This apartment building needs $24m in repairs. The builder is liable for none of it

2 days ago 4

Residents of a defect-plagued South Yarra apartment block face a $24 million repair bill and fear similar shoddy construction will undermine a push for more high-rise living in Melbourne.

Forty-six households within South Yarra Square are pleading for government help to meet the cost of rectifying flammable polystyrene panels, dodgy plumbing and compromised foundations in their building on Commercial Road.

Samantha Scherma, chair of the owners corporation for South Yarra Square.

Owners corporation chair Samantha Scherma blames state authorities and the City of Melbourne for failing to stop non-compliant works before the building was finished and approved for occupancy in the 1990s.

But a 10-year statute of limitations under the Building Act limits owners’ options for legal recourse as the defects were discovered only in the past five years.

“It’s just really frustrating,” Scherma says.

“We’ve drawn down our savings and sold our investment property just to make it safe and do the immediate structural repairs. We still could end up with no home and … potentially could go bankrupt.”

The foam insulation in the building is coming apart.

The four-storey block at 100 Commercial Road, opposite The Alfred hospital, was initially slated to be a medical centre.

But a convoluted development processes meant plans were eventually changed, and the building was turned into an apartment block after construction started.

Then-planning minister Robert Maclellan intervened in 1995 and ordered the now-defunct developer to pay $150,000 to the state government for building 1.29 metres higher than permitted, but ultimately let the structure remain unaltered.

The saga came back to life in 2022, when Scherma says wet weather led to flooding in the building’s basement, sparking engineering investigations.

The block was originally intended to be a medical centre.

Scherma says further inspections uncovered more and more defects, which a quantity surveyor’s report, seen by The Age, calculates would cost $24.2 million to rectify.

“It’s daunting beyond belief,” she says.

Scherma wants more done to protect apartment buyers from huge, unexpected costs from shoddy construction years after a building is completed.

She particularly wants change given the state government is pushing forward with plans to increase density in established suburbs via speeding up approvals and reducing regulation.

Scherma and South Yarra Square resident Kristen Morgan outside their defective building.

“The implications for everyday people, for whom this is the biggest purchase of their lives, are catastrophic,” she says. “There absolutely will be more cases like ours.”

Legal changes to boost consumer protections for home buyers were passed in May, after the Victorian Building Authority was criticised for inadequate regulation and the collapse of builder Porter Davis exposed deficiencies in the state’s home building insurance scheme.

A developer bond scheme will be set up for apartments, forcing companies to provide regulators with 2 per cent of construction costs, which can then be released to fix defects if needed. However, the bond is returned after two years.

The government has also said it is working on a 10-year liability scheme to cover apartment owners.