The significant price increases in labor and materials have created challenges for builders, both large and small, impacting their cash flow. In the last 24 months, Perth has seen a number of building companies go into administration. This has caused disruptions for buildings still under construction and left owners of properties within the Builder’s Liability Period (BLP) in a precarious position.

The Impact of Builder Insolvency on Strata Properties

Two strata properties in Perth, completed within the last three years, have numerous substandard workmanship and material defects that are no longer covered by the builder. In these cases, the repair costs have fallen directly onto the owners, leaving one couple homeless as their property was deemed uninhabitable. One building defect alone is expected to cost the owners over $700,000. Owners and investors may find themselves unable to lease, sell, or insure their properties, a situation that could become more common if more companies go into administration.

Research shows that about 52% of apartment owners in WA have had or are experiencing defects.” – Sam Reece, WAAA

Steps to Take If Your Builder is No Longer Trading

If you are an owner of a recently completed property and your builder is no longer trading, the initial step is to engage a qualified building inspector to inspect the common property and provide a detailed defects report. An asset register should also be obtained, as the Strata Manager will now act on behalf of the owners in managing repairs and maintaining assets.

Understanding the Defects Report

The report required for managing and financing building defects is similar to a Ten-Year Plan. The inspector will work with you to ensure your budgetary requirements can cover the repairs, matching available funds with the seriousness of the defect and the potential damage it may cause if not rectified.

Some building materials come with warranties of 10-15 years. If a defect is identified as a materials fault, owners may seek compensation from the manufacturer if the builder is no longer solvent.

The initial BCI assessment will identify:

  • If the building and materials are performing as intended.
  • If the building element complies with the Building Code of Australia or falls within the Standards and Tolerances.

Common Defects and Their Causes

Every defect will be identified with a description, priority, location, cause, recommended tradesperson, and suggested rectification. The most common defects include:

  • Moisture ingress, such as roof leaks or inadequate runoffs
  • Incorrectly installed window frames
  • Cracking on internal or external walls
  • Rising damp from pooling around the building perimeter
  • Substandard workmanship and materials

The inspector will determine if the issue is due to design fault, material issue, or poor workmanship.

Proactive Measures for Owners

The best advice for all owners is to have a defects report completed while the builder is still solvent so repairs can be addressed at their expense. Given the current economic uncertainty, it’s impossible to know how long a company may remain trading.

BCI WA: Your Partner in Building Inspections

BCI WA inspectors have been inspecting strata properties for 26 years in Perth. We offer practical, independent advice and explain defects in a way that owners can understand, helping to agree on an optimal maintenance strategy. Our services include:

  • Builder’s Liability Reports
  • Defects Reports
  • Ten-Year Plans
  • Asbestos Registry and Management Plans
  • Maintenance Reports
  • Dilapidation Reports
  • Moisture Ingress Reports
  • Pre-purchase Inspection Reports

For further information feel free to contact us at BCI WA.