Strata Building Bond & Inspection Scheme (SBBIS)

What Is The Strata Building Bond & Inspection Scheme (SBBIS)?

Under the Strata Building bond & Inspections Scheme (SBBIS), developers of new apartment buildings 4 storeys or higher must pay a building bond to NSW Fair Trading equal to 2% of the total price paid or payable of all contracts for the building. Once the building has been completed, a Qualified Strata Inspector must inspect and approve the work before releasing the bond. The bond will remain in place until all work is complete and approved by a Qualified Strata Inspector.

8 Stages of SBBIS

Strata Building Bond and Inspection Scheme

Stage 1 – Building Bond Lodgement

The developer is responsible for obtaining and lodging a building bond with the Secretary (NSW Fair Trading).

The bond amount must be calculated before applying for an occupation certificate.

To register a project in the NSW Planning Portal, developers need to know: the street address, the contact information of both developer & builder; class/use/storeys/units of development; and documents such as contracts, warranties etc.

Electronic copy of the building bond needs to be uploaded in the NSW Planning Portal, while the original should be delivered via courier, express post, or by hand pending COVID safe orders.

Stage 2 – Inspector Appointment

(We get involved from here)

The developer must appoint a building inspector within 12 months of an occupation certificate (OC) being issued, and the owners’ corporation must approve the appointment.

If this is not done in time, Fair Trading will arrange for one to be appointed at the developer's cost.

Within 28 days of appointing a building inspector, documents such as those listed under Stage 1 – Building Bond Lodgement and any information regarding known defects or maintenance schedules should be provided to them by the developer.

Stage 3 – Interim Inspection and Report

The building inspector must attend the site to perform an interim inspection between 15 and 18 months after the occupation certificate is issued.

The purpose of this inspection is to identify any defective building work.

The building inspector must give at least 14 days of written notice for access, and all parties must provide reasonable assistance with no obstruction or hindrance.

Defective work can be identified through visual inspections and non-destructive testing techniques; however, a secondary inspector may also need additional specialist/expert reports included in their report.

The SBBIS on Strata Hub will generate an interim report which should then be provided electronically via link form by Fair Trading, owners corporation, developer and builder responsible for defective works (if any).

If no defect is found in the interim report, then it becomes final without requiring further action from Fair Trading, which will release the bond accordingly upon considering the developer's application.

Stage 4 – Rectifying Defective Building Work

The developer is responsible for correcting any defective work identified in the interim report and must liaise with the builder.

If the original builder is unavailable, the developer should arrange a new builder.

Rectification of defects should take place after an interim inspection has been conducted and before the final inspection commences (roughly between 18 to 21 months).

The builder must give at least 14 days written notice to relevant parties before entering affected lots (e.g., apartments or balconies).

Access cannot be unreasonably refused if proper notice was given.

Stage 5 – Final Inspection Report

The developer must arrange for the same building inspector who prepared the interim report to carry out the final inspection and provide a final report.

If the original inspector is unavailable, written notice of this must be provided to Fair Trading within 14 days.

The Final Inspection takes place between 21-24 months after issuing an Occupation Certificate, determining whether defective building work identified in Interim Report has been rectified.

Upon completion of the Final Report (which includes details on how outstanding defective works should be rectified), links are sent out to parties such as Secretary (Fair Trading), Owners Corporation etc., which will also include information on accessing electronic copies from them if necessary.

Depending on findings from Final Report, either the whole bond may be returned by Fair Trade or costs estimated for rectifying any defects found.

Stage 6 – Determining Cost to Rectify Defective Building Work

If defective building work is identified in the final report, the cost to rectify it must be determined.

The developer and owners corporation can reach an agreement regarding this cost, providing a 'deed of agreement' and making an application to Fair Trading within 30 days.

If no agreement is reached, Fair Trading may require either party to provide information or reports or arrange for an appropriately qualified person to provide a report on the rectification costs.

This amount will then be claimed from the building bond, with both parties sharing equally in arranging this person's services.

Stage 7 – Paying the Building Bond

The payment of the building bond can occur 2 years after completion, with consent from both the developer and owners’ corporation.

If no defects are found in the interim report, and a waiver is successfully applied for, it becomes a final report and payment will be released within 90 days to an approved issuer.

If no defects are found in the final report, then again, the release of funds will happen within 90 days to an approved issuer.

In case defective work is identified in stage 5, payments come out of the building bond between 2-3 years post-occupation certificate issuance; if the cost exceeds the amount held by the bond, then the full amount is paid to the owners' corporation.

Fair Trading provides 14 days written notice prior to any proposed payments from Building Bond & may refuse/reduce such amounts if access was unreasonably refused for rectification works.

Stage 8 – Completion

The Owners Corporation must use any money received from the Building Bond to rectify the defective building work identified in the Final Report within a reasonable time.

They must also give written notice of completion and return any leftover bond after rectification is complete.

The timeline for this process should be completed within 3 years, excluding time taken to fix defects mentioned in the report, but this can vary due to applications for variations or reviewable decisions by Fair Trading, as well as orders made by NSW Civil and Administrative Tribunal.