Strata developers in NSW spared increase in bond payments until November 2024

Amendments to the Strata Schemes Management Regulation 2016 – bond increase to 3% delayed until 2 November 2024

Under section 207 of the Strata Schemes Management Act 2015 (NSW) (Act), prior to applying for an Occupation Certificate, the developer of a strata scheme is required to provide security (called a ‘building bond’) equal to 2% of the Contract Price for the building work comprising the strata development.  This percentage is found in section 54 of the Strata Scheme Management Regulation 2016 (NSW) (Regulation) and was due to increase to 3% after 1 July 2024.

However, on 21 June 2024, the Building, Development and Strata Legislation Amendment Regulation 2024 (NSW) (Amending Regulation) was published. The effect of the Amending Regulation with respect to building bonds for strata developments is to extend the time for the increase in bond payment from 2% to 3% of the Contract Price for the building work.

The Amending Regulation amends section 54 of the Regulation as follows:

54   Amount of building bond

For the Act, section 207(2) and (4), the prescribed percentage is as follows—

(a)  for a building bond given before 1 July 2024 2 November 2024—2%,

(b)  for a building bond given on or after 1 July 2024 2 November 2024—3%.

The reprieve, at least for a further four months, is welcome news for developers in the current constrained market and in the context of the government’s focus to increase housing supply.  The additional time may allow developers to explore the alternative and relatively new concept of ‘decennial insurance’, an alternative to the building bond which insures owners’ corporations against serious defects for 10 years, and on a strict liability basis.

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Authored by:

Matthew Taylor, Partner
Ryan James, Associate