Too often developers and Owners Corporations end up at 10 paces facing off through lawyers to resolve building defects. It’s expensive, takes a toll on relationships, and the final pill ends up difficult to swallow for all sides. New owners feel their prized asset is devalued and the reputation of the developer is tarnished. In an environment where everyone is looking to cover risk and limit liability can defects be successfully resolved while maintaining positive relationships?
As difficult as it seems, there are steps you can take to improve the relationship between you and the Owners Corporations. Here are our top 10 tips for ensuring the best outcomes when working to resolve building defects:
1. Get the handover right
Often left aside in the final push for completion is the compilation of handover documents. These records include maintenance manuals, warranty information, as-built plans, contracts and certifications and the crucial initial maintenance schedule.
Their early finalisation will enable a better establishment of the Owners Corporation and can also identify gaps from subcontractors before they become problematic down the track.
An Owners Corporation in possession of a comprehensive set of handover documents is far better equipped to take on the management of the asset and is less likely to have the builder and developer on speed dial to deal with building queries and issues.
2. Accept there will be defects
Although best efforts will have been made to complete the perfect project there will be imperfections. Denying or hiding defects will lead to distrust and frustration. Accepting that defects will be identified, and openly dealing with them by mobilising parties to respond and resolve issues in reasonable time frames builds confidence and facilitates a reasonable approach to defect resolution.
3. Agree a process for defect identification and resolution
Developing a clear and well-understood process for how building defects are to be handled and managed is fundamental to achieving positive outcomes. There should be a well-communicated process mapped out setting out defect identification, reporting, response times and rectification of accepted defect issues.
4. Defect lawyers are needed but can remain on the sideline
Lawyers will be needed for advice on time frames for warranties and liabilities under the Home Building Act and other relevant legislation and contract matters. This advice should be succinct and clear, providing time limits to establish a timeline for the resolution of building defects to meet the warranty/liability expiries.
Lawyers and the Building Commissioner can be called on if the process for resolution breaks down, complex issues arise and to formalise and enforce obligations and agreements but all efforts should be made to maintain direct lines of communication between the developer, builder and owners corporation representatives.
5. Keep communication lines open
Establishing channels of communication and appointing key people on both the side of the developer and Owners Corporation will ensure quick progression of defect matters and maintain a positive and open dialogue resolving issues. Although strata managers and building managers have a part to play in facilitating communication, they should not be the only channel of communication and cannot make determinations on defect resolution. Direct relationships with authorised decision-makers should be established and maintained.
6. Maintain transparency and meet regularly to review actioned and outstanding items
A running report of defect issues should be established and be accessible to the developer, builder and Owners Corporations. Keeping a running record and updating identified defects means all parties are kept informed of the progress of defect rectification. Failing to keep reporting updated or without proper detail inevitably leads to issues and frustration.
Additionally establishing regular meetings to review reported defects provides transparency, and builds relationships and accountability on the progression of items. Having the strata manager involved to keep a brief record / informal minutes of these meetings is best practice and provides an easy reference for what has been agreed and future meetings.
7. Agree on the engagement of experts
It will be necessary for interested parties to lean on their building experts for reporting and advice on defect issues. Under the Building Bond Inspection Scheme, Owners Corporations need to consent to the expert appointment by the developer but further expert consultants are likely to be required.
Knowing and getting buy-in on the expert engagement, and involving experts in meetings where required to get direct information means that rapport and trust can be built and there can be an easier pathway to resolution.
8. Agree on the process for signing off repairs
Often defect reporting has the sign-off for repairs by a builder without any agreed scope of repairs or review of the repairs completed. There should be a mechanism for interested parties to agree on the scope and ensure that repairs have been completed adequately. The sign-off for an OC could be by the appointed expert, building manager, nominated defect rep or lot owner. Agreeing on a proper sign-off process will avoid timely relisting and or disagreement on the defect repairs eroding trust.
9. Accept there will be give and take
There are defect items where there won’t be agreement. This could be that the Standards or BCA are unclear or have different interpretations or where required maintenance has fallen short. Robust discussion and negotiation will be necessary at times but having an intractable approach can quickly lead to a costly dispute. Knowing the severity of the defect and indicative repair costs makes for a more pragmatic discussion. Conceding on grey area items that won’t jeopardise the integrity of the structure can build trust and means greater attention is given to more important issues.
10. Formalise agreements
Legal advice will need to be obtained prior to warranty and statutory liability expiries but agreements might be possible to extend warranties, allow additional time for further investigations and repairs and to ensure the required works are captured and binding on responsible parties. This may avert the need for formal claims and resulting reputational damage.
Defects are going to occur even with the additional protections in place initiated by the Building Commissioner. Ongoing transparent communication and well-understood commitments around defect handling should lead to successful resolution without costly legal claims. The relationship between owners and developers can remain positive enhancing the satisfaction and value for new owners and in turn build the reputation and future buyer base for the developer.
If you are a developer who wants to build and maintain a strong relationship with your Owners Corporation, Strata Choice can help you implement measures to ensure a successful partnership for years to come, even when it comes to resolving building defects. Contact us today and find out how our experienced team can help you achieve the best outcomes in your development.
ABOUT THE AUTHOR
Stuart Denney is a highly experienced Strata Managing Agent. For more than 15 years he has been working with developers to assist in the successful establishment of strata and community subdivisions ranging from small residential to some of Sydney’s largest and most complex mixed-use developments.
Stuart’s passion lies in creating thriving communities and excels in offering guidance on the essential framework needed to ensure sustainable, efficient, and effective management of every development.