This guide was first published in October 2019. The seven stage Developer Building Bond process it describes is still the law, but the scheme has been amended several times since then. The changes that matter for developers are summarised here, and an Update box appears at each point in the guide where a change applies. The original text has otherwise been left as published.
The legislation and Building Commission NSW guidance were checked on 30 September 2026. Sources are given in each Update box.
Due to changes in the Strata Schemes Management Act 2015 (NSW) (the SSMA) and the Strata Schemes Management Regulation 2016 (NSW) (the SSMR) which commenced on 1 January 2018, developers are now required to lodge a building bond with NSW Fair Trading on behalf of the Department of Finance, Services and Innovation (the Secretary), to the value of 2 percent of the contract value for works (the Bond).
The requirement for the lodgement of the Bond applies to residential or mixed use strata buildings, which are four or more storeys, and where contracts have been entered into, or where work commences, on or after 1 January 2018.
The purpose of the Bond is to secure funding for the payment of the cost of rectifying defective building work identified in a final report under the SSMA (up to the amount secured by the Bond).
According to the Second Reading Speech, the purpose of the amendments are to “incentivise developers and builders to build well and to fix any problems early in the life of the building”.1
A Guide published by NSW Fair Trading2 sets out 7 key stages in the Bond process, which are summarised in this eBook. A helpful timeline that sets out the stages is also annexed at the end of this guide.
Since December 2023 the scheme has been administered by Building Commission NSW, the NSW building regulator established in that month as an agency of the Department of Customer Service, on behalf of the Secretary of that Department. The Department of Finance, Services and Innovation no longer exists, and the SSMA now defines the Secretary as the Secretary of the Department of Customer Service.
The NSW Fair Trading guide referred to above has been replaced by the NSW Government’s Strata Building Bond and Inspections Scheme pages, which describe the process in eight stages rather than seven. The extra stage comes from splitting payment of the Bond into two steps, determining the cost of rectification and then paying the Bond. The substance is the same as the seven stages in this guide.
Sources: SSMA s 4 (definitions of Department and Secretary); NSW Government, Strata Building Bond and Inspections Scheme.
Select a stage to open it.
Stage 1 requires the Bond to be lodged by the developer with NSW Fair Trading for residential and mixed use buildings which are four storeys or higher.3 Buildings up to three storeys are covered by Home Building Compensation Insurance.
For building contracts entered into on or after 1 January 2018, or where work commenced on or after this date, the Bond must be lodged on Fair Trading’s online portal:4
From 1 July 2020, section 207(1) of the SSMA requires the Bond to be given to the Secretary, in terms acceptable to the Secretary, before an application is made for an occupation certificate for any part of the building. Previously the deadline was the issue of the certificate. In practice the Secretary must review and accept the original Bond, which Building Commission NSW says occurs within 10 business days of receipt, before the developer applies for the certificate.
Two related obligations now sit alongside the Bond. Under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (the RAB Act), which commenced on 1 September 2020, the developer must give the Secretary an expected completion notice at least 6 months and not more than 12 months before applying for the occupation certificate. If a Bond required by section 207 has not been given, the Secretary may make a prohibition order preventing the occupation certificate from being issued and the strata plan from being registered.
Sources: SSMA s 207(1), as amended by the Strata Schemes Management Amendment (Building Defects Scheme) Act 2018; RAB Act ss 7 and 9(1)(d); NSW Government, SBBIS Stage 1.
To lodge the Bond:
The Act no longer fixes the percentage at 2 percent. Section 207(2) now refers to the percentage prescribed by the regulations, and clause 54 of the SSMR prescribes 2 percent for a Bond given before 1 July 2028 and 3 percent for a Bond given on or after that date. The increase to 3 percent was first scheduled for 1 July 2024 and has been deferred several times, most recently in June 2026.
The contract price is now the total price paid or payable under all applicable contracts for the building work, regardless of when the amounts become payable. A cost report from a quantity surveyor is required not only where there is no written contract but also where the developer and the builder are connected persons. The quantity surveyor must be a member of the Australian Institute of Quantity Surveyors or the Royal Institution of Chartered Surveyors and must not be connected with the builder, the developer or the financier of the work.
It is now an offence for a developer knowingly to give the Secretary false or misleading information about the contract price or the amount to be secured, with a maximum penalty of 1,000 penalty units for a corporation. If a Bond is not given, or is given for less than the required amount, the Secretary may recover the shortfall from the developer as a debt.
Sources: SSMA ss 207(2), 207A and 211A; SSMR cll 50 and 54; Building Commission NSW, Update on amendments to building regulations (26 June 2026).
The maximum penalty for failing to comply with section 207 is now 10,000 penalty units, which is $1,100,000 at the current NSW penalty unit of $110, plus a further 200 penalty units ($22,000) for each day the offence continues. The $22,000 figure above reflects the law as it stood in 2019.
Section 208 now specifies that a bank guarantee must be issued by an authorised deposit-taking institution and a bond by an approved insurer. The Secretary publishes the terms it will accept, and Building Commission NSW asks developers to upload a draft for review before the Bond is issued.
The SSMA now also provides that a developer who satisfies the Secretary that it has obtained decennial liability insurance for the building work is exempt from the inspection and Bond provisions of Part 11 (other than section 206). The policy must be taken out in favour of the Owners Corporation, cover relevant defects in the building elements of the common property for 10 years on a strict liability basis, and be in a form acceptable to the Secretary. As at September 2026 Building Commission NSW lists only one policy, the Resilience Insurance latent defects policy, which it accepted as a form of building bond for policies obtained between August 2022 and 24 October 2024 and which it notes is not decennial insurance within the meaning of the SSMA. Developers should confirm current availability with Building Commission NSW before relying on this route.
Sources: SSMA ss 207(5), 208, 211AA and 211AB; NSW Government, Ten-year defect insurance for apartment buildings (updated 28 August 2026).
To lodge the Bond, the developer must open an account on the “strata building bond and inspection scheme online portal” (the Portal) administered by Fair Trading,11 which can be completed at any time after the commencement of works.
Once the account has been created, documents can be uploaded to the Portal progressively as and when they become available.
Stage 1 is now completed in the NSW Planning Portal, where the development will already have been registered at the development application stage. The developer completes the scheme tasks, uploads the required documents, uploads a draft of the Bond and pays the lodgement fee, which remains $1,500 (excluding GST). Once the Secretary has confirmed the draft, the developer arranges for the approved issuer to issue the Bond, uploads a copy and sends the original to Building Commission NSW in Parramatta by courier, Express Post or Registered Post. Hand delivery is not accepted.
The Bond is recorded as lodged when the Secretary accepts it in the portal, which Building Commission NSW says occurs within 10 business days of receiving the original. Only then may the developer apply for the occupation certificate. From that point the matter moves to the Strata Hub for the remaining stages.
Sources: NSW Government, SBBIS Stage 1: Building bond lodgement (updated 5 August 2026); SSMR Sch 4, item 1.
The developer is required to pay a lodgement fee of $1,500.00 and upload various documents and information to the Portal, which include:12
Under the SSMR, documents required to be uploaded to the Portal could include the following:14
This information and documentation is then considered by the Secretary. The Secretary will then either approve or reject the Bond.
If the Bond is rejected, further information and documentation may be required to be provided by the developer.
If the Bond is accepted, the developer is able to lodge the Bond.
Schedule 4 of the SSMR, from which the list above was drawn, no longer sets out the Bond documents. Clause 52 now requires the lodgement form, the strata plan number, the street address of the building, the name and address of the principal certifying authority, addresses for service for the developer and the Owners Corporation, the documents used to determine the contract price (including any quantity surveyor’s cost report) and the documents listed in clause 46A(1)(b). That list broadly matches the documents above and now also picks up the regulated designs lodged under the Design and Building Practitioners Act 2020.
The same documents, together with a document identifying any defects of which the developer is aware (including any raised at the first annual general meeting) and the initial maintenance schedule, must also be given to the building inspector within 28 days of the inspector’s appointment. The maximum penalty for failing to do so is 200 penalty units.
Sources: SSMA s 198A; SSMR cll 46A and 52.
Within 12 months after the completion of the works, the developer must notify the Secretary and the Owners Corporation of the proposed independent building inspector (Inspector).
Completion of the works for Strata Schemes means the date of issue of an occupation certificate which authorises the occupation and use of the whole of the building.15
The Inspector must meet the following criteria:
Clause 44 of the SSMR now recognises 11 authorised professional associations that may maintain a strata inspector panel: the Housing Industry Association, the Master Builders Association of New South Wales, the Australian Institute of Building, the Australian Institute of Building Surveyors, the Australian Institute of Building Consultants, the Australian Society of Building Consultants, the Institute of Building Consultants, Engineers Australia, the Association of Accredited Certifiers, the Australian Institute of Quantity Surveyors and RICS Australasia. The Australian Institute of Architects is no longer listed.
Each association must keep a public register of its panel members, and the Secretary may impose conditions on inspectors. The two year rule on connection with the developer, the duty of disclosure and the duty to act impartially are unchanged.
Sources: SSMR cll 44, 45, 45A and 45C.
The Owners Corporation must agree to the appointment of an Inspector, prior to that Inspector being appointed.21
Once the Inspector has been selected by the developer, the details of the Inspector are uploaded to the Portal. The Portal will then notify:22
If the Owners Corporation approves the appointment through the Portal, the Inspector will be formally appointed as the building inspector.
The developer selects the inspector, makes disclosures and proposes the inspector to the Owners Corporation in the Strata Hub, and the proposed inspector makes his or her own disclosures there. The developer must also give the Owners Corporation written notice of the nomination, with the inspector’s particulars and project experience, at least 14 days before the general meeting at which the appointment is considered. The Owners Corporation records its resolution in the Strata Hub within 14 days of its decision, which generates the notices to the developer and the Secretary.
If the Secretary arranges the inspector, the developer pays a fee of $1,500 plus GST in addition to the inspector’s costs.
Sources: SSMR cl 45E and Sch 4, item 1A; NSW Government, SBBIS Stage 2: Building inspector appointment.
The Owners Corporation must also notify the developer and Secretary of any approval or rejection of the appointment of the Inspector proposed by the developer within 14 days of the making of that decision.23
Owners of a lot in a strata scheme can also object to the proposed appointment of the Inspector by the Secretary provided the Inspector has not carried out an interim inspection.24
If the Owners Corporation rejects the Inspector, the same process is repeated until either:
If the developers fail to appoint an Inspector by the required time:25
The developer is required to pay all costs associated with the Inspector, even if the Inspector is appointed by the Secretary.26
Between 15 to 18 months after completion of the building works, the Inspector is required to provide an “interim” report (Interim Report), which must:
Within 14 days after the Interim Report has been completed, the Inspector must provide a copy of the Interim Report to the:
The Secretary has the power to vary the time in which the Interim Report is provided, if it is appropriate to do so in the circumstances (this can be by application of the developer, Owners Corporation, the Inspector or the Secretary).31
For the purposes of preparing the Interim Report and inspecting individual lots, the Inspector is required to give at least 14 days written notice to the Owners Corporation and occupiers of lots of the Inspector’s intention to enter any part of the Strata Scheme.32
Within 14 days after the Owners Corporation receives the Interim Report, the Owners Corporation must give the Interim Report to the individual lot owners concerned in the Scheme.33
The timing, content and service requirements for the Interim Report are unchanged. The report is now prepared in the approved form and lodged through the Strata Hub.
Sources: SSMA ss 199, 202 and 203; SSMR cl 47.
The builder responsible for the defective work as identified in the Interim Report is required to rectify those defects before the final inspection is carried out by the Inspector.34
For the purposes of arranging any inspections to individual lots for rectification works, the builder must give the Owners Corporation, the developer and individual lot owners at least 14 days written notice prior to any proposed inspection being carried out.
The Secretary has the power to refuse a claim for the Bond by the Owners Corporation if the developer or builder is unreasonably refused access to the strata parcel.35
Section 206(7) allows the developer to appoint another person to rectify the defects, who is then treated as the builder for this purpose, if the builder has died, is insolvent or has ceased to exist. Since 2020 the regulations extend this to a builder who is unwilling to rectify the work, who cannot lawfully do so (for example because it is unlicensed), who is incapacitated or imprisoned, or who cannot be found in Australia after due search. The rest of this stage is unchanged.
Sources: SSMA s 206(7); SSMR cl 49A.
Between 21-24 months after completion of the building work, the developer must arrange for the Inspector to carry out a final inspection and provide a final report (Final Report),36 and notify the Secretary of the date for the final inspection.37
If the original inspector is not available, the developer is required to notify the Secretary of that fact, no later than 14 days of becoming aware.38
In this case, the Secretary will then appoint the building inspector who will carry out the final inspection and prepare the Final Report,39 which must be uploaded to the Portal between 21 to 24 months after completion of the building work.40
The Final Report must:
If the Interim Report was prepared by the Inspector appointed by the developer and does not identify any defects, the developer may make an application to the Secretary for a determination that it is not required to arrange the Final Report.42
The Secretary may on such an application:
The Secretary may also make this determination if the Inspector that prepared the Interim Report was appointed by the Secretary, as long as the Interim Report did not identify any defects.45
In the above case, the Bond will be released to the developer which is explained in further detail later in this eBook.
Section 200 requires the developer, not later than 18 months after completion, to arrange for the inspector to carry out the final inspection, or to notify the Secretary that the original inspector is unavailable, or to apply for a determination that no Final Report is required. The inspection and Final Report then take place between 21 and 24 months after completion. These requirements, and the content of the Final Report, are unchanged.
Sources: SSMA ss 200 and 201; SSMR cl 48.
Any claim to the Bond must be made by the Owners Corporation within 14 days prior to the expiry of the latest of the following dates:46
If there are no defects identified in the Final Report, the Bond is released in full to the developer through the issuer of the Bond.47
The claim period has moved from the Act into the regulations and has been extended. Under clause 54A of the SSMR the amount secured by the Bond must be claimed or realised before the later of 2 years after completion of the building work and 90 days after the Final Report is given to the Secretary. The 60 day period referred to above reflects the law in 2019. An application by the Owners Corporation must still be made at least 14 days before the last day of that period, and the Bond itself must remain capable of being claimed for at least 30 months and no more than 3 years after the occupation certificate.
Sources: SSMA s 209(3); SSMR cll 51, 53 and 54A.
Any part of the Bond (or the entirety of the Bond) may be claimed by the Owners Corporation or realised by the Secretary for the following:48
The cost of rectification must be agreed between the developer and the Owners Corporation.
Absent any agreement, the Secretary will appoint a quantity surveyor to determine the cost to rectify defects, based on the defects identified in the Final Report.
The cost of such an appointment will be borne by the Owners Corporation and the Developer equally49 (which appears to be an attempt to incentivise the Owners Corporation to act reasonably as to the quantification of defects).
Section 209A now sets out the process. If the developer and the Owners Corporation cannot agree the cost of rectification, the Secretary determines the amount and may require either party to provide information or reports, or may arrange for a suitably qualified person to report on the work required and its cost. The cost of a report arranged by the Secretary is borne by the Owners Corporation and the developer in equal shares unless the regulations provide otherwise.
The Bond may now also be applied to pay the building inspector’s fees, or the developer’s share of the cost of such a report, where those costs are unpaid and the developer has died, ceased to exist, is bankrupt or insolvent, or cannot be found in Australia after due search. Before any payment the Secretary must give at least 14 days written notice to the Owners Corporation, the developer and the builder.
Sources: SSMA ss 209(1), (1A), (2A) and 209A; SSMR cl 55.
If the Secretary intends to make any payment out of the Bond, it must provide 14 days’ notice to the Owners Corporation and the developer, prior to the Bond being utilised.
The Owners Corporation must repay any excess amounts to the developer and must also provide written notice to the developer that the defective works identified in the Final Report have been rectified.50
If the Owners Corporation fail to comply with this requirement, it faces a maximum fine of $1,100.00.51
The developer cannot impede the use of the Bond and in fact has positive obligations to assist the Secretary in that regard.52
If the developer does not comply with its obligations to assist the Secretary, there is a maximum fine of $1,100.00.
The legislative changes are unclear in relation to what triggers the release of the remaining part of the Bond (if any) back to the developer.
It does, however, appear that the release of Bond back to the developer is triggered by the notification by the Owners Corporation that defects have been rectified (as it appears logical that if no further right to the Bond existed, it should be paid back to the developer).
Once the above notification has occurred, it is suggested that the developer notifies the Secretary through the Portal and requests for the balance of the Bond to be returned.
The legislative changes are also unclear in relation to the timing of this refund back to the developer.
Section 210A of the SSMA, in force since 1 July 2020, allows the Secretary to give the developer the release needed to cancel the Bond where the Interim Report identifies no defective building work and the Secretary considers it appropriate, or, on the developer’s application with the agreement of the Owners Corporation, after part of the Bond has been claimed. Clause 55AA of the SSMR adds a release where the Final Report identifies no defective building work, or identifies only defects for which the Bond cannot be claimed.
Building Commission NSW describes the final step (its Stage 8) in these terms: the Owners Corporation completes the rectification and, if it costs less than the Bond, the balance is returned to the developer. The Owners Corporation’s obligation to repay any excess and to notify the developer that the defects have been rectified continues under section 210(2).
Sources: SSMA ss 210(2) and 210A; SSMR cl 55AA; NSW Government, SBBIS overview.
The following decisions are reviewable:53
Any request for a review must be made within 14 days of the relevant decision.54
If the reviewer is not the Secretary, that reviewer must be approved by the Secretary55 and must be an individual who:56
The reviewer must now be a member of staff of the Department of Customer Service, which replaced the Department of Finance, Services and Innovation. The four categories of reviewable decision and the 14 day time limit are unchanged. Two points have been added: a builder who carried out the work, or who is responsible for the defective work, is an interested person entitled to seek a review, and a decision to pay out the Bond can no longer be reviewed once the amount has been paid.
Sources: SSMA s 213(6); SSMR cl 56.
The Bond process will impact on contractual terms for all stakeholders involved in carrying out work on residential or mixed use construction projects, particularly in relation to the requirements for practical completion, the defects liability period and the release of security.
This is because both the developer and builder will attempt to shift their risk and obligations down the contracting chain to limit their exposure, which may mean for example longer defects liability periods and a later release of security.
The developer should also be aware that these amendments are in addition to the rights of an Owners Corporation pursuant to Part 2C of the Home Building Act 1989 (NSW) (the HBA) which relates to statutory warranties.
For example, if no defects are identified in the Interim Report, this does not mean that the developer is free from any claim, as the statutory warranty period contained within the HBA would still be applicable (2 years for non-major defects and 6 years for major defects)57 and it would be open to the Owners Corporation to take action in the appropriate forum.
Statutory duty of care. Since June 2020, section 37 of the Design and Building Practitioners Act 2020 has imposed on any person who carries out construction work a duty to exercise reasonable care to avoid economic loss caused by defects. The duty is owed to the owner and to each subsequent owner, an Owners Corporation is taken to suffer the loss, it cannot be contracted out of, and it applies to loss that first became apparent within the 10 years before the section commenced. An Interim or Final Report that shows no defects does not answer a claim under this duty, any more than it answers a statutory warranty claim.
Enforcement. The RAB Act, in force since 1 September 2020, allows Building Commission NSW to inspect apartment buildings for up to 10 years after completion, to issue stop work and rectification orders, and to prohibit the issue of an occupation certificate, including where the Bond has not been given. Part 11 of the SSMA now also contains its own investigation powers, exercisable by authorised officers.
Statutory warranties. The warranty periods of 6 years for major defects and 2 years otherwise, under Part 2C of the HBA, are unchanged.
What is coming. The Building (Approvals and Practitioners) Act 2026 passed Parliament in August 2026. It will replace the Design and Building Practitioners Act 2020 and the Building and Development Certifiers Act 2018, carry the statutory duty of care across in substantially the same form, and replace construction and occupation certificates with building approvals and completion approvals. It received assent on 14 August 2026 and commences on a day to be appointed by proclamation. As at 30 September 2026 its substantive provisions had not commenced, so the current certificate regime and the Design and Building Practitioners Act 2020 continue to apply. Separately, the Fair Trading and Building Amendment Act 2026, which commenced on 20 August 2026, refined the definition of relevant defect for decennial liability insurance.
Sources: DBP Act ss 37 to 40; RAB Act ss 6, 7 and 9; SSMA Part 11, Division 3A; NSW Government, Ten-year defect insurance for apartment buildings.
For contracts entered into on or after 1 January 2018, or if no contract, where work commences on or after that date. Months are counted from completion, being the date of issue of an occupation certificate for the whole of the building.
Developer opens an account on the Portal at any time after building works commence, pays the $1,500.00 lodgement fee and lodges the Bond (2 percent of the contract price) before the issue of an occupation certificate for the Strata Scheme.
The Bond must now be lodged in the NSW Planning Portal, and accepted by the Secretary, before the application for the occupation certificate is made (SSMA s 207(1)). An expected completion notice under the RAB Act is due 6 to 12 months before that application.
Occupation certificate issued authorising the occupation and use of the whole of the building.
Developer must notify the Secretary and the OC of the proposed Inspector. The Building Inspector must:
OC to notify approval or rejection within 14 days of its decision. If the developer fails to appoint, it must notify the Secretary within 21 days after the 12 month period and the Secretary appoints the Inspector.
Inspector gives at least 14 days written notice before entering the Strata Scheme, then provides the Interim Report.
Builder rectifies the defects identified in the Interim Report before the final inspection, giving at least 14 days written notice of any inspection of individual lots.
If the Interim Report does not identify any defects, the developer may apply to the Secretary to determine that no Final Report is needed. If such a decision is made, Secretary to notify OC within 28 days of decision that Final Report is not required.
Developer arranges the final inspection, notifies the Secretary of its date, and the Final Report is uploaded to the Portal. If the original inspector is unavailable, the developer notifies the Secretary within 14 days of becoming aware and the Secretary appoints the inspector.
OC must claim Bond within 14 days to the expiry of the latest of the following dates:
If no defects are identified in the Final Report, the Bond is released in full to the developer. Otherwise the Secretary gives 14 days’ notice before any payment out of the Bond.
The period is now the later of 2 years after completion and 90 days after the Final Report is given to the Secretary (SSMR cl 54A). Notice of a proposed payment now also goes to the builder.
On notification by the OC that defects have been rectified, the developer notifies the Secretary through the Portal and requests the balance of the Bond to be returned.
Release of the Bond is now governed by SSMA s 210A and SSMR cl 55AA, including where the Interim or Final Report identifies no defective building work.
This publication has been prepared for general information. You should not rely on the contents of the publication. It is not legal advice and should not be regarded as a substitute for legal advice. The contents of this publication may contain copyright. The Update boxes state the position as at 30 September 2026 and are subject to the same limitations.
This content has been prepared by the team at Kreisson.
