As builders go bust, apartment owners will have to foot the bill for any defects, with some running debts into the thousands. Image: Canva.
  • Apartment advocates are calling for more protections when a builder goes bankrupt
  • One in three Aussies saw the builder of their apartment collapse in the last 12 months
  • A massive three out of four apartment owners have experienced defects

Another builder went bust recently, with the pandemic toll now rising to some 30 builders around Australia. So far we have seen builders large and small fold, the list includes Home Innovation Builders, Probuild, Jaxon, Snowden Developments, Pivotal Homes, Condev, Pindan, and Remi Capital.

The collapse of apartment builders is of particular concern, with the peak body for apartment owners issuing a clarion call for more protection.

When an apartment builder goes under, most apartment owners will not have builder warranty or insurance to fix building defects, opening up a world of financial hurt when things go wrong.

Australian Apartment Advocacy said, under current legislation and regulations in most Australian states, apartment owners only get assistance where the complex is three storeys or below when a builder goes bankrupt.

“[The] latest ABS data shows that 50% of apartment owners live in four storeys or
higher and the Government is basically leaving them stranded often with debts
over $1 million,” said Australian Apartment Advocacy (AAA) head, Samantha Reece.

“Apartment buyers are furious.”

Samantha Reece, Australian Apartment Advocacy

WAAA Director Samantha Reece
Samantha Reece, AAA founder. Image- Supplied.

Apartment defect research

The AAA recently released a research report, showing a whopping three out of four (76%) apartment owners have experienced defects.

The survey of 1,100 apartment owners, nationally, who live in apartments over three storeys also showed that one in three buyers (34%) have seen the original builder go broke in the last 12 months, meaning there is no protection against defects and leaving the buyer to pay, instead of the original builder.

One in five new apartment owners reported defective fireproofing, three out of ten structural cracking, one in three experienced waterproofing issues, and a massive two in three had water penetration from outside.

Survey response Defect
20% Defective fireproofing
30% Structural cracking
34% Waterproofing issues
67% Water penetration from outside

Source: Australian Apartment Advocacy

In the survey, new apartment owners demanded insurance to protect them, with large numbers also demanding the developer or builder foot the bill for insurance.

Survey response Desired outcome
95% Want a level of insurance to protect them
94% Would prefer to purchase an apartment with builder/developer insurance
80% Would be prepared to pay 1.5% additional on their purchase price to have this insurance
72% Want the developer or builder to pay for the insurance

Source: Australian Apartment Advocacy

More protection needed

The anger is palpable as soon-to-be apartment owners are being asked to pay more for their apartments, however, they’re ready to stump up additional cash for a rainy day:

“With developers now approaching buyers to pay an additional 25-30% for their apartments because of increasing construction costs, it is evident that buyers would pay 1.5% for the insurance pool so that if their builder goes bankrupt, they have insurance to cover their defects,” said Ms Reece.

“We have a very clear view that bankruptcy will catch more builders over the last 12 months and that the problem will only escalate.

“We are also concerned that builders under financial pressure will use short cuts,
which will see an increase in apartment defects.”

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