The insurance product giving Australian property buyers surety
Property is a key pathway to wealth. A new product ensures you get what you paid for.
4 min
Following significant building industry reforms in NSW in recent years, the insurance industry has entered the apartment sector, offering insurance on quality building projects, for quality trustworthy producers. As the NSW Government under the administration of the Office of NSW Building Commissioner leads building regulatory change, the need for commercial solutions supporting consumers and those trusted building practitioners could not be timelier. Enter Latent Defects Insurance (LDI). Here’s what you need to know about this game changing product.
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What is Latent Defects Insurance?
Latent Defects Insurance (LDI)is an insurance product available around the world for decades but only now available in Australia. It provides insurance protection for structural defects and waterproofing defects in apartment buildings for a period of 10 years after completion of construction. This is a protection unavailable to consumers or industry previously, and it provides unequalled consumer confidence in the quality of building for purchasers while eliminating the destructive and growing litigation business model operating across the construction industry.
Why would an insurer offer this cover given the stories of poor building?
LDI changes the way building insurance is offered. Rather than reliance on history and in house certification, LDI requires a developer and builder to employ an independent inspection service all the way through construction. This inspection service must be approved by the insurer and the scope of inspections agreed before construction commences. The inspection program is detailed and includes design review, construction inspection, waterproofing inspection and testing among many aspects of assurance. This gives the insurer, the construction participants, and consumers much greater surety of compliance with standards and codes, safety, and delivery, enabling an insurance security to be offered after completion of the building project.
Won’t this insurance only add to the already strained affordability pressures?
No. In NSW, a developer is required to provide a 2 percent financial bond to NSW Fair Trading at completion securing the quality of building for a period of two years. This cost, the 2 percent bond is charged to the construction cost and therefore onto the purchaser of units. If that bond is returned to the developer at the end of two years, it is rarely if ever passed back to those purchasers. LDI is an alternative to the Strata Bond, meaning that the developer has a choice of providing the two-year bond or a 10-year insurance policy. The current experience for the cost of the LDI product is it is priced at approximately 1.5 percent. This means LDI is in fact cheaper than the current bond and reduces the impost on purchasers.
How does this benefit consumers and the building industry?
Latent Defects is a 10-year insurance cover with cover at the building value or $50 million. The strata bond is a two-year protection valued at 2 percent of the cost of building. The limitations on the value and time offered by the strata bond are and have been catastrophic for many consumers. It also brings about significant litigation risk for developers, builders, and financiers. Latent Defects Insurance is offered on a strict liability basis. That means there is no need to find fault to enable a claim, eradicating the litigation business model that costs all participants tens and often hundreds of thousands of dollars and many years of time and frustration.
Why would a developer not elect to purchase Latent Defects Insurance?
The product is only new to Australia, being offered in the open market in the past 12-months. Resilience Insurance is the first to offer this product. The insurance is offered selectively to developers and builders with quality building histories meaning those with a history of association to consumer harms or poor quality outputs will either not be able to obtain the cover. Other developers have relied on the return of the 2 percent bond in their own profitability models, taking that benefit to their business returns over tangible, transparent delivery and security in favour of their clients.
How do you ensure your property is protected by Latent Defects Insurance
Prospective purchasers should be asking their developer in the sales display suite if their property will have Latent Defects Insurance. There is already strong evidence and media reporting of consumers moving purchase decisions on this exact point. Ask your developer and their agents if you are getting a property with two years limited protection or 10 years full insurance protection. For developers, the security provided means that the risk of litigation is eliminated.
CEO of Resilience Insurance, Corey Nugent says:
Latent Defects Insurance is a vital protection for consumers and building practitioners changing the way building outputs are overseen and delivered. Ensuring quality and backing that product with full insurance protection enables apartment buyers to have confidence in their investment, without the fear of catastrophic future exposures.
Supporting the significant and necessary regulatory reform in NSW, Resilience Insurance has been able to offer this product benefiting confidence, transparency and trust in quality building product. Providing insurance protection for the benefit of apartment owners, removing the litigation risk for building industry participants and ensuring our apartment buildings are delivered to a quality benchmark are just some of the benefits of Latent Defects Insurance.
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The penthouse unit at 80 Columbus Circle in Manhattan spans 8,000 square feet and once set a price record for the city.
2 minEight is definitely someone’s lucky number—especially when a few zeros are tacked on at the end.
The top-floor unit of the 80-storey 80 Columbus Circle in Manhattan is coming to market for the first time in more than 20 years and asking a nice round $80 million.
The full-floor unit spans over 8,000 square feet and is part of the Mandarin Oriental Residences above the hotel in the Deutsche Bank Center. It has eight rooms with eight ensuite baths, each with its own walk-in shower.
It last sold in 2005 for a hair under $30 million to cosmetics executive Sandie Tillotson, a founding member and senior vice president at the Utah-based Nu Skin Enterprises. She agreed to purchase the unit in 2001 while the complex was under development as the Time Warner Center.
Today, the six-bedroom apartment features spacious living areas and views from every room, including a close-up view of Central Park and panoramic 360-degree vistas stretching to the Mario M. Cuomo Bridge, according to listing agent Eva J. Mohr of Sotheby’s International Realty.
“There are windows all the way around,” Mohr said. “The views are spectacular and there are no obstacles in front of the windows.
The apartment comes with a library and cinema, a primary bedroom with its own lounge, an oversized kitchen, a corner breakfast area with two glass walls and a utility room with caterer-level equipment and two sinks—one for prepping flowers and the other for bathing pets.
The 80th-floor unit has never been resold and was rarely used by the seller, according to information provided by the listing agency. The corresponding top-level unit in the complex’s second tower just sold. That unit once belonged to Related Companies boss Stephen Ross and sold for $50.7 million in an off-market deal last week.
“The one that went for $55 (sic) million was completely redone with marble and it was beautiful, but you don’t have the views,” Mohr said.
When Tillotson bought the property, the $30 million contract was a record price for a condominium, according to the New York Times. In 2005, the apartment was delivered as “8,200 square feet of raw space” and Tillotson brought her own team to do the interiors, the Times reported.
Tillotson’s Nu Skin is a seller of anti-ageing and wellness products that was founded in the 1980s and is active in more than 50 international markets, particularly in China. The publicly traded company has also recently expanded into India. Nu Skin has several thousand permanent employees at its Provo, Utah, headquarters as well as tens of thousands of salespeople worldwide.
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