NSW lays final groundwork for 10-year defects insurance on apartments

NSW has passed the legislation it needs to bring decennial liability insurance to apartment buildings. The Government announced on 6 August that the Fair Trading and Building Legislation Amendment Bill had passed Parliament, describing it as the final piece of legislative groundwork for decennial liability insurance, or DLI.

DLI is a form of insurance that covers the cost of fixing serious defects in apartment buildings for ten years. The Government calls it a nation-first protection for apartment owners. For builders and developers, it signals where the regulation of apartment building quality is heading.

What decennial liability insurance is

DLI is common in some other countries, where it has been used for decades to give owners of new buildings long-term protection against serious structural and building defects. The core idea is simple: an insurance policy is taken out for the building, covering the cost of rectifying serious defects that emerge over ten years, and the policy stays with the building rather than with the developer or builder.

The Government’s announcement points to the defects crises at Mascot Towers and Opal Tower in 2018 and 2019 as the kind of situation DLI is designed to address. In those cases, apartment owners faced enormous costs and uncertainty. Under DLI, if the developer or builder goes out of business, owners remain protected because the cover is attached to the building.

Why apartments need a different model

In NSW, most residential building work valued at more than $20,000 must be covered by the Home Building Compensation Fund, which protects owners if the builder dies, disappears or becomes insolvent. But that scheme does not cover apartment buildings above three storeys. For those buildings, the main protections have been the statutory warranties and the strata building bond and inspections scheme, under which developers lodge a bond that can be used to fix defects identified in inspections.

The bond is a percentage of the contract price and is held for a limited period. It is useful, but it can be small relative to the cost of fixing serious defects in a large building, and it does not provide the long tail of cover that serious defects often need, because some problems take years to appear. DLI is intended to fill that gap.

What happens next

Passing the Bill is not the same as having DLI available to buy. The Government says the passage of the Bill gives insurers the confidence they need to seek review and endorsement for their DLI policies so they can be rolled out across NSW. Building Commission NSW will work with prospective DLI providers to align their policies with the new legislative requirements and make sure they are fit for purpose.

So there are still steps to go before DLI is a commercial reality. The timeline will depend on how quickly insurers bring products forward, how long review and endorsement take, and how the market prices the risk. DLI is not yet mandatory for new apartment projects, and the Government has not announced a date by which it will be.

The other changes in the Bill

The Bill is broader than DLI. The Government says it also modernises property laws, closes loopholes, and gives property and building regulators more power to take disciplinary action and protect consumers. Several changes are directly relevant to builders.

Licensing. NSW Fair Trading and Building Commission NSW get clearer powers to refuse applications or cancel licences obtained through misrepresentation, error or invalid qualifications. This follows years of concern about licences being obtained with qualifications that did not reflect real competence. For legitimate licence holders, it is a reason to keep your own qualification records in order. For the industry, it is a step towards a licence meaning what it says.

Certifiers. Private certifiers will no longer be able to surrender their registration to prevent disciplinary action being taken against them. Previously, a certifier facing investigation could, in effect, walk away before the regulator acted. Closing that path increases accountability in certification, which matters to builders because certification failures often end up as defects the builder is asked to fix.

The context: 75,000 homes under construction

The Government noted that more than 75,000 homes are under construction across NSW. With a volume like that, and with the housing targets pushing for more, the Government is trying to lift supply and quality at the same time. That is the thread that links this Bill with the building approvals and prefabrication reforms that passed in the same week: faster approvals and new construction methods on one side, stronger consumer protection and tougher regulation of practitioners on the other.

How builders can prepare for insured buildings

If DLI becomes a common feature of apartment projects, the insurer becomes a new stakeholder in the build. That changes how quality is evidenced. Builders who want to be the contractor of choice on insured projects can start preparing now.

• Inspection and test plans. A documented plan of what is inspected, when, by whom and against what standard, with records kept as the job progresses. Insurers and their inspectors will want to see it.
• Photographic records of concealed work. Waterproofing, fire-stopping, structural connections and drainage are the areas most likely to generate serious defect claims, and the ones hardest to verify after they are covered.
• Controlled product substitution. A substitution that was not approved by the designer is exactly the kind of thing an insurer will query. Keep a register of approved substitutions.
• Competent, documented subcontractors. Licences, qualifications and scopes for every trade on the job.
• Defect close-out records. Evidence that defects found during construction were rectified, and how.

None of these is new. They are what good builders do already. The difference is that, with a ten-year insurer involved, the quality of the records may affect the price and availability of cover for the whole project.

What it means for builders

• Apartment builders and developers should follow the DLI policies as they come to market, and expect insurers to take a close interest in design, construction methods and quality assurance.
• All licence holders should make sure their licence and qualification records are accurate and supportable, given the clearer powers to cancel licences obtained through error or misrepresentation.
• Builders working with certifiers can expect a certification system with more accountability, which is good for builders who do the work properly.

For house builders, DLI is unlikely to change much directly: it is aimed at apartment buildings, and houses remain covered by the statutory warranties and HBCF. But the direction of travel is the same across the industry. Regulators want demonstrable quality, clear records and accountable practitioners, and the builders who already work that way will find each new reform easier to absorb.

Questions builders ask

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

Published 6 August 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.