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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Two architecture lovers created a real-life version of the home in Utah. It is now on the market for $45 million.
5 min
Near the end of “North By Northwest,” Alfred Hitchcock’s 1959 thriller, the protagonist, Roger Thornhill (played by Cary Grant), follows the seductress Eve Kendall (played by Eva Marie Saint) to a sprawling Modernist house reminiscent of Frank Lloyd Wright’s Fallingwater.
Except this house is situated not over a waterfall but, absurdly, atop Mount Rushmore.
The Vandamm House, named for the movie’s villain, never existed except on a Hollywood soundstage.
But it seems so real on the screen that Christine Madrid French, an expert on the architecture of Hitchcock’s films, says people sometimes tell her: “I went to Mount Rushmore, but I forgot to visit the house.”
John Boccardo, who grew up in Los Gatos, Calif., was 11 when the film came out. He saw it nearly a dozen times at the Studio Theatre in San Jose.
He was especially taken with the Vandamm House, which seemed completely real to him.
“I promised myself I would visit it one day,” says Boccardo. In the meantime, he drew surprisingly realistic renderings of it, from memory, while still in grade school. undefined
Years later, as an architecture student at SCI-Arc (Southern California Institute of Architecture) in downtown Los Angeles, he learned that the house didn’t exist.
A couple of rooms and two small sections of its exterior had been built on MGM’s Culver City lot under the supervision of production designer Robert Boyle.
For scenes in which the house was in the background, Hitchcock relied on paintings of the imaginary building by special-effects artist Matthew Yuricich.
The paintings, known as mattes in Hollywood, weren’t terribly realistic, but with Cary Grant and Eva Marie Saint moving across the screen, moviegoers didn’t notice.
“It may be the most famous Modernist house that never existed,” says French, an architecture and film historian and the author of “The Architecture of Suspense: The Built World in the Films of Alfred Hitchcock.”
Boccardo went on to become a successful architect who worked in both northern and southern California.
Then, while semi-retired and living in Utah, he decided it was time to build the Vandamm House. His partner, Derek Esplin, threw himself into the project, working out details of everything from financing to furnishing. Says Esplin, a film producer, “I took it on as my life’s work.”
Boccardo, 78, Esplin, 59, and their three dogs (two schnauzers and an aussiedoodle) moved into the house in February.
The men have used it the last four months to ensure that everything is working perfectly. Now they are offering the house for sale at $45 million. The furniture and fixtures are available separately. “It can be turnkey,” Esplin says. The broker is Paul Benson of Engel & Völkers in Park City.
“I expect to get the full price,” says Benson. “It is not an outlier. We sold a house by the same architect in Park City last year for $65 million. And this is one of the most exceptional homes ever built in the state of Utah. You couldn’t recreate it for $45 million.”
Boccardo and Esplin declined to say how much it cost to build the house. But they got a bargain when they paid about $2 million for the 1.7 acre lot in 2021. (Benson says the land alone would command $7 million to $10 million today.) They chose the site, high above Park City, after searching for property that would let the house, with its dramatic cantilevers, be seen from below.
The property, which offers unobstructed views of the Wasatch Range, is in the Pinnacle , a gated community (complete with a clubhouse and a concierge) within the Promontory, a larger gated community—like a nightclub’s VVIP room entered through its VIP room.
With the site selected, they turned to Salt Lake City architect Michael Upwall, who is known for designing very large houses for the very rich. The dramatic aerie in HBO’s “Mountainhead,” with Steve Carrell, was one of his.
Laying out the house, Boccardo and Upwall, who served as co-architects, knew it would have a large living room with a wall of windows at one end and a stairway at the other. The stairway would lead, via a mezzanine, to one of the bedrooms. But that was all they could glean from the movie.
To finish the floorplans, says French, they had to answer all the questions the filmmakers never asked, such as “What’s behind that door?”and “What’s around that corner?”
And how many bedrooms, bathrooms and kitchens are there? Their answer: six, eleven and three. (Boccardo and Esplin met French when they attended a lecture she gave about Hitchcock. The two men have since hired her to write about their house.)
Boccardo and Esplin also had to answer questions the filmmakers, even the wildly imaginative Hitchcock, would never have thought to ask:
How many black leather seats, fully reclining and heated, should there be in the home theatre? (18)
How much will it cost to fire-harden the house? (Over $1 million. “You can’t make a house completely fireproof, but you can improve its chance of surviving,” Esplin says. A special pump allows the water in the extra-deep, 75-foot lap pool to be used for firefighting.)
How much should we spend on custom walnut cabinetry? (Also over $1 million.)
What if our dogs’ feet get cold? (Relax. The house’s 100-foot-long gravel dog run is heated.)
Structural engineer Cambria M. Flowers figured out how to support the living room, which cantilevers 40 feet into thin air. The answer was to build two 160-foot-long steel-reinforced concrete beams, 120 feet of which anchor the cantilever while also supporting the ceiling of the garage.
Thick diagonal beams, like those shown prominently in “North By Northwest,” were slipped in later to provide additional stability. In the end, the project required 400 tons of steel, 4,000 cubic yards of concrete and 24 miles of electrical wire, according to contractor Gary Hill.
Now the men are ready to return to the last dream house they built, against dramatic red rocks in the southern Utah town of Ivins. Boccardo hopes the buyer of the Vandamm house is a lover of “North By Northwest.”
Esplin says that he and Boccardo, who dreamt of the house for more than 60 years, occasionally wonder if they really want to sell it. But then they remind themselves that it will be okay for someone else to own it. After all, Esplin says, “Many houses are built without stories. But this house has a story. And the story of this house belongs to us.”
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