Decen­ni­al insur­ance for new apart­ment buildings

The New South Wales Gov­ern­ment con­tin­ues to address the lack of con­fi­dence in the build­ing indus­try, par­tic­u­lar­ly in rela­tion to stra­ta liv­ing with the recent­ly passed Fair Trad­ing and Build­ing Leg­is­la­tion Amend­ment Bill 2026 lay­ing the final piece of leg­isla­tive ground­work required to bring Decen­ni­al Lia­bil­i­ty Insur­ance (DLI) to the market. 

On 5 August 2026, the New South Wales Gov­ern­ment passed the Fair Trad­ing and Build­ing Leg­is­la­tion Amend­ment Bill 2026 (NSW) (Build­ing Amend­ment Bill) which pro­vides clar­i­ty as to the defects to which a DLI pol­i­cy, a 10 year no fault insur­ance pol­i­cy for new apart­ment build­ings, must respond. 

A DLI pol­i­cy must respond to a ​‘rel­e­vant defect’ as that term is defined in the Stra­ta Scheme Man­age­ment Act 2015 (NSW). 

The NSW Gov­ern­ment says that ​‘DLI is an insur­ance prod­uct that will give NSW home­own­ers strong, reli­able cov­er­age against rec­ti­fi­ca­tion costs aris­ing from seri­ous defects in apart­ment build­ings, like this seen at Mas­cot Tow­ers and Opal Tow­ers in 2018 and 2019. For the first time in Aus­tralia, apart­ment own­ers will be backed by an insur­ance prod­uct that guar­an­tees this depth of pro­tec­tion over 10 years. Impor­tant­ly, DLI stays with the build­ing so even if a devel­op­er or builder goes out of busi­ness, apart­ment own­ers remain pro­tect­ed’.

The Build­ing Bill, which received assent on 14 August 2026, amends the Stra­ta Scheme Man­age­ment Act 2015 (NSW) (SSMA). 

Pre­vi­ous­ly, the only pro­tec­tion afford­ed to an own­ers cor­po­ra­tion against seri­ous defects was by the statu­to­ry obla­tion imposed by the SSMA on devel­op­ers to engage with the two-year stra­ta bond scheme and lodge, with the Build­ing Com­mis­sion, a bond to the val­ue of 2% of the con­struc­tion cost to cov­er the cost of rec­ti­fi­ca­tion of seri­ous defects.

DLI is a pol­i­cy where the lia­bil­i­ty for financ­ing rec­ti­fi­ca­tion of ​‘rel­e­vant defects’ lies with the insur­er regard­less of whether the devel­op­er or builder becomes insol­vent, ceas­es oper­a­tion or is deregistered. 

Whilst the option cur­rent­ly still remains for a devel­op­er to lodge the 2% bond, devel­op­ers can opt into the decen­ni­al insur­ance scheme and replace the require­ment to lodge the stra­ta bond by obtain­ing a DLI policy. 

Sec­tion 211AA(1) of the SSMA defines DLI is a pol­i­cy of insur­ance obtained by the devel­op­er for the ben­e­fit of the own­ers cor­po­ra­tion which ​‘insures against rel­e­vant defects in the build­ing ele­ments of the com­mon prop­er­ty’ for 10 years on a strict lia­bil­i­ty basis.

A strict lia­bil­i­ty basis means that the own­ers cor­po­ra­tion does not need to prove that the devel­op­er is at fault before being able to claim under the insur­ance pol­i­cy. So as long as the own­ers cor­po­ra­tion can sta­b­lish the exis­tence of a ​‘rel­e­vant defect in a build­ing ele­ment of the com­mon prop­er­ty’, then the DLI pol­i­cy should be trig­gered and respond to the own­ers cor­po­ra­tions claim.

Impor­tant to note is that the defect must be 1) a ​‘rel­e­vant defect’ and 2) in a ​‘build­ing ele­ment’ of the com­mon prop­er­ty. Each of those terms is defined in the SSMA (See: Sec­tion 211AA SSMA) and broad­ly refers to a fail­ure of struc­tur­al, fire safe­ty sys­tems, water proof­ing, mechan­i­cal, plumb­ing and elec­tri­cal ser­vices and ver­ti­cal trans­porta­tion ( lifts) to com­ply with the BCA, Aus­tralian Stan­dards or the rel­e­vant approved plans and which is like­ly to cause to dam­age the build­ing or a risk of death or serios injury or a defect in a build­ing ele­ment attrib­ut­able to defec­tive design or faulty work­man­ship like­ly to ren­der the build­ing inhab­it­able or at risk of destruc­tion or collapse 

Present­ly the DLI pol­i­cy offered by Resilience Insur­ance Pty Ltd has been reviewed by Building