New Property Developments – Takeaways for Owners and Developers

This article explores the critical considerations for property owners and developers when constructing new buildings.

Concerning trends around poor Design and Quality

Over the past two decades, the building industry has witnessed a number of concerning trends around the quality and design aspects of new large multi-level developments. A key concern is the design of the building, which does not seem necessarily intended to last decades, and we are seeing an increased frequency in the number of structural defects, waterproofing failures and water ingress concerns. Further to this is the use of lower-quality building materials that are less durable than traditional ones. For example, plumbing failures are becoming far more common in new buildings due to the use of PVC pipes, which have a 25-year lifespan in new builds, instead of traditional copper or galvanised steel, which has a 70 – 100-year lifespan.

The cutting-edge new designs in structural integrity are well documented and the relatively new approach of incorporating significant garden rooftops and balcony greenspaces have been promoted as one of the best ways to green new buildings, however for more than a decade, insurers have been warning of water membrane failures, poor maintenance practices and fire hazards if new buildings are not carefully monitored. We encourage property owners and developers to assess long-term risks that are present in the design and quality of the new build and ensure that appropriate risk surveys are carried out pre and post-build.

Navigating Insurer’s Appetite

When engaging in the quoting process for new developments, insurers review a number of factors that significantly influence the premiums they offer. These factors encompass various elements, such as perceived property risks—factoring in elements like construction materials, occupancy of commercial tenants, location, the environments susceptibility to natural disasters, fire safety measures, and security protocols. An in-depth evaluation guides the insurance landscape for new developments. Each insurer has a unique set of underwriting guidelines and specific appetites that may include or exclude certain risk exposures.

Insurers are known to quickly and significantly amend their appetite and pricing for large multi-level developments and indicative quotes of insurance premium at the start of a new build have been know to become redundant and have a pricing variable of 50%-100% or more by the time that practical completion is achieved sometimes many months or years later.

Deliberate Selection of Building Materials

We emphasise the criticality of meticulously selecting construction materials. This choice holds the potential to profoundly impact the insurance coverage lifecycle for the Body Corporate. Notably, structures constructed with inferior materials, such as flammable cladding or NRG Greenboard (rendered EPS foam), tend to attract fewer insurers and higher premiums. The hesitance arises from concerns regarding the long-term durability of such lightweight cladding. Instances have arisen where a sole insurer offered quotes for structures with subpar materials, leading to substantially elevated premiums compared to more robust construction options. This is common for buildings made of a large percentage of inferior materials.


Strategically Timed Insurance Placement

A strategic insurance placement becomes essential upon the achievement of practical completion and the transition from the construction phase. The construction policy ceases to provide coverage at this juncture. Post the registration of the body corporate, the onus falls on the developer to secure insurance for a full year from the registration date. This requires an endorsement to extend the policy's expiry date to align with this requirement. Some insurers stipulate mid-term policy cancellation and subsequent reinstatement for a complete 12 months from the registration date, guided by their underwriting principles for maximum policy duration.


Precise Insurance Valuation

We address concerns regarding second-year premium increases within Bodies Corporate following property valuations. Instances have unfolded where developers inadvertently underestimate the full replacement cost for the body corporate. Opting for insurance coverage solely based on the project's construction cost can result in insufficient coverage in the event of a total loss. A comprehensive insurance valuation should factor in debris removal, professional fees, escalation, and complete rebuilding expenses. Insuring solely for the initial build cost exposes the body corporate to underinsure risk. We strongly advocate for an independent valuation before practical completion or within 60 days thereafter, ensuring the initial premium accurately mirrors the building's complete replacement cost.

Nuances of Staged Developments

Staged developments introduce unique considerations as projects progress through various phases. This evolution necessitates adaptive insurance requirements. Elements such as partially completed structures, fluctuating property valuations, and varying risk profiles contribute to premium fluctuations. While certain underwriters may express caution toward staged developments due to associated risks with ongoing construction, others may require additional underwriting data to assess perceived exposure accurately. Many insurers will avoid quoting stated developments until all stages of the development have been completed.

Addressing Defects Proactively

In alignment with evolving standards, some states mandate that the Body Corporate obtains defect reports before the second annual general meeting. Insurers emphasise timely rectification of critical defects that jeopardise safety and the effective handling of other defects. Transparent disclosure of defects to insurers for evaluation proves pivotal. In some instances, insurers may impose risk requirements on the Body Corporate, with a specific focus on defects related to passive fire protection and inadequate waterproofing. Best practice is to provide a clear rectification plan along with the defects report.


With you all the way

To find out more or to discuss your insurance needs, please reach out at any time. Through collaborative efforts, we can tailor insurance strategies to enhance the success of your developments.

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Autumn Maintenance Tips for Owners

HVAC System (Heating, Ventilation and Air Conditioning) Inspection:
Have your heating system inspected by a professional to ensure it is in good working condition. Replace air filters if needed for optimal performance.

Check Windows and Doors
Seal any gaps with weather stripping or caulking to improve energy efficiency and keep warm air inside.

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Understanding Tree Laws in Victoria

In Victoria, the regulations concerning trees fall under the purview of general property law and 'common law,' shaped by court decisions over time.
Tree Ownership and Maintenance Obligations
Tree owners in Victoria are generally not legally obligated to maintain their trees unless they cause damage or become a nuisance. Additionally, council rules may apply, and it is advisable to check with the local council to determine if the tree in question is protected. Notably, the council will not intervene in disputes or trim trees unless they are on council property.
Boundary Line Trimming Rights
Property owners have the 'right of abatement,' allowing them to trim branches, leaves, or roots extending beyond their property boundary at their own expense. Renters should consult their property managers before taking action to avoid violating their rental agreements.
Prior to trimming a neighbour’s tree, consider:

  • Discussing maintenance plans with your neighbour.
  • Confirming the tree’s protection status with the local council.
  • Seeking advice on proper trimming techniques.
  • Agreeing with your neighbour on disposal arrangements for trimmings.

Reminder that you are responsible for any damage caused to your neighbour’s tree. You must obtain your neighbour’s consent before entering their property for maintenance.
Handling Trees Affecting Light or Views
No specific regulations in Victoria prevent property owners from planting large trees. This becomes a matter for negotiation between neighbours. If an agreement cannot be reached, mediation is recommended, providing an opportunity for both parties to discuss and resolve tree maintenance concerns. If mediation fails, legal advice is suggested before considering court action.
Dealing with Trees on Nature Strips or in Parklands
For trees causing issues on nature strips or in parklands, contact the local council to check protection status. Protected trees may prompt the council to send an arborist for assessment, while unprotected ones allow trimming along the boundary line.
Costs and Liability for Tree Maintenance
Tree owners are not obligated to cover maintenance costs, but they may choose to do so to prevent damage to neighbouring properties. Maintenance of branches crossing property lines is the responsibility of the owner incurring the cost. To compel a neighbour to pay for tree maintenance, evidence of property damage or a 'private nuisance' in court is required.
If a neighbour's tree causes damage, they may be liable for repairs. Check insurance coverage and attempt negotiation before resorting to legal action, considering factors such as arborist reports, photos of damage, and repair cost estimates.
Initiating a Conversation about Trees
Resolving tree disputes often starts with an informal discussion with neighbours. Clear communication, active listening, and sharing relevant information contribute to finding mutual solutions. Consider leaving a note in your neighbour's letterbox if a face-to-face conversation is challenging.
Court as a Last Resort
Going to court is expensive and time-consuming and may strain neighbour relationships. Before proceeding, assess if you understand each other's concerns, have been clear about your priorities, and explored alternative solutions. If necessary, a local Magistrates' Court can be approached, where a magistrate will determine the issue of private nuisance and cost-sharing.
Understanding Private Nuisance Claims
Private nuisance claims require a court application, and legal advice is crucial. To succeed, you must demonstrate the significance and unreasonableness of the nuisance, considering factors such as the environment, duration, impact, and necessity of the activity causing interference.
In conclusion, acknowledging the normalcy of certain inconveniences in a neighbourhood and striving for amicable solutions with neighbours is often more effective than pursuing legal avenues. The court's role is limited to legal aspects, and finding common ground with neighbours is generally the preferred course of action.

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Owners Corporation Fee Payments - The Convenience of DEFT

Managing Owners Corporation fees can sometimes be a challenge, especially when faced with quarterly or six-monthly payment notices. However, there is a convenient way to stay on top of fees by setting up recurring payments through DEFT. In this article, we will explore the benefits of using DEFT to pay Owners Corporation fees and how it can help budget more effectively.

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