Lies, Damned Lies and Statistics – NSW Government shoots down apartment owner rights

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Mark Twain, the celebrated American author, coined the above phrase to describe the persuasive power of numbers, particularly the use of statistics to bolster weak arguments. This technique is one commonly employed by governments.

An example of this technique in action is the continual amendment of Home Building legislation in NSW with a view to encouraging builder and developer activity and thereby stimulating the economy. The latest set of amendments should not be allowed to pass without mention. On 5 June 2014 the Home Building Amendment Bill 2014 received assent and more than any other Bill since at least 2002, will reduce the rights of owners corporations under the Home Building Act to recover losses arising from significant defects in their buildings.

The Home Building Amendment Bill 2014 introduces the concept of a ‘major defect’ which will replace ‘structural defects’ in connection with statutory warranties in the Act.  The definition of a ‘major defect’ contains the following criteria all of which must be satisfied.  A defect, to be a ‘major defect’, must:

  1. be a defect in a ‘major element’ (as defined in the Act and includes fire safety, waterproofing and load bearing structural elements) of a building;
  2. be attributable to defective design, defective or faulty work or defective materials (or any combination of these);
  3. arise from a failure to comply with the structural performance requirements of the National Construction Code;
  4. cause or be likely to cause the inability to inhabit or use the building or part of the building for its intended purpose or the destruction or the threat of collapse of the building or any part of the building; and
  5. not be otherwise excluded by the regulations to the Act.

The great concern is that the 6 year limitation period for structural building defects will effectively be replaced by a 2 year limitation period.  This change will apply to many structural defects that owners corporations typically complain about – even if these defects cost millions of dollars to fix.

Further, the reforms are largely retrospective such that buildings more than 2 years old with defects that cannot be re-classified as major defects will lose the benefit of statutory warranties entirely unless that owners corporation has already commenced proceedings or made a home warranty insurance claim.

In the light of the above, Minister Matthew Mason Cox’s press release dated Friday 13 June 2014 stating “Consumers will benefit from a new definition of major defect to include serious fire safety and waterproofing defects for the first time” is extraordinary.

While it may be true that the definition of major defect will include serious fire safety and waterproofing defects, what the press release glosses over is that those fire safety and waterproofing defects must satisfy the above criteria. As the required criteria will not be met in the vast majority of buildings, the implication that consumers will somehow benefit from these reforms is simply incorrect.

See the link below to a Sydney Morning Herald article quoting me on this issue.

http://smh.domain.com.au/real-estate-news/strata-reforms-gunned-down-20140702-zssw4.html