Buying an off-the-plan apartment has turned into an expensive, lengthy legal battle for Melbourne woman Tamara Railton-Stewart, and she is not alone.

"I had no idea of the disaster of that decision," Ms Railton-Stewart said.

She told ABC 7.30 her apartment in Melbourne's south-east, completed in 2015, was so riddled with defects it had to be gutted and was only recently rebuilt.

And her situation is all too familiar.

Building defects cost in the order of $2.5 billion nationally per year, according to a 2021 report from the Centre for International Economics (CIE) prepared for the Australian Building Codes Board.

The report found defective apartment buildings accounted for 52 per cent of the problem, at an annual cost of $1.3 billion.

Ms Railton-Stewart and the other apartment owners in her complex have found themselves in an ongoing legal fight with the builder, Shangri-La Construction.

The company denies the allegations against it and is defending its workmanship in the Victorian Civil and Administrative Tribunal (VCAT).

In a statement, Shangri-La Construction told 7.30 it was "greatly concerned by any allegations of defects at the property".

"We take immense pride in the quality of the projects we deliver, and take any allegations of defects very seriously.

"The allegations of defects are the subject of a current proceeding at VCAT, in which not only the extent of any defects but also the allocation of responsibility for any such defect between multiple parties — including the subcontractor who was responsible for waterproofing at the property and the building surveyor who issued the relevant occupancy permit — is in issue."

'Water running through the bedroom'

Ms Railton-Stewart said the warning bells started shortly after she got the keys in late 2015.

"Six weeks later we had a substantial flood in our bedroom," she said.

"It was water running through the bedroom and that was because they had just not connected a drainpipe. There was a hole with no drainpipe connected."

Ms Railton-Stewart said mould later appeared throughout the apartment, which she claimed led to her daughter developing asthma, at the age of two.

A 2020 report by Cladding Safety Victoria (CSV) found her building was "in poor condition". 

"The rate of deterioration of various facade systems is rapid, primarily due to water ingress," the report said.

"Internally, the presence of mould was identified visually and presented a strong odour in wall cavities and bathrooms, despite extensive cleaning."

The CSV report also found evidence of combustible expanded polystyrene (EPS) external cladding which had to be removed. 

A separate, 2019 water damage report by occupational hygiene consulting group EHS Assess, commissioned by Ms Railton-Stewart, also found visible mould.

“Based on the extent of the water damage, visible mould present and the owner occupiers having a young baby — considered an at-risk group — the property is, in our opinion, currently not fit for occupancy until mould remediation works occur,” the report said.

Ms Railton-Stewart said expert reports and legal fees alone had cost the handful of apartment owners in her building complex around $500,000.

"For the actual re-build, we had to get a multi-million-dollar strata loan as an owners' corporation," she said.

"The interest on that loan is over $150,000 every 12 months.

"So every extension [on the legal process] costs us a lot of money.

"You are forced into a process that is never-ending, expensive and draining."

Ms Railton-Stewart's 4-year-old daughter, Charlie, came into the apartment as a newborn.

"Our little girl is going to be nearly eight years old by the time this is over," she said.

"[With] the appeals process, she could be nearing nine or 10.

"How much longer is this going to take?"

'Risk of purchasing an apartment with defects still very high'

Ms Railton-Stewart's story was not uncommon, according to lawyer Bronwyn Weir, who co-authored the landmark Building Confidence Report (BCR) report in 2018 about the scale of problems in Australia's building industry.

"To buy an apartment that has defects and find yourself in an awful legal battle that goes on and on for years has massive implications for owners," she said.

"Not just financial, but the emotional trauma that is involved for those owners trying to understand how, through no fault of their own, they have ended up in these situations.

"Year upon year, they are battling through legal fees and reading distressing reports about potential safety issues in the place where they lay their heads and sleep every night."

The Centre for International Economics (CIE) report estimated that total benefits of implementing Ms Weir's 24 recommendations would be in the order of $1.4 billion each year. 

One of the 24 recommendations in the BCR was to set a three-year time frame for implementing all of the changes, which no jurisdiction has done.

Ms Weir said that, across the board, most state and territory governments had been slow to act on the report's findings and she could still not say she would feel confident buying a new apartment today.

"It's been four years since the report was released and it is fair to say that, while it is not quite collecting dust on the shelf, the uptake from governments has not been as impressive as I would have liked," she said.

"There is nothing to suggest that we have got better-quality buildings in our system being built.

"There are good builders and there are many people who are happy with what they have purchased.

"But there are also many who are not.

"The risk of purchasing an apartment with defects is still very high across Australia."

Common problem

Samantha Reece — the founder of Apartment Advocacy Australia, a not-for-profit that promotes apartment living — agreed.

"I receive calls on a daily basis from people saying, 'I've got defects and my developer doesn't want to address it, government has turned their backs on me'," Ms Reece said.

"This can be rectified. We're four years on from the Shergold-Weir report. We're five years on from [the deadly UK apartment block blaze] Grenfell.

"There is loopholes galore for builders and developers to step out of, leaving these kind of residents with significant defect debt and no solutions."

Ms Weir said New South Wales had taken the most proactive action to crack down on builders and developers since the release of her report in 2018, including by introducing audits that prevent the sale of defective apartments.

"Auditing buildings prior to hand over, while we still have the developer and the builder in control and accountable," she said. 

"Actually going into buildings and doing a thorough audit before those off-the-plan sales crystallise."

In a statement, a spokesman from the Victorian Department of Environment, Land, Water and Planning said that state's government had "led the way on the issue of combustible cladding".

"Cladding Safety Victoria, Victoria's dedicated cladding rectification agency, has overseen cladding rectification on [more than] 170 apartment buildings, with works on a further 135 buildings underway.

"In addition, the Victorian government is delivering a safer, more compliant building industry that protects consumers, supports skilled and experienced practitioners and enables regulators to effectively and efficiently enforce compliance."

'Very difficult, very expensive'

According to the Victorian Building Authority's (VBA) data on building inspections, the regulator conducted 2,256 inspections in the first quarter of 2022.

Just 54 of those inspections were of apartment buildings. 

Ms Railton-Stewart's VCAT case against her builder started in 2019 and was recently deferred until March next year after Shangri-La Construction joined several parties as respondents.

"Going through the process is very difficult. It is very expensive. It is very time-consuming," she said.

"The process of VCAT is designed for the builder. It is not designed for the consumer." 

At risk of going bankrupt, Ms Railton-Stewart said she had to dip into her parents' superannuation.

"My parents have worked a long time, they've saved, they've done the right thing," she said.

"They wanted to travel, to maybe go out and buy a caravan, maybe be grey nomads. 

"They have not been able to do any of that."

Ms Railton-Stewart, her partner and daughter lived in a rental while her apartment was re-built, adding to their long list of expenses.

She said stories of other builders around Australia going into liquidation made her nervous.

"Our insurance does not cover alternative accommodation, which at the moment [has cost] just under $50,000," she said.

"It does not cover our legal fees or expert reports and that is nearly half a million [between the apartment owners in the building].

"None of that is covered if they [Shangri-La Construction] liquidate.

"Our legal process is providing them more and more time to do just that."

A Victorian Building Authority spokesman said the regulator took decisive action when practitioners broke the rules.

"The Victorian Building Authority (VBA) actively targets non-compliant building and plumbing work through our nation-leading Proactive Inspection Program (PIP)," the spokesman said.

"Our inspectors carried out more than 12,000 proactive inspections across the state in [financial year 2021-22], helping to reduce non-compliant building and plumbing work in Victoria."

Following questions from 7.30 about progress made since the 2018 BCR report, the West Australian government announced on Monday a new registration scheme for building engineers.

"The West Australian government is also finalising its broader review into strengthening the state’s building laws around the approval, certification and inspection of residential and commercial buildings, as well as the registration of builders," a government spokesman said.

"The West Australian government has already established a regime of general compliance building audits and published an enforceable code of conduct for building surveyors, both of which were recommendations from the report."

Watch this story on 7.30 on ABC TV and ABC iview.