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

For further information please contact:

Michael Byrnes, Partner
Phone: + 61 2 9233 5544
Email: mjb@swaab.com.au

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.