The insurance product giving Australian property buyers surety
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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.

By Corey Nugent, CEO Resilience Insurance
Fri, Sep 22, 2023 10:02amGrey Clock 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.

For more stories like this, order the latest issue of Kanebridge Quarterly magazine here.

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

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.



MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

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Hotel experience at home in Castle Hill

A new development in the Hills District sets a new standard in buyer expectations

By KANEBRIDGE NEWS
Wed, May 22, 2024 3 min

Castle Hill is set to be home to a new hotel-like development, with the announcement that the 94-apartment Astrid site is just weeks away from completion.

While the penthouse apartments across the two buildings have already been snapped up, there are still one, two and three-bedroom residences on offer. The development comes with a gold star iCIRT rating, guaranteeing it has met quality construction standards. The iCIRT rating system has been developed by Equifax in partnership with government, industry and market and rates projects from one to five stars following a rigorous and independent review process.

Steve Harb from developer CBD Core, said it’s the best indicator would-be buyers could have that their investment is safe.

“The iCIRT rating gives people the assurance that we’re trustworthy and have integrity as a developer,” he says. “Our service is complete from start to finish, from developer to builder. 

“As a buyer, you have one point of contact, there’s no shifting responsibility or passing the buck so if anyone has an issue, it can be sorted out as soon as possible.”

He said Astrid has proved popular with locals interested in upgrading without leaving the convenience and amenity of the Hills District. Surrounded by some of the best restaurants, clubs and recreational facilities in the area, it is also just six minutes’ walk to the new Metro station and a seven-minute drive to Castle Towers Shopping Centre. Schools and tertiary education options are also within an easy drive. In addition to some of the best parks and reserves in Sydney, it’s an attractive option for families on the move.

Mr Harb said the concept for the development, as with all his projects, was to create a hotel-like environment.

“I only do boutique projects and when I say ‘boutique’, I mean hotels without the concierge,” he says. “The quality and integrity is built into it.”

The infinity edge pool is surrounded by leafy gardens in a resort-style environment.

Leisure facilities include rooftop gardens and entertaining spaces as well as a fully equipped gym on the ground floor overlooking an infinity edge pool surrounded by lush landscaped gardens. Mr Harb says beautiful landscaping is a signature of all his developments.

“I have lived in the Hills District for more than 15 years and the reason I live here is because I love the leafy environment, the greenery,” he says. “I always like to emphasise that in my developments with strong landscaping.”

WORK FROM HOME HUB

Recognising the ongoing desire to adopt a hybrid working model, Astrid provides a dedicated on-site working environment suitable for exclusive use by residents needing focused work time, as well as those seeking professional meeting rooms to receive clients, with wifi enabled work desks, as well as more casual seating. 

Mr Harb said the pandemic taught him that, while working from home was convenient, having breakout spaces within a wider residential development was highly attractive.

“You’re not stuck looking at the same four walls,” he says. “The shared work space at Astrid has comfortable lounges, chairs, coffee tables and more than a dozen cubicles,” he says. “It’s more like going into a meeting room in a hotel.”

The apartments are characterised by light-filled interiors.

IN RESIDENCE

The apartments are light-filled living spaces with seamless access to balconies, through to integrated joinery secreting storage. Finishes have been chosen to last, from the Michael Angelo Quartz benchtop and Char Oak Polytec Ravine joinery in the kitchen to the stone splashback and custom-made joinery in the bathroom.

Access throughout the buildings is via a swipe card, providing a secure environment. 

For more information, see Astrid Castle Hill.

MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

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