NSW: Building better outcomes on defects: What NSW strata owners and managers need to know in 2025

In 2025, building defects remain one of most stressful and expensive issues in New South Wales strata. From water ingress and cladding replacement to structural failures and ageing buildings, committees and owners corporations face complex legal choices that can have long term financial consequences if they delay action.

In last week’s Lookupstrata webinar (13 November, 2025), NSW: Building defects – key legal updates and insights, Duncan Campbell and Jack De Gioia from Bannermans Lawyers walked attendees through the fast moving landscape of defect bonds, statutory warranties, cladding litigation and the Design and Building Practitioners Act. Drawing on active cases in NCAT, the Supreme Court and recent High Court authority, they explained how the law currently operates, where it is shifting, and what owners corporations can do to protect themselves.

NSW: Building defects – key legal updates and insights | Duncan Campbell and Jack De Gioia, Bannermans Lawyers – Nov 2025

The session focused on New South Wales legislation as at November 2025, but many of the themes will interest strata professionals and owners across Australia, especially those dealing with serious defects or contemplating legal action.

Understanding building defects in 2025 and who is responsible

Duncan and Jack began with the basics. Defects are not just annoying problems. They represent legal risk for owners corporations and serious safety or asset value issues for residents and investors. Under the Home Building Act, the law draws a distinction between:

• Major defects: typically structural elements and critical systems such as waterproofing and fire safety, where failure creates a serious risk to safety or habitability
• Minor defects: other non structural or less serious issues

For strata schemes, common property defects sit at the heart of most disputes. Owners corporations have a clear, ongoing duty to keep the common property in good and serviceable repair. Even if the builder or developer has long since moved on, the obligation to fix the building remains with the owners corporation.

Responsibility does not end with the corporate entities. Under the Design and Building Practitioners Act, certain individuals involved in construction work owe a statutory duty of care to current and future owners. That duty can reach through special purpose vehicles and target those who actually controlled the work on the ground. This has become a powerful tool when original companies have been wound up or stripped of assets.

Statutory warranties, time limits and the duty of care

The presenters spent considerable time on limitation periods because many schemes come to grief here. In summary:

• Statutory warranties under the Home Building Act give two years for minor defects and six years for major defects, calculated from completion
• If you discover a major defect in the last six months of the six year period, you may receive an extra six months to commence proceedings
• After statutory warranties expire, the Design and Building Practitioners Act can still provide a pathway for claims based on a statutory duty of care, with its own six year period running from when the owners corporation knew or ought reasonably to have known of the loss, subject to an overall ten year long stop

Crucially, the duty of care can apply not only to the builder and developer but also to certain downstream professionals who exercised substantive control over the work. Recent cases have explored how far this concept extends to nominated supervisors, project managers and certifiers, and how precisely plaintiffs must plead the risks and precautions that should have been addressed.

Duncan and Jack emphasised that these regimes operate in parallel. You do not pause your statutory warranty clock by engaging with government schemes, and you cannot assume that a complaint process will protect your limitation position. Legal advice and proper expert input early in the life of a building remain vital.

Cladding, class actions and government schemes

The webinar also reviewed the national cladding class actions and New South Wales specific schemes such as home warranty insurance, Project Remediate and Project Intervene. While each mechanism has its own criteria and limits, the key message was that:

• Home warranty insurance provides a safety net for certain smaller residential projects when the builder dies, disappears, becomes insolvent or loses its licence
• Project Remediate can assist eligible schemes with interest free loans for cladding rectification, and in some cases a lump sum payment for works completed before mid 2021
• Class actions such as the Alucobond and Vitrabond matters target manufacturers and their insurers where unsafe products have created widespread fire risk

These avenues can provide real relief in the right circumstances. However, they do not replace the need for owners corporations to understand their own legal rights against builders, developers and other duty holders, or to budget for rectification where external recovery proves limited.

The building bond scheme and the role of the Building Commissioner

New South Wales introduced the building bond scheme to create a financial buffer for newly constructed class 2 residential buildings. Developers currently lodge a bond based on a percentage of the contract price, intended to fund rectification of defects identified in early inspections. The move from two percent to three percent has been delayed more than once, partly in response to the evolving insurance market.

Attendees heard that the bond and related inspection process can help resolve issues in the early years after completion. Separately, the Building Commissioner now has significant powers to issue orders requiring developers to rectify serious defects. Those powers extend for up to ten years after completion.

The presenters stressed that these are compliance and enforcement tools, not additional warranties. Owners corporations still need to monitor their statutory limitation periods and consider Design and Building Practitioners Act claims as needed. The Building Commissioner can put pressure on a developer to act, but that does not extend the underlying time limits for private legal action.

NCAT, the Supreme Court and the importance of expert evidence

Duncan and Jack then stepped through the practical pathway of a defects claim. For many schemes, proceedings start in NCAT because it offers a quicker and often cheaper jurisdiction with a focus on just, quick and cost effective resolution. Higher value claims or more complex matters may proceed in the Supreme Court instead.

Whichever forum you use, expert evidence sits at the centre of any successful defects case. General building defect experts, structural engineers, waterproofing specialists and mechanical engineers all play a part in defining the defects, linking them to breaches of standards and estimating rectification costs.

A typical timetable includes:

• Engaging appropriate experts and completing intrusive investigations
• Filing evidence and pleadings that clearly link defects to legal causes of action
• Joint expert conclaves where opposing experts meet, discuss their views and produce a joint report that narrows the issues

It is often at the expert conclave stage that many matters settle, either by way of a work order or a deed of settlement that captures a scope of works and cost contribution.

The presenters also noted recent updates to the expert code of conduct, including guidance about generative AI. In short, expert reports must reflect the expert’s own analysis, and any use of AI tools requires careful disclosure and court approval.

Practical guidance for committees and strata managers

Throughout the session, Duncan and Jack returned to what owners corporations can control even in a difficult defects environment.

For committees and owners corporations:

• Put defects on the agenda at every annual general meeting as required by the 2025 strata law reforms
• Obtain your own independent defects report rather than relying only on reports arranged under government schemes
• Act early rather than waiting for disputes to escalate or for limitation periods to run out
• Use your strata manager to coordinate expert engagement, evidence gathering and communication with the builder and developer
• Rectify serious defects as soon as practical to keep the building safe and habitable, while preserving your right to recover costs where possible

For strata managers:

• Remind committees of their strict duty to maintain and repair common property, regardless of disputes with builders or developers
• Flag key time limits clearly and encourage schemes to seek timely legal advice
• Help prepare clear records of correspondence, complaints, expert reports and decisions to support any future litigation
• Guide committees on when and how to escalate from negotiation to formal complaints, NCAT proceedings or court action

Several attendee questions touched on reluctant committees, fears about upsetting builders, and confusion over roles between building managers, strata managers and lawyers. The presenters were clear that owners corporations cannot avoid their responsibilities by ignoring defects or waiting for someone else to act. Where necessary, individual lot owners can use their own rights under the Strata Schemes Management Act to push for action.

Why this matters beyond New South Wales

Although the legal detail in the webinar focused on New South Wales, the broader themes resonate across Australia. High density living is expanding in every capital city, and many states face similar challenges regarding cladding, latent defects and ageing buildings. New South Wales case law on duty of care, proportionate liability and the role of certifiers will continue to influence how other jurisdictions think about consumer protection and industry standards.

For interstate managers, consultants and owners, the session provided a useful preview of reforms and risk management strategies that may emerge in their own markets over time.

Watch the full recording

This webinar delivered a dense, practical update on one of the most important legal topics in strata right now. Whether your scheme is dealing with cladding replacement, water ingress, structural cracking or simply planning ahead, the recording offers a clear roadmap of the current law, the traps to avoid and the options available when things go wrong.

If you attended live, it is worth watching again to revisit the detail on limitation periods, duty of care and strategy. If you missed it, this is an essential session for New South Wales strata managers, committee members and consultants who want to handle defects with confidence and protect their owners from unnecessary risk.

Link to presentation: NSW: Building defects – 2025 key legal updates and insights

Duncan Campbell
Bannermans Lawyers
E: enquiries@bannermans.com.au
P: 02 9929 0226

Jack De Gioia
Bannermans Lawyers
E: enquiries@bannermans.com.au
P: 02 9929 0226

This post appears in Strata News #770.

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Read next:

• NSW: Navigating the DBPA 2020 and the Building Defects Claims Process
• NSW: Water Leaks, Defects and Disputes in Strata Buildings
• NSW: Q&A Strata Dispute Resolution and NCAT Orders

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