New South Wales is tightening its apartment quality with stricter rules, more inspections and longer-tail liability. While this is good for buyers, it comes at a time when the demand for residential builders is at an all-time high, and builders prepared to work in the sector is at an all-time low.
The longer tail defects cost is crushing builders that are already squeezed by wafer-thin margins.
Multi-Unit Development Building Defects – A Rising Crisis
Serious defects remain a common problem in New South Wales as the state continues to focus on multi-unit developments to meet the housing supply crisis.
The Building Commission NSW and SCA NSW’s most recent statewide survey found that more than half of strata buildings reported serious common-property defects. These defects are dominated by waterproofing and fire-safety issues. Encouragingly, the rate is lower than schemes registered since 2020 (27%).
But the problem is not just the builders. When control shifts from a sophisticated developer and builder to a volunteer-led Owners Corporation, the governance capability and the ability to manage defects drop significantly.
NSW’s landmark Governing the Compact City study documented that many owners lack knowledge of rights/responsibilities, committees struggle to implement legislation, and volunteer governance without training. These are common occurrences that will slow or misdirect early defect responses and drive up costs.
Are Low-Service Strata Equipped to Manage Multi-Unit Complexities?
As NSW transitions to larger multi-unit developments with sophisticated engineering, fire and plumbing systems and larger numbers of owners, the management of these buildings is becoming far more complex. Ultimately, it is too complex for the management skills of lay residential owners on strata schemes.
Low-touch strata management models are not equipped to manage the growing demands of strata management. Strata schemes often focus on cost saving, targeting strata managers with low-cost models that are company secretarial first, rather than maintenance building managers.
Recent UNSW research highlights chronic information-access problems and poor record-keeping, plus dissatisfaction with manager communications. These issues directly degrade triage, evidence capture, and follow-through when building defects surface.
The same UNSW work study found that owners often struggle to obtain building plans and financial records. In fact, inconsistent advice and incomplete files are recurring pain points as strata committees change over time. That hampers causation identification and the subsequent rectification when dealing with the builder.
The timeframes for strata schemes are also tight. Strata committees must make claims within the Home Building Act warranty windows, generally 6 years for major and 2 years for other defects, with a 6-month extension for late-apparent breaches.
They must also keep to the Strata Building Bond & Inspections Scheme (SBBIS) milestones (inspector deployed within 12 months, interim report within 15–18 months, and final report within 21–24 months). Missing these claim periods weakens the claim and pushes disputes into costlier channels.
Why unskilled committees + low-service models drive poor outcomes
Ultimately, owner-led committees and cost-saving strata models impact builders, residents and investors.
- Slow or wrong triage leads to missed limitation windows under the Home Building Act and weaker linkage to enforcement options under the Residential Apartment Buildings (RAB) Act.
- Incomplete evidence (i.e. visual-only inspections, missing test data) weakens the causation proof and results in poorer remedial design.
- Continuity failures (i.e. manager churn/oversized books), stalled actions, and loss of chain-of-custody for documents will be increasing common.
- Builders deal with procurement mistakes (appointing advisers without building-pathology expertise), scope creep, higher cost, and lower rectification quality (a predictable outcome in volunteer-run schemes highlighted by UNSW’s governance findings).
The Reality of Building Defects
When a defect is identified, these strata schemes often hand claim management to their solicitors, driving defect management down a litigation track where work doesn’t commence until the claim is resolved.
A mitigated rectification plan from an experienced strata company that’s working with advisors would normally identify and resolve the issues earlier, reducing the impact both in cost to the builder and the strata.
As advisors, we have experienced a number of situations where defect management was delayed purely due to a lack of coordination of access to units to fix the problems promptly, worsening them and increasing costs. While pressure continues to mount for builders to improve quality and manage defects, without strata cooperation, more builders will exit the industry.
Construction failures have been extreme. Roberts & Co, one of the country’s most experienced builders, closed its Victorian operations and sold its New South Wales business in early 2025. ASIC data continues to show construction being the hardest-hit sector in insolvencies. Media summaries of ASIC figures reported 3,217 construction insolvencies in 2024 alone.
Looking Ahead for Builders
The NSW Building Commissioner highlighted that more than 400 builders have now received iCIRT ratings and over 200 ten-year warranty policies have been issued. This suggests that higher-assurance pathways that favour financially stronger builders are becoming more common, creating what is often described in the industry as a ‘flight to quality.’
However, the Commissioner also noted that many experienced builders are leaving the residential construction sector. This exit reduces competition and drives up project costs; representing a dire market shift.
If we want to improve the quality of construction, builders should not take the full burden of cost and poor planning. We need to improve the quality and governance of the strata schemes that take control after construction is complete.
In doing so, defects are detected earlier and managed efficiently. The alternative is to continue operating in an industry of under-capitalised builders, reduced competition, and handing over complex engineering structures to inexperienced strata management.
If you’re a builder looking to stabilise and protect your working capital, contact our team at Olvera Advisors for a personal discussion.
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