Latent Defects Insurance in New South Wales (Classes 2-9)

NSW led the nation on LDI, and its bond scheme is about to get more expensive.

Under the Fair Trading and Building Legislation Amendment Act 2026, it is mandatory to lodge an approved Latent Defects Insurance policy or a 2% building bond in order to obtain an Occupation Certificate. LDI is far superior — not only from a developer protection aspect, but as a positive financial purchase. The bond is expected to increase to 3% from 1 July 2028. The NSW Government has also indicated its intention to mandate LDI in the future. SHC is the most experienced and longest-standing brokers to manage this process on your behalf.

What the NSW framework means for your project

NSW was the first state to legislate LDI, and continues to refine the framework.
Under this legislation, developers of Class 2 apartment buildings can choose between the Strata Building Bond and Inspections Scheme or a first-resort, 10-year LDI policy.

Applies to Class 2 apartment buildings, with extension to Class 3 and 9c buildings anticipated.
Administered by NSW Fair Trading and Building Commission NSW
The Strata Building Bond rises from 2% to 3% of contract price from 1 July 2028, for buildings four storeys and over
The NSW Government has stated an intention to make LDI mandatory for Class 2 buildings, anticipated by 2028
LDI must be secured before construction begins. Engage SHC’s ecosystem of insurances for significant price savings.

What Latent Defects Insurance Covers

Covered

Structural elements: load-bearing walls, slabs, columns, beams, transfer structures, and foundations
Building envelope: external walls, roof, and waterproofing systems
Waterproofing failures relating to structural or envelope defects
Fire Safety Structural Elements
Consequential losses: temporary accommodation, reinstatement fees, and pre-authorised investigation costs where the building is uninhabitable
MEP - Mechanical, Electrical and Plumbing systems

Not Covered

Cosmetic or non-structural defects
Damage from poor maintenance or wear and tear

*Not all events are covered

Who should hold this policy?

As the developer, you carry the project risk. LDI is built around that. But the policy extends its value to every party in the transaction: builders, financiers, and future owners all benefit from 10 years of first-resort structural cover.

For financiers

Locking 2% of contract price into a bond for two years is capital your next project can't use. LDI replaces that cost with a single premium, and it's increasingly the detail New South Wales financiers ask about before signing off on a project structure.
For future purchasers and owners corporations

An owners corporation taking over a NSW building doesn't inherit a bond claim tied to a defect schedule. It inherits ten years of direct, first-resort cover, transferable from the day the policy was written.

Bond or LDI: what it costs your project

Latent Defects Insurance

Premium averaging 1.5% of construction cost
One-off premium, no capital held or returned
10-year cover from the date of your Occupancy Certificate
First-resort, strict-liability: claim directly with the insurer, no fault attribution required

Strata Building Bond

2% of contract lodged under the SBBIS
Held for 2 years after completion
Capital tied up for the holding period, not available for your next project
Covers common property defects only, drawn against a limited defect schedule

Why choose us for LDI in NSW?

A Sydney-based specialist team

SHC Insurance Brokers operates from Level 2, 2 Glen Street, Milsons Point, with a team that works directly with NSW developers, financiers, and building surveyors on the bond-versus-LDI decision project by project.
Specialist depth no generalist can match

SHC Insurance Brokers is Australia’s largest LDI broker and first to market to secure this product in the Australian market. We have managed $8bn of construction value in the last 12 months through this program.
One broker, one file for the full ten-year tail

From DA through to OC and beyond, SHC Insurance Brokers carries you through each stage with one continuous file and one specialist team. We understand where insurance intersects the certification pathway, flagging issues before they become PC or OC blockers, because we have seen every version of this before.

Frequently asked questions

Is LDI mandatory in NSW?

Not yet. LDI is an alternative to the Strata Building Bond. The NSW Government has stated an intention to make it mandatory for Class 2 buildings, anticipated by 2028, but this has not yet been legislated.

What is the Strata Building Bond, and how does it compare to LDI?

The Strata Building Bond is a financial security lodged under the SBBI. It is currently 2% of construction value and held for 2 years. In our experience it can take considerably longer than 2 years to retrieve and can cost as much as 1.7% to retrieve back.

How much is the NSW Strata Building Bond, and is it changing?

The NSW Government has deferred the increase from 2% to 3% of the strata building bond until 1 July 2028.

Does LDI replace the Strata Building Bond?

Yes. LDI is a formal alternative to it, not an addition. A developer choosing LDI does not also need to lodge a bond for the same building.

When do I need to arrange LDI for a NSW project?

LDI must be secured before construction begins. The independent Technical Inspection Service (TIS) that forms part of the policy starts at the design stage. Retrospective cover is not available.

Does LDI cover private lots as well as common property?

Yes. Unlike the Strata Building Bond, which covers common property only, LDI covers structural elements and waterproofing across the entire building, including private lots.

What does LDI cost compared to the bond?

LDI premiums generally range from 1.3% to 1.7% of construction cost, averaging around 1.5%. Typically a 30% deposit is taken at construction commencement and the balance is due at Occupation Certification. SHC can also arrange premium funding where cash flow is a consideration.

Can LDI be transferred to the owners corporation at handover?

Yes. LDI is issued to the developer and is transferable, including to the owners corporation on creation. It remains in force regardless of whether the original developer or builder is still operating.

What is the Technical Inspection Service, and is it required in NSW?

TIS is a mandatory, independent third-party oversight service that runs from design stage through to practical completion, confirming the project is being built to its approved design and code. It applies to LDI-insured projects nationally, including NSW. Empirical evidence suggests that the TIS program can lower defects by as much as 93%.

Who administers the NSW scheme?

NSW Fair Trading and Building Commission NSW administer both the Strata Building Bond and Inspections Scheme and the requirements for LDI as its alternative, under the Fair Trading and Building Legislation Amendment Bill 2026.