Buying a brand-new apartment is about more than beautiful finishes, contemporary design and the excitement of being the first person to call it home.
For today's apartment buyer, there can also be an important additional benefit — long-term insurance protection for certain building defects.
Known as Latent Defect Insurance, including forms of Decennial Liability Insurance, this emerging protection is designed to give apartment owners greater confidence in the quality and longevity of their new building.
What Is Latent Defect Insurance?
In simple terms, Latent Defect Insurance is designed to protect against certain significant defects in a building that may not be apparent when you purchase or move into your apartment.
A new building can look perfect on completion, while some construction issues may only become apparent years later.
This is why long-term insurance protection can be so valuable.
Depending on the policy, cover may extend for up to 10 years, providing long-term protection well beyond the initial excitement of moving into a new home.
Protection That Stays With the Building
One of the most attractive features of this type of insurance is that the protection is associated with the building.
This is particularly important for apartment owners because responsibility for major parts of an apartment development — including the structure and common property — is shared through the owners corporation.
Where an eligible insured defect arises, there is an insurer behind the policy and an established process for assessing a claim.
That can provide an important additional level of certainty for owners.
Up to 10 Years of Protection
A home is a long-term purchase, so long-term protection makes sense.
Depending on the particular policy, Decennial Liability Insurance can provide protection for certain serious defects affecting common property for up to 10 years.
For someone purchasing a brand-new apartment as their long-term home, that can be an important consideration.
It means the conversation is not simply about how the apartment looks when the keys are handed over.
It is also about how the building is protected into the future.
An Additional Layer of Protection
Latent Defect Insurance doesn't replace all of the other protections available to purchasers of new apartments in NSW.
Instead, it can provide an additional layer of protection alongside statutory building warranties, building regulation, inspections and the ongoing responsibilities of the owners corporation.
That combination provides buyers with a comprehensive framework around their new home.
More Than Just an Insurance Policy
One of the less obvious benefits can occur before the building is even completed.
To obtain this type of insurance, insurers may require the development and construction process to undergo independent technical assessment and inspections.
This can involve reviewing important aspects of construction while the building is being delivered rather than simply examining the finished building.
For purchasers, this can provide an additional level of comfort that the development has been subject to scrutiny beyond the normal construction process.
Particularly Valuable for Apartment Owners
Modern apartment buildings are sophisticated structures.
They can include basement car parks, lifts, waterproofing systems, façades, balconies, landscaped areas, fire systems and extensive common property.
For owners, the benefit of Latent Defect Insurance is therefore not simply protection for an individual apartment.
It can provide protection for eligible defects affecting the building and its common property, subject to the terms and conditions of the particular policy.
That distinction is important because maintaining the common property ultimately affects every owner.
Added Confidence for Future Purchasers
Long-term building protection may also become increasingly valuable when an owner eventually decides to sell.
Imagine comparing two similar apartments several years after completion.
One is in a building with meaningful long-term defect insurance still in place, while the other has no comparable insurance protection.
For a future purchaser, the existence of remaining insurance cover could be an attractive additional feature.
While it cannot guarantee a property's future value, it can provide another point of confidence in the building.
What Should Buyers Ask?
When considering a brand-new apartment, buyers should ask the selling agent or developer:
Does this development have Latent Defect or Decennial Liability Insurance?
How long does the protection last?
What parts of the building are covered?
What types of defects are covered?
Who is the insurer?
When does the insurance commence?
Is the protection transferable and does it remain with the building if an apartment is sold?
Can my solicitor review the policy documentation before I purchase?
The exact coverage, exclusions, conditions and claims process will depend upon the particular insurance policy, so buyers should always review the actual documentation.
A Better Way to Buy Brand-New
The quality of the apartment will always matter.
The design, location, outlook, finishes and lifestyle are naturally at the centre of the purchasing decision.
But sophisticated purchasers are increasingly interested in another question:
What protection stands behind the building after I move in?
A development offering genuine long-term Latent Defect Insurance can provide an important answer.
It offers buyers another layer of protection, greater confidence in the building process and the reassurance of knowing that eligible defects may be backed by insurance for years after completion.
For buyers planning to make a new apartment their home for many years, that can be a very valuable benefit.
Buy the apartment you love — with greater confidence in the building behind it.
This article provides general information only. Insurance coverage varies between developments and policies. Purchasers should obtain independent legal advice and review the relevant policy documentation before purchasing.
