What every owners corporation needs to know right now.

A recent Supreme Court decision has changed the landscape for owners corporations pursuing strata building bond money.

Here’s what happened, what it means for you, and why getting the right advice early is more important than ever.

First, a quick refresher: What is a strata building bond?

When a developer builds a residential strata scheme worth more than $20,000 in contract price, they are required by law to lodge a building bond with NSW Fair Trading. This bond typically 2% (increases to 3% 1 July 2026) of the contract price acts as a financial safety net for the owners corporation if building defects are found but not fixed.

The process broadly works like this:

• An independent building inspector completes an interim and then a final report identifying any defects.
• If defects remain unrectified, NSW Fair Trading can order the bond (or part of it) to be paid out to the owners corporation to fund repairs.
• The developer can dispute this decision via an internal review, and ultimately through the courts.

What happened in this case?

In May 2026, the NSW Supreme Court handed down a significant decision: Peninsula Point Frederick Pty Ltd v Secretary, Department of Customer Service [2026] NSWSC 476.

Here’s the short version:

• A developer at Point Frederick, NSW, lodged a building bond of just under $800,000.
• Defects were identified in interim and final inspection reports, with a quantity surveyor estimating rectification costs of over $1.3 million, well above the bond amount.
• The Secretary determined the full bond should be released to the owners corporation.
• The developer challenged the decision, submitting its own expert evidence and arguing the government reviewer hadn’t properly engaged with competing reports.
• The Court ultimately quashed the review decision and sent it back for redetermination — not because the owners corporation had done anything wrong, but because the reviewer failed to properly consider the developer’s submissions about methodology.

In summary, the owners corporation was on the verge of receiving nearly $800,000 to fix genuine building defects. Because of a procedural flaw in how the government reviewer handled the developer’s submissions, the whole process had to start over. No money. More waiting. More uncertainty.

What this means for your owners corporation.

This case is a wake-up call. It demonstrates three areas about the building bond regime that every owners corporation should understand:

• You may not even know the developer is fighting you.
  A developer can lodge an internal review application and pursue the matter all the way to the Supreme Court without the owners corporation being formally served or having any real opportunity to put its case forward. You can be completely in the dark while the process that affects your building’s future plays out.
• The bond process is deliberately provisional.
  The Court confirmed that the Secretary’s role is not to make binding legal findings about whether defects exist or who is to blame. The bond regime is designed as a rough-and-ready safety net, not a final determination. That means the money can be paid out, and then potentially clawed back, without ever resolving the underlying dispute about the building.
• Once you receive bond funds, your obligations are strict.
  Under the Strata Schemes Management Act, owners corporations must apply bond money strictly in accordance with the legislation. If the decision to release the bond is later set aside on appeal or remitter, there are real questions about what happens next including whether funds already spent need to be repaid or accounted for.

The parallel proceedings problem

Many owners corporations dealing with defects are pursuing claims under both the building bond regime and the Home Building Act 1989. These two pathways don’t always run smoothly side by side.

Decisions made in one forum can affect your position in the other. Accepting bond money (or not) can have strategic implications for your HBA claim. Engaging in one process without considering the other can inadvertently limit your options.

This is exactly the kind of complexity that requires experienced legal guidance a lawyer who understands how these regimes interact.

Our advice: Don’t wait until there’s a problem.

If you have received any notice from the Secretary under the building bond regime or if you’re aware that a building bond has been lodged for your strata scheme speak to a specialist strata lawyer now.

The timeframes in the legislation are strict, the stakes are high, and the window to protect your position can close quickly. 

For a detailed analysis of the Court’s decision, you can read our full case here: Strata Building Bonds Case:_What You Should Know

Strata Building Bonds: Complex Law, Clear Advice.

Strata living is about people’s homes, investments, and communities. Our team works with owners corporations, strata committees, and strata managers across Sydney metropolitan and regional NSW every day.

We can help you:

• Review any notices under the building bond regime and advise on your rights and obligations
• Monitor and intervene in review or judicial review proceedings to protect your interests
• Advise on how the bond regime interacts with any Home Building Act claims
• Guide your committee and manager on how bond funds must be applied and accounted for
• Represent you if the developer takes the matter to NCAT or the courts.

Our specialist strata legal team understands this area of law is complex. That’s why we ensure that our advice is clear, practical and focused on your outcomes.