud cracks in the apartment block of 392 homes at Sydney Olympic Park. Structural cracks were found in the pre-cast concrete panels.

Months later, 130 residents were given hours to flee their 10-storey Mascot apartment building after cracks were discovered in the basement raising concerns of collapse. They were never able to move back in.

These homeowners became the very public face of the poor standards plaguing the $24 billion NSW building and property development industry. But you didn’t have to end up on the six o’clock news to empathise.

Four in 10 new residential apartment blocks in NSW have serious defects at an average cost of more than $330,000 a building, according to the Strata Community Association of NSW, with waterproofing and fire safety the most common problems.

And up until recently, the only avenue homeowners had to seek help was negotiating directly with the builder or developer, or embarking on a lengthy and expensive legal battle to get the defects rectified.

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When the first NSW building commissioner was appointed in 2019 under the Berejiklian government, changes came swiftly. David Chandler, a 40-year veteran of the building industry, was armed with legislative powers to overhaul the state’s residential building sector — the RAB or Residential Apartment Buildings (Compliance and Enforcement Powers) Act — in what was called once-in-a-generation reforms.

And he wasted no time doing exactly that. The reforms included the power for Chandler to issue developers with orders to rectify serious defects before granting them an occupation certificate.

“The RAB Act was a turning point, it was an important piece of legislation which is quite unprecedented in the country…I’m the only regulator who has the powers that are in the RAB Act,” Chandler says. “It really needed to be brought in; it switched the balance to give consumers a much better standing than perhaps they have had in the past. In effect, it allows me to stop the issuance of an occupation certificate, and therefore consumers ultimately being forced to settle on their apartments.

“I use those powers very, very cautiously, but I have used them.”

Chandler also backed moves to give more power to apartment owners, pointing out that they had less consumer protection than someone buying a toaster or washing machine. To this end, he supported the creation of a ratings system for developers — the independent Construction Industry Rating Tool or iCIRT — to help homeowners arm themselves against buying apartments with defects.

Prior to this, homeowners had few, if any, resources to have defects fixed. A 2012 report by the UNSW City Futures Research Centre found 72 percent of apartment blocks in NSW had defects and in newer units it was as high as 85 percent.

An unregulated industry where tight deadlines and budgets to complete major works were written into contractual agreements between builders and sub-contractors led to cost cutting and a rise in defects.

“It was shocking,” says executive director of the Owners Corporation Network of Australia, Karen Stiles, about the state of the residential apartment sector before Chandler’s appointment. 

“You had more chance of winning a $20 million lottery than you did of having a building with no defects.”

 “Unfortunately most of us fall in love with the glossy brochure. That’s why iCIRT is so good. We are so used to seeing a ratings system on electrical appliances and cars but until now there has never been one on builders and developers.

“I’m hearing reports of people taking back their deposits when they discover a developer is not rated. It’s a really powerful card to play for a prospective buyer.”

Mirvac was the first major property developer to be rated on iCIRT and is the only company to have a five-star rating. Mirvac was awarded the five-star rating following a detailed, independent and rigorous review and Stiles hopes their addition will encourage other major developers to come forward and be added to it.

“Raising the standard of construction in NSW is critically important to protect purchasers and restore confidence in buying off the plan and newly built apartments,” says Mirvac’s head of residential Stuart Penklis about iCIRT.

Stephen Brell, president of the Strata Community Association of NSW, believes a new scheme called Project Intervene — which allows homeowners to bypass the courts and engage directly with a developer to fix defects with the support of NSW Fair Trading and the NSW Building Commissioner — is the most exciting new reform to come out of Chandler’s reign.

“It’s a really cost effective program and removes the often combative and expensive legal element from the process of having defects rectified,” he says. 

“Before, the onus of proof was on the owners corporation, so you would spend tens of thousands of dollars to identify the defects and then tens of thousands to get it through the courts. But Project Intervene only works if the builder has not gone into receivership.”

Another positive move is the introduction of a decennial insurance product which allows owners corporations to have serious defects fixed by builders for up to 10 years after the building is first occupied. Brell says the positive changes Chandler has brought in don’t just help homeowners, but all elements of the industry, including the vast majority of honest builders who now have a way to distance themselves from the dodgy developers in the market.

With Chandler set to retire in August, there is hope that the sweeping changes he made will be upheld.

“Chandler has set up a legacy system for NSW,” says Brell. “He has a great team and two significant and brand new pieces of legislation: the Design and Building Practitioners Act and the Residential Apartment Buildings (Compliance and Enforcement Powers) Act. This will give the commissioner’s office certain powers to last beyond Chandler’s retirement.”

Chandler himself is hopeful for the future of the NSW residential apartment industry and wants to pass on this positive outlook to a new generation.

“I am (hopeful) because the industry doesn’t want to go back to where it came from,” Chandler says. “The other challenge we also have is to make sure we have tomorrow’s workforce; we were facing a situation where young people were hearing such horrendous stories about our industry that their parents were doing everything in their power to dissuade them from coming into our industry, which is a great industry.

“So we’re working with TAFE, we’re working with a whole range of employer groups to attract the next workforce, which has got to be a composition of male and female. 

“If by 2025 we can lift the number of women in our industry up to 20 per cent that would be a great outcome, and if a few years down the track we can raise it to another level, that would be great.”