Lessons from Mascot Towers – the significant cost to Government when Strata goes wrong…
Mascot Towers is not simply a building defects story. Rather it is an example of what happens in practice when a regulatory system has no one empowered to intervene before catastrophe become irreversible and too far gone. The NSW government has paid the cost of this failure in financial aid, political capital and in the suffering of the 132 lot owners who were unfortunate enough to purchase a lot in a defective complex. Such consequences should not be repeated. Here, the case of Mascot Towers makes the need for a Strata Commissioner concrete and urgent.
In 2019, significant structural defects were identified in the transfer beams of the basement of Mascot Towers during a routine inspection. After being declared unfit for habitation, the 132 lots were evacuated and the dual tower, ten-storey residential and commercial complex was left empty for nearly five years. From special levies and loans to legal action, a developer buyout, and a Supreme Court application, the Owners Corporation was unable to resolve the crisis, with each avenue either collapsing through lack of owner consensus or being rejected by the courts. By the time the saga concluded in mid-2024, the NSW government had spent years funding rental assistance for displaced owners at approximately $250,000 per month. Based on this, the Parliamentary Budget Office estimated that the cost of extending the assistance package to 30 June 2024 would be around $2.8 million.[1] However this was not the entire extent of financial assistance incurred by NSW government. That is, since the evacuation of Mascot Towers five years ago, assistance packages amounting to $24.52 million have been paid out to impacted residents, owners, and investors in need.[2] This represents a huge cost to the government and the taxpayer that must be avoided going forward.
Whilst examining the example of Mascot Towers, one of the most consequential and under-discussed aspects is the role of insurance or more accurately, the lack of. Strata insurance covers accidental damage, theft, and legal liabilities. Earth movement (including subsidence, settlement, or shrinkage of earth) are policy exclusions[3]. At Mascot Towers, there was therefore no building damage cover and no rent loss cover. The very defect that rendered the building uninhabitable fell entirely outside the protection owners believed they had. This is not an anomaly: industry data suggests 75–85% of strata buildings carry known defects, and insurers routinely exclude or price these risks in ways that leave owners exposed.[4] As strata buildings age and as the extent of the apartment building defects crisis becomes clearer, the risk of buildings becoming uninsurable, or of owners discovering that their insurance does not cover the defects they face grows significantly. The consequences of insurability extend beyond individual owners: banks holding mortgages over those lots face impaired security, and governments face pressure to step in as insurer of last resort.
Yet even if insurance had responded, it would only have addressed the symptom. The deeper failure at Mascot Towers was structural: when owners turned to the legal framework that was supposed to protect them, they found it offered rights without remedies. For instance, the right to require the OC to repair the building exists under section 106(1) of the Strata Schemes Management Act 2015 (NSW), which imposes a duty on the OC to properly maintain and keep common property in a state of good and serviceable repair. Whilst this is a clear right, there is no quick or effective procedure to enforce it. The process is potentially lengthy, expensive and carries the risk of an adverse cost order. Justice Peden confirmed this in practice within the case of Mascot towers: even where evidence showed it was commercially viable, the Court could not mandate it.[5] This is precisely the vacuum a Strata Commissioner would fill. Rather than leaving owners to navigate the legal framework alone, a properly empowered Strata Commissioner would intervene before deterioration become irreversible. Not after five years, or extensive government bailout. Here, the financial case for a Strata Commissioner is straightforward as explained in the aforementioned costs incurred by the NSW Government as well as the owners' own costs in legal fees, strata loans and interest accrued on mortgages.
This matters beyond the individuals affected. As governments at every level grapple with a housing affordability and supply crisis, the viability of apartment living as a long-term housing choice depends on public confidence that strata buildings are safe, well-maintained, properly governed and critically sustainable. If prospective buyers come to associate strata ownership with the risk of uninhabitable buildings, unenforceable rights, and personal liability for collective failures they had no role in creating, they will stop buying units. That outcome would be catastrophic for housing supply at exactly the moment supply is most needed.
[1] https://www.parliament.nsw.gov.au/pbo/Documents/2023OppositionCostingsandRequests/C1683%20-%20Costing%20-%20Mascot%20Towers%20Package.PDF
[2] https://www.nsw.gov.au/media-releases/mascot-towers-owners-finally-free-to-move-on
[3] https://www.flatchat.com.au/nsw-failed-mascot-towers/
[4] https://inside.strata.community/defects-in-strata-properties-and-their-impact-on-insurance/
[5] https://www.caselaw.nsw.gov.au/decision/18bda56c022633c18d495908