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Most tower blocks defective, study finds

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An analysis of 212 building audits in three states has found more than half of high-rise blocks have at least one defect, prompting calls for an insurance overhaul to address the problem.

Building fabric and cladding issues top the list of flaws, followed by fire protection, waterproofing, roof and rainwater disposal, and structural issues, the study by Victoria’s Deakin University finds.

NSW buildings are by far the worst, with 97% having more than one fault, followed by Victoria on 74% and Queensland on 71%.

“Unfortunately, new residential buildings in Australia appear to be plagued with defects, and while the building itself can be fractured by these defects, it is the residents living there who face the impacts,” Lead Researcher Nicole Johnston said.

“Building defects are considered inevitable by the building industry, so it is essential to gain a better understanding of the nature of defects in residential multi-owned properties, in order to respond effectively.

“Government intervention that starts with in-depth stakeholder and end-user consultation is urgently required to stem the flow of these defects.”

Many study interviewees believe insurance needs a regulatory overhaul to address the building industry’s problems.

While insurers were not interviewed for the study, respondents support extending the statutory warranty scheme.

“Many were perplexed about the current regime and believed building defects would not be as prevalent if the insurance scheme were extended to cover buildings over three storeys,” the university’s research report says. Many interviewees suggested this is a critical issue that requires investigating.

“However, given the current environment and the extent of building defects identified, it is unlikely that insurers would expose themselves to such risk by extending the scheme.

“Historically, this type of approach has not been successful, yielding little financial benefit for the insurance industry.”

Interviewees say most lot owners often wrongly think costs associated with rectifying building defects will be covered by insurance.

Owners Corporation Network spokesman Stephen Goddard told insuranceNEWS.com.au insurers must take a more active role addressing the growing building crisis, which recently saw a second forced evacuation of residents in Sydney in six months.

“Step up, get a backbone, have a voice at the table, and it is in your interest to do so, or you will suffer brand value,” Mr Goddard said. “You need to make clear to the community that building defects are not an insurable risk and you call upon governments to introduce the consumer protections to resolve these defects.”

Problems in the building industry are already affecting insurance, with the last remaining provider of exclusion-free professional indemnity cover indicating it will pull out next month.

“I think the trend we’re already seeing, with professionals starting now to not be able to find insurance, or are starting to dry up on no-claims basis… that is all starting to dry up and I think that will continue as insurers respond to what is an aggregated kind of exposure in the market,” Strata Community Insurance MD Paul Keating told insuranceNEWS.com.au.

“At the end of the day, there is a need for a government-led response to drive confidence back into the market.”

See ANALYSIS.