Few things are more unsettling for an apartment owner than discovering serious defects in a relatively new building — except, perhaps, discovering that the company behind the development has disappeared as well.
Water starts finding its way into the basement. Cracks appear where they should not. Waterproofing fails. The owners corporation begins asking who is responsible, only to encounter a maze of developers, builders, related businesses and special purpose companies. The entity named in the original paperwork may now have few assets, little money or may no longer be trading at all.
This is where an important distinction needs to be made between ordinary corporate structuring and illegal phoenix activity.
Using a special purpose vehicle (SPV) for a particular development is common in the property industry and is not, by itself, suspicious or unlawful. Developers regularly establish separate companies for individual projects. Illegal phoenixing is different. ASIC describes it as a situation where a new company continues the business of a company that has been liquidated or abandoned, while assets are transferred for little or no value and outstanding debts are left behind.
The financial damage is significant. ASIC has cited estimates putting the annual economic impact of illegal phoenix activity at around $4.89 billion, while earlier Phoenix Taskforce estimates placed the figure above $5 billion.
For the person who has just bought an apartment, though, the issue is far less abstract: if something goes seriously wrong with my building, who will still be around to fix it?
When the corporate structure becomes part of the problem
Large development groups can operate through multiple companies, trusts and project-specific entities. That structure may be perfectly legitimate, but it can make identifying responsibility much harder when defects emerge.
NSW apartment owners are not without protection. Residential building work generally comes with statutory warranties lasting six years for major defects and two years for other defects. Where a breach only becomes apparent during the final six months of the relevant warranty period, an additional six months may be available to commence proceedings.
The difficulty is that having a legal right to pursue someone does not necessarily mean recovery will be straightforward. If the responsible company becomes insolvent, owners may need to investigate other available avenues rather than assuming the original developer will simply fund the repairs.
| Risk area | What buyers may discover | Why it matters |
| Project-specific company | The contractual developer may be an SPV rather than the well-known parent brand | The entity’s financial backing may be very different from what the branding suggests |
| Illegal phoenix activity | Assets may have moved while liabilities remain with another company | Creditors and defect claimants can face significant recovery difficulties |
| Major building defects | Waterproofing, structural or other serious failures can emerge after settlement | Rectification can become enormously expensive |
| Statutory warranties | Major defects generally have a six-year warranty period | Waiting too long can jeopardise a claim |
| Strata building bond | Eligible NSW apartment developments currently require a 2% bond | It provides some protection, but the available pool is limited |
| Owners corporation exposure | Common-property defects can become a problem for the entire scheme | Owners may ultimately face special levies, professional fees and litigation costs |
The 2% bond helps — but it cannot solve everything
The NSW Strata Building Bond and Inspections Scheme provides another layer of protection for eligible new apartment developments. Developers of eligible buildings of four storeys or more must currently provide security equal to 2% of the relevant building contract price before an occupation certificate is sought. That money can be used towards rectifying defects identified through the statutory inspection process.
There is also an important detail worth clearing up: the bond has not increased to 3% in 2026. The NSW Government has deferred that increase until 1 July 2028.
Even so, 2% can suddenly look rather modest when an apartment complex requires extensive façade, waterproofing or structural repairs. Serious building defects can quickly become a major financial exercise.
That is why due diligence before exchange matters so much. For an existing strata property, buyers should be asking: • who actually developed and built the building; • whether related entities have an insolvency history; • what previous strata records say about defects and rectification; • whether litigation or building complaints exist; • whether special levies have already been raised or proposed; and • whether the owners corporation has sufficient capital works funding.
NSW reforms commencing in April 2026 have also strengthened aspects of strata maintenance and financial planning, including standardised 10-year capital works fund plans and additional independent review requirements for certain multi-storey schemes.
The lesson is uncomfortable but simple. The impressive name stretched across a development billboard matters far less than the legal entity standing behind the contract.
Flash Conveyancing Advice
When buying a new or relatively recent apartment, look beyond the developer’s trading name and glossy marketing. Find out who the contractual vendor actually is and examine the strata records carefully, particularly for defect reports, litigation, special levies and previous rectification work. If problems have already surfaced, do not leave them for later — limitation periods can turn delay into a very expensive mistake.
A beautiful apartment can hide an ugly corporate history.
That is why careful conveyancing matters. By the time cracks, leaks or other serious defects become impossible to ignore, the corporate structure behind the project may look very different from the one buyers thought they were dealing with when they settled.
Flash Conveyancing, led by Julian & Renee, helps buyers look beneath the surface before serious money is committed. Their approach is personal and practical: reviewing the Contract for Sale, title and relevant strata material, identifying unusual conditions and making sure clients understand potential warning signs before exchange.
For strata buyers, looking beneath the surface means more than inspecting the apartment. A renovated kitchen will not reveal a waterproofing dispute in the basement. A great balcony view will not tell you that the owners corporation is considering a substantial special levy. And a familiar developer’s brand does not necessarily tell you which legal entity is actually standing behind your contract.
Flash Conveyancing assists with property transactions throughout NSW, including Sydney, Newcastle and Wollongong, as well as council areas including Blacktown, Hawkesbury, Blue Mountains, The Hills, Hornsby and Parramatta.
Julian & Renee also assist buyers and sellers in Acacia Gardens, Angus, Arndell Park, Blacktown, Colebee, Glendenning, Glenwood, Grantham Farm, Kellyville Ridge, Kings Langley, Marsden Park, Melonba, Oakhurst, Parklea, Quakers Hill, Riverstone, Schofields, Seven Hills, Stanhope Gardens, Tallawong, The Ponds, Baulkham Hills, Beaumont Hills, Bella Vista, Castle Hill, Kellyville, Kenthurst, North Rocks, Northmead, Rouse Hill, Vineyard, Windsor, Annangrove, Box Hill, Cattai, Dural, Gables, Galston, Glenhaven, Glenorie, Maraylya, Middle Dural, Nelson, North Kellyville, Norwest and Winston Hills, along with other locations across NSW.
The frightening possibility is very real: buy the wrong apartment, inherit a serious building problem, and you could end up trying to recover money from a company that no longer has the financial capacity you expected.
You cannot guarantee that every developer will still be there when a defect appears. What you can do is investigate who sits behind the property, understand the building’s history and know exactly what you are buying before you sign. Flash Conveyancing is here to help you do that.
