First 10-year defects insurance policy accepted in NSW: what apartment developers and builders need to know

Ten-year defects insurance for apartment buildings has moved from legislation to the market in NSW. The reforms that clarify the scope of decennial liability insurance, or DLI, commenced on 20 August 2026, and Building Commission NSW now lists a first policy as being in a form acceptable to the Secretary of the Department of Customer Service. For developers and builders of apartment buildings, DLI is now a real option.

What has happened

The Fair Trading and Building Legislation Amendment Act 2026, which passed Parliament in early August, received assent on 14 August. Its DLI reforms commenced on 20 August. According to Building Commission NSW, the reforms clarified that DLI provides cover where non-compliance related defects, those resulting from non-compliance with the Building Code of Australia, Australian Standards or the approved plans, cause or are likely to cause damage or a risk of death or serious injury.

Building Commission NSW’s DLI page, updated on 28 August, lists a Resilience Insurance Latent Defects Insurance Policy as reviewed and determined to be in an acceptable form. The Commission says it continues to work with other prospective providers to bring more products to market. Any DLI policy must reflect the wording of a policy in an acceptable form.

How DLI works

DLI is an insurance product for residential strata apartment buildings over three storeys. It is taken out by the developer before an occupation certificate is issued, in favour of the owners corporation. It covers relevant defects in the building elements of the common property, which include the structure, fire safety systems and waterproofing, for up to ten years after the building is first occupied.

The Commission describes DLI as first resort insurance: owners can claim when a defect is identified, without needing to litigate or negotiate with the developer first. It operates on a strict liability basis, so fault does not need to be proven. And because the policy attaches to the building rather than the developer, successive owners are protected even if the developer or builder goes out of business.

DLI or the building bond

Developers of new strata buildings without home building compensation cover have had to lodge a building bond under the Strata Building Bond and Inspections Scheme, currently 2% of the contract price, which can be used to fix defects identified in inspections. A DLI policy in an acceptable form is an alternative to the bond: only one is required to obtain an occupation certificate.

The Government has said it intends to increase the building bond once the DLI market is sufficiently mature, to encourage DLI uptake. That increase has been deferred to 1 July 2028.

What developers must do

A developer intending to use DLI must notify Building Commission NSW of that intention through the NSW Planning Portal before construction starts. The notice must include a certificate of currency setting out the issuer, the insured, the amount covered, the terms and conditions including the building work covered and the commencement date, and the premium deposit and confirmation it has been paid. Before applying for an occupation certificate, either the building bond must be lodged or the DLI policy issued; the policy only needs to be in force once the occupation certificate is issued.

What it means for builders

For builders of apartment buildings, DLI brings a new stakeholder into the project: an insurer that will be covering the building’s structure, fire safety and waterproofing for ten years. Insurers offering this kind of cover typically want confidence in the design, the builder and the construction process, which can mean inspections, documentation requirements and quality assurance expectations during construction.

Builders with strong quality systems, including inspection and test plans, photographic records of concealed work, controlled product substitutions and competent subcontractors, will be better placed to work on DLI-insured projects. Those records also support the building compliance declarations already required under the Design and Building Practitioners Act.

Developers are likely to pass insurer requirements into the building contract: access for the insurer’s technical inspectors, hold points before waterproofing and fire-stopping are concealed, and defined handover documentation. Builders should read those clauses carefully at tender, price the extra inspection time, and make sure their subcontract agreements pass the same obligations down to the trades whose work will be inspected. Where an insurer pays a claim, it may seek to recover from the parties responsible for the defect, so DLI does not remove a builder’s exposure for defective work. It changes who pays first.

What it means for owners

For apartment buyers and owners corporations, DLI offers a long-term, high-value protection for serious defects in common property, with a claims process that does not depend on the developer still existing. It addresses one of the lessons of the Mascot Towers and Opal Tower crises, where owners faced enormous costs and uncertainty.

Why apartment defects needed a new answer

Home building compensation insurance, which protects buyers of houses and low-rise homes when a builder dies, disappears or becomes insolvent, is not required for residential buildings of more than three storeys in NSW. For years, owners of new apartments relied on the statutory warranties and, when those failed, on litigation against a developer or builder that was often a single-purpose company wound up once the project was sold. The building bond scheme gave owners corporations a fund to draw on for defects found in the interim and final inspections, but a bond is a fixed percentage of the contract price, held for a limited period.

DLI takes a different approach. Instead of a pool of money held for a short time, it provides an insurance policy for the longer tail of serious defects, with a claims process run by an insurer rather than a courtroom. It is a model long established in France, where ten-year liability cover is a fixture of residential construction, and it is the model the NSW reforms have been building towards since the Building Commissioner’s early work on restoring confidence in apartments.

What to watch

• More policies listed as acceptable, as Building Commission NSW works with other prospective providers.
• Developer uptake, and whether DLI is priced competitively with the building bond.
• Insurer requirements for inspections and documentation during construction.
• The building bond increase, deferred to July 2028, which is intended to push the market towards DLI.

Questions builders ask

• Building Commission NSW
• Decennial liability insurance
• Defects
• NSW building reform

Published 5 September 2026. General information for builders, not legal, financial or engineering advice for a specific job. Check current requirements with the relevant regulator or standard before relying on them.