Stuart didn’t think much of a wet patch in his lounge room. Then he came home to a flooded flat
Defective buildings across Sydney are costing home owners and taxpayers $700 million a year. This is what is at stake as development accelerates.
Inside Stuart Mclean’s flat, which had a waterproofing defect.Credit: Stuart Mclean
Stuart Mclean’s concerns about the quality of his apartment building began when he realised the wet spots in the middle of his living room weren’t from his dog having an accident: water was seeping up from between the slab and the floorboards.
The business consultant considered himself a savvy property purchaser and had negotiated a lower price for his family’s new North Ryde apartment on the basis that the strata report had no committee meetings and almost no maintenance documentation.
Every time it rained, his apartment would become sopping wet. It would eventually need new floors, skirtings and gyprock, covered by strata insurance, and the owner’s corporation had to spend more than $40,000 repairing cracks and putting waterproofing down.
Mclean’s apartment, purchased in 2020 and built in 2017, was riddled with defects. But his is far from the only one in Sydney. As the state government champions a rapid increase in high-density development, a Herald series is examining how far NSW has come from the days of Opal Tower and Mascot Towers, two buildings that were so shoddily built that their residents were evacuated in 2018 and 2019, and which prompted an overhaul in the way buildings were constructed and regulated.
Stuart Mclean negotiated a discount on his flat when he saw the strata report was threadbare. Credit: Oscar Colman
Our investigation has revealed that while the government body responsible for enforcing quality workmanship, Building Commission NSW, has significantly increased its investigations and prosecutions, the industry has little data to show whether buildings have fewer problems.
There are, however, two things that the data makes clear: 40 per cent of work rectification orders for stand-alone homes were not being complied with within the mandated period, and defects are being found in close to 25 per cent of apartment complexes.
Before he retired last year, Building Commissioner David Chandler insisted there was a “deep denial about the quality of home construction”.
But his successor, James Sherrard, takes a different view.
“No building is built defect-free,” he said. “If that door handle is set 50 millimetres higher [than detailed on the plans] it’s a defect, but it’s not an irrecoverable defect. The solution is: replace the door.”
Why are waterproofing problems are so common?
- Builders and designers lack training or competence and may not understand design rules.
- Weak oversight by licensing bodies and state and local regulators to enforce rules.
- “Squeezing” of compliance checking processes, especially the rise of Design and Construct contracts, where clients enter into a single contract at the beginning of the process
- “Over time, the previous construction practice of relying on gravity has been forgotten.”
But the commission is not issuing work rectification orders for door knobs: “If they’re serious structural defects, then we will put an injunction on [the developer], they won’t be able to get their occupation certificate.”
Defective work is estimated by the government to cost NSW home owners $700 million annually. So what is really going on?
Speak to anyone with any experience of dealing with a defect in NSW, and one word almost always covers it: waterproofing.
Defective or missing waterproofing is a major defect that can cause structural damage, mould and concrete cancer, as well as damage to floor and wall coverings and fixtures.
Building Commission NSW says it is the single biggest problem in construction across the state. According to a major 2024 study, 20 to 40 per cent of all apartment buildings nationally face problems with water ingress, which can cost between $235 and $610 million annually to fix. And fire systems – including alarms, sprinklers and doors – are also commonly installed incorrectly.
Both the Coalition and Labor governments have also spent big on addressing the problem. In 2023, the new Labor government moved the commission out of Fair Trading and established it as its own office, taking it from 40 to 400 staff. It cost taxpayers $59 million over the past two years.
NSW Building Commissioner James Sherrard inspects a building in Sydney’s north.Credit: James Brickwood
Avoiding defects in the first place
Getting ahead of defects – making sure they don’t happen in the first place – was the key tenet of the former Coalition government’s Design and Building Practitioners Act, which set out stringent regulations for new constructions.
“The DBP Act was a really fantastic reform for NSW,” said Bronwyn Weir, a leading building consultant who wrote the landmark report into Sydney’s defect crisis in 2018 and who helped craft the legislation. “It’s really nation-leading, what was done. But it was also, in some respects, a hopeful way of improving the quality of design.”
Anoulack Chanthivong, the minister for regulation responsible for the building commission, did not think there was a crisis, saying that with more inspections came more defect notices. He said the government was working on legislative changes to improve standards and that the commission had conducted 1100 investigations into defective homes and units in the past year.
“In one sense, I’m pleased that we are finding defects in some of these older buildings because it means our enforcement regime is actually working,” he said. “But more importantly, as you actually find the defects, you get good, intelligent data about where the concentration is in the defects.”
Fixes driving up costs
Weir, who has closely monitored the industry since the act was introduced, said there was no doubt the requirement for specific designs was leading to far better outcomes but accepted there was another, potentially unexpected, cost to unit owners who have been forced to rectify defects in buildings made before the act came into effect in 2020.
Because of the much higher design and engineering requirements under the legislation, more detailed planning needs to be done before any work can take place – and that work is very expensive.
Take a nine-unit apartment building in Rosbery, built 20 years ago. The waterproofing and tiling of a ground-level courtyard required replacing in 2018, before the law was introduced, and cost the owners’ corporation $13,000.
But now, when another ground-level courtyard needed the same repairs, the cost from the same builder had skyrocketed to $78,000. The act requires full remedial work to be completed, not just patchwork repairs.
That has led to a simultaneous rise in the industry of highly specialised builders dedicated to fixing the problems. Sam Coady, managing director of family-run Sydney remediation company RM Watson, said recent legislative changes had altered the way they operated.
Minister for Regulation Anoulack Chanthivong says the state is not in a defects crisis.Credit: Steven Siewert
“You used to be able to do smaller-type repair projects. So if there was a leak on a balcony, for example, you used to be able to do a partial repair … but the Practitioners Act ruled that out in that it is now required that there is sort of wholesale replacement of the whole balcony deck.”
“It’s still repairing the same sorts of elements, whether it be brickwork or masonry repair or cladding replacement, glazing repair – it’s just on a bit of a larger scale, and that obviously doesn’t happen overnight.”
(Further proposed changes to the National Construction Code could blow out the cost of fixing a single balcony from $55,000 to $196,000, the national association representing the remediation industry has warned.)
“You might argue if we’d known that [the cost to owners to rectify issues in older buildings], would the bill have ever passed? It was almost impossible to predict what the market would do,” said Weir.
“Every defect you prevent is saving tens, if not hundreds, of thousands of dollars down the track,” she said.
The reason things need to change
In the midst of a housing crisis in a city where the median price of a home unit is $851,934, any risk to buyer confidence could undermine supply.
“All [the reforms to the sector] in the government’s interest [to resolve], but also in the sector’s interest as well,” said Chanthivong. “You don’t want shonks in the market, which then, I think, reduces confidence, so people won’t buy.”
Most banks require developers to have secured at least 40 per cent of off-the-plan sites to provide finance for the rest of their work.
“[If] people aren’t buying, people aren’t building,” the minister said.
Tomorrow: How we got into this mess
correction
An earlier version of this story reported Building Commission NSW cost $59 million annually. That figure is the cost over two years. It has been updated.