Shaking up defective apartment building claims: How decennial insurance is changing in NSW

The Fair Trading and Building Legislation Amendment Bill 2026 (‘the Bill’) was passed by parliament on 5 August 2026. The Bill will implement changes to the decennial insurance model that may affect not only apartment owners, but also builders and developers involved in new apartment projects.

What is Decennial Insurance?

Decennial insurance is designed to cover remediation costs for defects in new apartment buildings that are identified within ten (10) years after initial occupation. The model was first proposed, and later introduced, following the Ministerial Advisory Panel’s findings in 2022. It was intended to give unit owners clearer options for reimbursement or recourse when defects emerge, while increasing consumer confidence in the construction sector.

How Has Decennial Insurance Operated So Far?  

The Ministerial Advisory Panel that initially endorsed the scheme preferred mandatory decennial insurance requirements for all building developers of class 2 buildings and buildings with class 2 parts. However, mandatory insurance was not required by the 2022 provisions and has not been adopted in the Bill.

To date, few, if any, insurance providers have offered decennial insurance products in the market. The absence of a mandatory requirement for developers to obtain this insurance may have contributed to limited provider uptake. The original legislative definition also left uncertainty about the model’s scope, which the 2026 Bill seeks to address by creating greater certainty for insurers and developers.

The original 2022 definition of decennial insurance, introduced into the Strata Schemes Management Act 2015 (NSW) under section 211AA, was broad and uncertain. The model was described as insurance taken out by developers for the benefit of the owners corporation of a strata scheme. It would insure against serious defects to building elements for 10 years on a strict liability basis. In this context, strict liability means a claimant only needs to establish that the relevant building defect exists; they do not need to prove fault by the builder or developer.

Ambiguity in the meaning of serious defect has hampered the success of decennial insurance. The 2026 amendments seek to address that uncertainty by defining the defects that can fall within the scheme.

Effect of the 2026 Amendments

The 2026 Bill seeks to provide greater certainty by replacing the phrase “serious defects” with “relevant defects” in the legislative definition of decennial insurance. In practical terms, the amendments shift the focus from a broad and uncertain concept of “serious defects” to a more specific list of defects that may be covered. This should help owners, developers and insurers identify whether a defect falls within the decennial insurance framework.

Notably, the following are considered relevant defects under the new section 211AA of the Strata Schemes Management Act 2015:

1. A defect to a building element which involves failure to comply with the Building Code of Australia, arelevant Australian Standard or the relevant approved plans;
2. A defect which causes or is likely to cause damage to the building or risk injury or death to one or more persons;
3. A defect which is attributed to defective design, defective or faulty workmanship or defective material, and which causes or is likely to cause inability to inhabit the building, destruction to the building, or a threat of collapse of the building; 
4. Use of a building product in contravention of the Building Products (Safety) Act 2017;
5. Installation of vertical transportation in a building which is or is likely to cause injury or death to one or more persons; or
6. Any defect of a kind prescribed by the regulation.

Decennial insurance remains a strict liability model, meaning apartment owners need only establish that a defect to their building falls within one of the listed categories to qualify for compensation.

What Does This Mean For Builders And Developers?

For builders and developers, the practical question is not only whether decennial insurance becomes more widely available, but how the amended definition of “relevant defects” may affect project risk, documentation and quality-control processes. If insurers begin offering decennial insurance products more widely, developers may face increased scrutiny during the design and construction phases, particularly in relation to compliance with approved plans, product selection and defect prevention. Builders and developers should review whether their compliance systems, records of approved plans, product documentation and defect-management processes are sufficient to respond to insurer requirements and future claims.

For builders and developers, the amendments may therefore make defect prevention, compliance records and early engagement with insurers more important in future apartment projects.

If you are an apartment owner, builder or developer and would like to discuss how the Bill may affect your rights, obligations or options regarding building defects, please contact our office on (02) 4288 0150.

This article was co-authored by Lorri Field (Director) and Miranda Whitfield (Law Clerk).