Ten-year defect insurance or a building bond: how NSW now protects new apartment buildings against serious defects

Serious defects in new apartment buildings, such as water getting through the building envelope, structural problems or fire safety failures, can take years to show up. NSW now has two ways to make sure money is available to fix them: the long-standing strata building bond and, from 2026, ten-year decennial liability insurance (DLI).

For owners corporations of newer buildings, knowing which one applies to your building, and what it covers, can make a real difference when a defect appears.

What has happened

The NSW Parliament passed the Fair Trading and Building Legislation Amendment Bill in August 2026. According to Building Commission NSW, the amending Act received assent on 14 August 2026 and commenced on 20 August 2026.

Building Commission NSW says DLI:

• applies to residential strata apartment buildings over 3 storeys
• covers relevant defects in the building elements of common property, including structure, fire safety systems and waterproofing
• provides cover for up to ten years after the building is first occupied
• is taken out by the developer in favour of the owners corporation, and attaches to the building rather than the developer
• covers remediation costs if a builder or developer is unable or unwilling to fix the defects, including if the developer becomes insolvent.

Under the 2026 amendments, the relevant defects are those resulting from non-compliance with the Building Code of Australia, Australian Standards or the approved plans that cause, or are likely to cause, damage or a risk of death or serious injury.

DLI does not replace the strata building bond. It is an alternative: a developer must either lodge a bond or have a DLI policy issued before applying for an occupation certificate. At the time of writing, Building Commission NSW lists one product as acceptable DLI. In its 6 August 2026 release, the NSW Government said insurers can now seek review and endorsement of their policies.

How the building bond works

Under the Strata Building Bond and Inspections Scheme, the developer lodges a bond of 2% of the contract price before the occupation certificate is issued. The scheme does not apply where Home Building Compensation Fund cover applies.

The developer appoints a building inspector, who carries out an interim inspection between 15 and 18 months after the work is finished and a final inspection between 21 and 24 months. The bond may be used to fix defects identified in those inspections. A planned increase in the bond from 2% to 3% has been deferred to 1 July 2028.

What it means in practice

The two options work differently for owners:

• Timeframe. The bond process runs for roughly two to three years after completion. DLI cover runs for up to ten years, which matters because some defects, particularly waterproofing failures, can take longer to appear.
• How defects are found. Under the bond scheme, defects are identified through the two scheduled inspections. Building Commission NSW describes DLI as a “first resort” product that can be claimed against as soon as a defect is identified.
• What happens if the developer is gone. DLI stays with the building, so it can respond even if the developer or builder has gone out of business.

Neither option replaces the statutory warranties and other rights owners may have. The two can run alongside each other, so committees should get advice on which pathway suits a particular defect.

What committees and managers may want to consider

This is general information, not legal or insurance advice. Committees and managers of newer apartment buildings may find it useful to:

• Find out whether the building has a strata building bond or a DLI policy, and keep the documents with the scheme’s records.
• If there is a DLI policy, check the insurer, the policy period and how claims are made.
• Keep a dated register of suspected defects, with photos and reports, from the first months of occupation.
• Get an independent inspection where defects are suspected, so scope and likely causes are documented.
• Get legal advice early if a defect may be serious, as time limits can apply to other rights.

How Beams & Dreams can help

Beams & Dreams Constructions (NSW Builder Licence 397915C, Registered Building Practitioner BUP4253866) works with owners corporations, strata managing agents and building managers on defect rectification in Sydney. We can inspect common property, scope rectification works clearly and carry them out in a planned order, working alongside your inspector, engineer and lawyer. Read more about our remedial process.

Next step

If your building has suspected defects and you need a clear scope of works, request a remedial and commercial enquiry.

This article is general information only. It is not legal, financial, planning, engineering or compliance advice. Rules and timeframes can change. Check the official sources linked above and get advice from a qualified professional about your building or project.