Monthly Archives: August 2011

My Position On Strata

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We have developed a great tradition here. Once a month, each member of the team must do a five-minute stand up speech on the set topic for that month. Each time we do this there’s humor and good-natured ribbing but it’s taken seriously and it’s always interesting to hear what our guys come up with.

This month’s topic was ‘My Position On Strata’. Appropriate topic really, given that this is all we do and we do it for 8 to 10 hours a day. We have a diverse and talented team but even so the range of matters touched on in the presentations was extraordinary.

Simone structured her presentation around the letters STRATA and lead off with S for ‘Story’- each one of our clients has a story to tell she thought, and its our job to listen to that story and give it a better ending.

Tom looked to the future and saw green issues and social networking having a big impact on the way people run their communities. He sees a role for us to lead the way in these progressive areas.

Our senior building and construction man, Chris spoke about the increasing complexity of legal issues facing clients frustrated with the response of various governments and semi governmental authorities struggling with poor building practices, private certification and unworkable insurance schemes. He thinks that the disciple of administrative law (compelling government to do its job) has a big future for us.

Dan, who works in levy collection, saw scope for nationalized laws to simplify the administration of strata throughout the land and argued that it is a travesty that as a result of recent cases owners can be out of pocket for collecting debts from defaulting co-owners. He can quote parliamentary speeches on the topic.

Jasmine drew on Maslow’s Hierarchy of Needs to make sense of conflict within our strata communities. She related each of the five levels of need – physical, safety, belongingness, esteem and self-actualization – to several of our clients’ disputes.

Wayne gave us his thoughts on the reason he likes the work we do; we are concerned with improving the living conditions of ordinary people. He believes we do this on a micro level by handling client matters well each day and on a macro level by contributing to strata education, law reform and the quest to instill a culture of responsibility in every strata body.

And me? You read about what strata means to me each week. This week it means that I get to work with really smart, engaged people and that means everything.

The Old Golden Rule

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The banks with money … the banks just make the rules.

More than 5500 apartments and townhouses were approved nationally in December – the highest monthly number in seven years.

It’s no wonder developers are moving quickly to satisfy demand because the 7th Annual Demographic International Housing Affordability Study has just found Australia to have the most intense housing stress of any nation in the world. 27 of the 32 urban housing markets in Australia have been rated ‘severely unaffordable’ with prices on average more than 6 times gross annual household income. The benchmark for affordability is three times this measure.

Sydney comes in at a massive 9.6 times the gross annual household income to make it the second most expensive city in the world for housing second only to Honk Kong (11.4) and just ahead of Vancouver (9.5).

Inevitability the market is turning to apartments over houses as the affordability gap widens. Last weeks RPData/Rismark study shows in Sydney the gap between house and unit prices is, not surprisingly, the highest in Australia at $144,000 at the median house and unit prices. Of course, this gap is much higher closer to the city where most want to live and work.

So we want more apartments, the developers know this and the local authorities are approving them in record numbers – but will they be built? The answer to this question rests with the banks, and my friends in development world say on current trends it’s not likely that many will get up.

Banks presently want 10 – 20% more presales than ever before they will consider financing a new block and the pre sales numbers aren’t as easy to fudge as they used to be. Overseas sales are being ignored in this count, as are multiple purchases and related party transactions. Jump through these hurdles and you might get to borrow some money, but it will be expensive and the approval time will be frustratingly slow.

So until the banks release the reigns, while some housing markets will plateau for a while for apartments we can expect demand to continue outstripping supply, rents and prices to increase and the gap between the price of apartments and houses to narrow.

Legalise Euthanasia For Termally ill Buildings Before Its Too Late

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Ten years ago, on the initiative of the then Premier of NSW, the Hon. Bob Carr, my firm was commissioned by The Property Council of Australia and the City of Sydney to advise on the vexed question of terminating strata title schemes for buildings beyond their useful life.

Pursuant to the commission I invented the concept of a “Renewal Plan,” by which a developer, group of owners, or government departments could initiate a formal process of proposing the redevelopment of a scheme with compensation payable to those who don’t want to participate. It is an original concept not found anywhere else in the world by which someone with a plan can instigate a formal process with a view to getting a diverse group to a common goal. Otherwise, people just don’t know what to do and so nothing happens. The concept relied on the government reducing the threshold for termination resolutions from 100% (plus all mortgagees) to something more sensible. I proposed 75%.

Three Premiers on, the Property Council of Australia still endorses my concept as its policy, but politically nothing has happened. Carr was passionate about the urban environment. It seems Morris Iemma, Nathan Rees, and Kristina Keneally had other priorities.

A recent decision of the Land and Environment Court of NSW highlights how important it is that the next Premier of NSW does something about this ticking bomb.

In Marana Developments v Botany Bay City Council (2010) NSWLEC 1237, the owner of a 1960’s building containing 34 flats was refused permission to strata title the block because the court decided that, should the building for which demolition was soon imminent, be owned by 34 separate owners it would make it harder for that block to be redeveloped when its time came. The Court came to this decision despite accepting evidence that the strata title sell down was economically feasible whereas demolishing the building and erecting a new one was not.

The court based its decision on one of the objectives of the Environmental Planning and Assessment Act 1979 being the promotion and co-ordination of the orderly and economic use and development of land. It seems that the State Government can set this as a goal for developers but can’t get its act together to facilitate the same when a proposal has been on the table for 10 years that doesn’t seem to have any real opposition.

Now is the time for us to call on the Premier in waiting, Barry O’Farrell, to see if we can get any commitment from him to take up this important issue.

Are AGMs pointless

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Australia’s most connected businessman, David Gonski AC, Chair of Coca-Cola Amatil and the Australian Stock Exchange Ltd has called for reform of Annual General meetings for Australia’s listed companies. His comments have made me think about how AGM’s are working for our bodies corporate and owners corporations and I see some parallels in what he is saying and some merit in his proposed solution.

Gonski’s comments were made on the back of a survey of 125 leading directors by law firm Mallesons Stephen Jacques. It identified that, due to proxies, matters were largely decided before the meeting commenced and the information given to attendees was therefore nothing more than information that could be accessed on-line or in the meeting papers. Gonski suggests there should be a separation of the voting requirements of an AGM from the meeting itself so that it becomes more informative, there is more discussion, and it is more open.

Imagine owners turning up to a meeting with open minds to debate important issues about how they live together in close proximity. Imagine how that might lead to a better understanding within the community of the role of an owners corporation and the responsibilities for each owner to the others when they sign up for apartment living. Imagine that, following such a debate, the polls were open for 14 days and owners could vote on-line or by written voting paper and the strata manager could count the vote, have them scrutinized by an independent returning officer and declare the motions won or lost by posting the minutes electronically or by snail mail.

Too far fetched? Never going to happen? Good things don’t happen unless we first imagine.

Where Less Would Be A Whole Lot More

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The Chief Justice of the Federal Court of Australia, The Honorable Pat Keane recently took a swipe at the federal legislature about the sheer volume of pages of the countries tax laws. His Honour said, in his refreshingly colorful way that opening the Tax Act was “like entering the door to a parallel universe.”

The same thing may be said of the strata laws in this country. I am preparing to give a paper in two weeks on compliance by owners corporations with the various state and federal laws applying to apartment blocks in New South Wales. I am writing it from the perspective of strata records inspectors who are the ones that go from strata managers office-to-office trying to make sense of what has been done and not done in the name of compliance with these laws.

The undergraduates that are helping me with the background research for the paper have so far identified more than 20 federal laws and 75 state laws that we have to consider for New South Wales alone. I have no doubt the count would be similar in other states and territories. The number of laws that make the final cut will be interesting as will the length and breadth of what we expect of our volunteers who run these organizations.

Judges and trained members of the legal profession have enough trouble making sense of these laws. I have sympathy for the managers and owners from whom we expect compliance. I suspect we have reached the point where all the laws now just guarantee non-compliance.

Its time for those of us who care about this universe and who seek to avoid entering parallel ones, to argue passionately that there is more to saving the people from themselves than yet another set of regulations.

Challenging the environmental high moral ground of highrise living

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If nothing else, the reignited political debate in Australia about a carbon tax will see talk of sustainability and green issues remain at the fore of public debate for some time.

In strata I suspect there has always been a bit of smugness on the question of sustainability – ‘we live in high-rise and have a smaller footprint than you environmental terrorists living in the outlying suburbs and driving your fuel guzzling cars to and from the city’. Well the environmental high moral ground of high-rise dwellers is being challenged.

The Fifth Estate writer, Lynne Blundell has covered recent comments by Tony Arnel, the Australian who heads the World Green Building Council. Arnel says that there is no evidence that high-rise buildings are more sustainable than conventional homes. Blundell says this is consistent with her earlier report of comments by NSW Energy Australia that a high rise apartment uses up to 30% more energy than a detached house.

This new reality might shake executive committees into environmental action. At the moment there is little executive committee talk of environmental issues but for the occasional enquiry about communal composting and replacing some public area lights with lower voltage bulbs. The more courageous initiatives; grey water treatment plants; solar panelling and complete renewable energy upgrades are not getting any air time at all.

This lack of debate and action in our strata communities will have something to do with a general apathy in owners corporations on all issues not least the environment. It will also be due in part to concerns by building and strata management that it will lead to more work for no more pay. Undoubtedly, however, it will be mainly due to the short-term capital cost of green features, which is capital most strata don’t have and, if they do, don’t want to spend.

So until the economics of short-term outlay against medium and longer term savings on power and water become compelling we can expect nothing will change in our strata communities. If the carbon tax and rising energy prices do anything they might shift the pendulum in strata from environmental inaction to action, but ever so slowly.

For some inspiring examples of strata communities that are taking environmental action visit www.greenstrata.com.au

Cloud Based Practice Guaranteed

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It doesn’t often occur to me to talk about this because it’s just a part of what we do. Because it has evolved slowly I sometimes forget how far we’ve come.

However, as I sit here, working from home today I’m reminded again about this flexible, scalable, service oriented system we have built at TEYS Lawyers. And, if you don’t mind, I’d like to brag a little.

About 12 months ago to the day, I started this firm in a small office with a legacy of much bigger operations still within me. I’m used to servers and secretaries, heaps of paper and all the usual complexities of business administration.

However, while we had the turn-on-a-dime flexibility of a smaller start-up firm I thought I’d make the most of it and challenge a few of the norms.

I started with the huge, clunky, loud, frightfully expensive server tower in the corner of the office. Why was that humming monster making so much noise and, frankly, what on earth does it do? It was the first thing to go.

In its place I’ve found the panacea to expensive tech support teams, IT help lines, server downtimes, system crashes, software installs and constant upgrades. And I found it, of all places, in the cloud. Having come from a very traditional mode of business operations, it is truly a breath of very fresh air to have disentangled from a world of technology traps that I never understood or saw value in.

These days, 100% of our operations are hosted in the cloud. Our accounts, our document storage, our emails and even our wiki are all stored online.

From the serenity and productivity of my home office I can access all of my files, communicate with my clients and my team and never feel out of the loop.

Plus, with such access – through my iPad, my laptop and even my phone – my clients are the beneficiaries too. It provides them and I with a real time connection that allows me to respond in a way and in a time frame that, only 12 months ago, would have been impossible.

Plus, with all of our data stored securely online, it gives our clients access to view, change and interact with their case material at any time of day and from wherever they are as well.

But what does this really mean for our business? Well, it’s because of this transparency and this fluidity of communication that we are now able to go out to the market with one of the bravest and most authentic messages that a law firm has ever delivered.

“We guarantee our work. If our clients are not happy with our work, they do not have to pay our fees”

The confidence that we need to stand behind our firm’s output with that sort of guarantee is a confidence that has remained sorely wanting by clients for a long time and we are quite pleased to be able to say it.

The compliance police are coming and the sooner the better

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The compliance police are yet to find strata management. In other fields of business and endeavour – public companies, funds management, financial planning – the compliance police have been active for decades. Sooner or later they are going to stumble across the strata world, and they are not going to like what they find.

Compliance police are a bit like the police sergeant in a small country town in the sixties. They don’t like issuing tickets but they do like you to know that they can. They prefer instead to change the way people think about breaking the law. The country-based police sergeant of yesteryear thought this approach made good sense because he had to live in the community he policed. Compliance police think the same. They work in the companies they police and it’s in their interest to get people with the program rather than to alienate the whole workforce by prosecuting the favorite corporate son or daughter.

In strata management, we don’t have any compliance police despite having a raft of laws with which to comply. My research team last week completed an exercise for me and complied a list of 88 pieces of state and federal legislation regularly applying to owners corporations in New South Wales. The numbers will be the same in other civilized places. That’s a lot of law for a place with no Sheriff.

The strata manger is as close as we come to having compliance police but their situation is compromised. They act as advisors on compliance, sometimes, but they are not qualified to do so and, moreover, are not empowered by anyone to do anything if compliance is observed only in the breach. It’s wrong to blame them for the lack of compliance in strata.

Ultimately changing community standards will drive the appointment of compliance police to strata organizations. Just as we changed our attitude as a community to blatant breaches of drink driving laws, police and official corruption and pedophilia in schools and youth groups, we will change our attitude to the non-compliance with laws purportedly governing our strata communities.

If workplace health and safety laws, compulsory savings for necessary repairs and replacements, sustainability and environment standards and human rights are really important to us as I suspect they are, then sooner or latter the compliance police will find strata. And like the wise old country police officer, the world will be a better place for their presence.

In the footsteps of our Founding Fathers

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There are moves afoot to merge the eight state and territory based organisations for strata management into a national body with state territory branches. Apparently this is planned for 1 July 2011.

I commend this for the simple reason that without a national body for strata management, we cannot hope to have a uniform set of strata laws operating nationally, something I believe to be in the best interests of all involved in owning and managing strata titles.

With the best will in the world, the new strata body will have a lot of work ahead of it to secure uniform national legislation.  This has been hard to achieve in higher profile areas such as corporation laws and the criminal code. The road to national laws to regulate lawyers and occupational health and safety has also been a bumpy one and the parties are not quite there yet. So for the strata title concept, which so far has ranked low on the political agenda, there might be a decade of work ahead until this compellingly logical proposition becomes a reality. Such is life in a country of many governments like ours.

In the meantime, there is much to be done in lifting standards across the board and this starts with training. It seems to me a lot of attention has traditionally gone into ‘how to’ training as course designers have been constrained by state legislative terms and practices. There might be much more to be gained by a focus on ‘why’ training. Teaching strata professionals why we do things a certain way is a higher order of thinking and may just add the extra dimension we need to lift standards across the board.

Like our founding fathers, credit should be paid to those who have bought nationalisation thus far for their foresight and persistence.  The results of their efforts will not be immediate but are likely to be immensely important.

How A Sensible Push For Nationalised Laws can Go Horribly Wrong

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The strata industry Australia-wide is set to undergo major reform on 1 January 2012 if the proposed national harmonisation of work health and safety laws proceeds as planned. The push for the new laws in NSW received the support of the NSW Business Chamber on the weekend (Australian Financial Review Monday 11 April 2011).

Working papers released on the weekend show major companies are concerned that the draft harmonisation laws are unclear, will create more red tape and health and safety representatives would get more powers. The federal opposition, at odds with their colleagues in the new O’Farrell government in NSW, is also critical of the proposed reforms.

Reviewing the laws last week as they apply to owners corporations, I reluctantly came to the same conclusion. I am a great advocate for uniform state and territory laws on as many fronts as possible but this one has some unresolved issues that could send us all into a spin and result in mass confusion for strata owners and managers alike right around the country.

The question is whether work health and safety laws should apply at all to strata communities. The starting point is that these laws don’t apply to freestanding houses so why should they apply to residential apartments that happen just to share floors, walls and ceilings?  On this premise, in 2002 the NSW OH and S boffins had a crack at exempting “residential strata” and we have spent the past nine years or so, unsuccessfully trying to work out what that means.

The fact is, the so called exemption applies only to a very limited number of provisions but the word ‘exemption’ in the context of residential strata in a Google search engine, has meant that anyone looking for a reason not to spend money on compliance, has argued that the laws don’t apply. Meanwhile in Queensland and Victoria, where it is clear the laws do apply, strata communities have largely got on with the job and quite well understood and developed safety regimes have been put in place, at least in the major buildings where these things are taken seriously.

The proposed harmonisation laws that await us when we wake up with hangovers on January 1 lead us down the NSW path of mayhem and confusion of partial exemption for residential strata. Executive committees and strata managers will have no clear-cut guidance from the new laws about what safety regime applies when management rights are in place, what happens if someone is working from home and what applies when some apartments are being used for holiday letting or serviced/executive apartments?

A clear-cut yes or no to the application of the new national laws will be better for everyone than the quagmire of messy what ifs and maybes that await us if we don’t act soon to clarify the laws before they come into play.

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