New building laws won’t stop dodgy developers cutting corners
The Sunday Morning Herald
Ross Taylor
12 September 2017

With the home unit building fervour in NSW in full swing, the occurrence of substantial defects in new construction is a massive problem.

It is common for large-scale apartments of 100 units or more to have defects costing $5 million to $15 million to fix. Many strata owners end up paying for the repairs themselves after protracted efforts to get the developer, architect, engineer or builder to fess up.

Recent and proposed changes to NSW strata and building laws have been accompanied by bold press releases promising that effective regulatory reform has at last arrived. However, a close reading reveals a different story. These changes are merely placebos.

As a waterproofing consultant with more than 40 years in the industry, I have analysed a myriad of building repairs and defect cases and have found the systemic, expensive-to-fix defects have their origins primarily in the decisions and directions of the developer or developer/builder and are not so much the fault of the tradies as is commonly believed.

This is particularly evident with the more rapacious developers and developer/builders who don't care about the end result once the pre-sales contracts are snapped up. Cost minimisation lies at the heart of these developers business model.

This attitude, while now the norm in Sydney, is by no means universal. Developers and developer/builders who have a reputation to maintain, who care about the end result and eschew the skimping, cost-driven mentality certainly exist, but are in the minority.

And when a developer is solely profit-focused, the major defects have their origin at least two years before the workers arrive. It goes like this.

The developer saves on consultant fees by only paying the architect or structural engineer enough fees to get building approval, but not enough to provide working drawings or address design anomalies between documents. Defects often originate in the gaps between professional's drawings. It is common for architect's drawings to say one thing and the structural engineer and hydraulic engineers drawings to describe something quite different, and there is no time or budget for reconciling and closing of these gaps.

Once development approval is achieved the lowest-bid builder is asked to "value engineer" the design to effectively screw down his price or otherwise the next builder in line will get it.This builder is then contracted to take over full design responsibility at the reduced price. To afford this the builder is reliant on the subbies to design the details for free.

Cost minimisation lies at the heart of unscrupulous developers' business model. Photo: Ross Taylor

Since time is now of the essence to meet the developers' sales program, the key designer of the details often will, by default, become the brickie or formworker who has to make it work as best they can.They have to change things on the go to make it fit the space or more importantly, the budget, available.

Compounding the errors is the dizzying array of new building materials arriving on site. These are often nominated, once again by the developer, for their speed of installation and lower cost – not their longevity, track record or beauty.

Many strata owners end up paying for the repairs themselves. Photo: Ross Taylor

The latest changes in the Home Building Act were promoted as providing protection from these practices. The reverse is the case. Under the recent changes the definition of the type of a "major defect", which draws the maximum six-year warranty period, has now been tweaked (actually, diluted) to include only the most extreme type of failure – the type that almost never occur. All the rest of the expensive systemic defects such as leaks and cracks, the ones that happen most of the time, only attract a two-year warranty. However, the causes are usually deeply hidden and the effects don't emerge for three or four years.

The arrival of the Strata Building Bond scheme has also been much heralded. It is scheduled to commence in January 2018. The scheme allows for a building inspector to be appointed to review the building for defects and provide a report. But the building inspector can be appointed by the developer at any time within the first 12 months and can submit the report as early as 15 months after the building is completed. At 15 months the major defects are still in hibernation awaiting three or four good hot summers and several more drenching rains before they emerge.

Defects often originate in the gaps between professional's drawings.  Photo: Ross Taylor

The new "independent inspector" is to be selected and paid for by the developer. Like the building certifier system before it, there is a fundamental conflict of interest built into the system.The building inspector in the proposed system will rely on the developers for repeat business. As one certifier recently confided "you challenge them at your peril".

While the legislation provides for the owners corporation to have a right of refusal of the developers appointment , the strata committee will still be unpacking their boxes when this is going on.

Major defects can have their origin at least two years before the workers arrive. Photo: Ross Taylor

The developer is to deposit a bond amounting to 2 per cent of the building contract to pay for any repairs found by the building inspector that haven't already been dealt with by the builder. However, we often find that the defect repair bill on an average block of units is about 8 per cent of the original construction cost. The owners will cop the 6 per cent difference or commence legal action.

Legislation like this certainly doesn't provide protection to consumers. It is defective legislation for defective buildings. Laws are needed which create a level playing field of compliance expectations rather than a sanction-free race to the bottom. Detailed working drawings on the key defect issues by qualified architects and engineers must be made mandatory prior to development approval.

Bring back the long-lost clerk of works role to the building sites to check that the works are carried out in accordance with the drawings, codes and standards. This overcomes the problem of design on the run. There is a desperate need for better consumer information calling out repeat offenders so that better informed purchasing decisions can be made. Name and shame legislation would help raise the bar. The government needs to create an environment that supports good behaviour and calls out the bad.

Ross Taylor is the managing director of Ross Taylor & Associates.

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