Monthly Archives: August 2015

New laws will tease tenants with a false sense of relevance

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The cultural divide in Australia between owners and tenants will be widened by proposed laws for NSW allowing tenants limited rights to participate in meetings of owners corporations.

By these proposals a copy of the agenda of each meeting is to be provided to tenants on the owners corporations roll, and tenants will be entitled to attend strata meetings.

Some owners will be object to this reform merely on economic grounds. Strata managers usually charge by the page or in some cases, unbelievably, by the email so the more they send they more they are paid. The tenants’ objections will be far more personal.

The right of attendance given to tenants by the proposals is insignificant having regard to the limitations attached. Unless specifically resolved by an owners corporation on a case by case basis:

• Tenants will be entitled to be seen but not heard.
• Tenants will be asked to leave when financial matters are being debated.
• Tenants will not be entitled to see any documents sent with the agenda.

If the purpose of these proposals is to unite our strata communities, then they fail miserably. Tenants won’t come to a show to be relegated to the cheap seats without a program and to suffer the indignity of being removed when matters of finance are raised.

This is a policy so compromised in the making that it perhaps unwittingly will set owner/tenant relations back 50 years, ironically to a time of segregation when King had a dream and Kennedy thought what unites us was far greater than what divides us.

Not in strata my friends, not in strata.

Engineers can spot the rot the government is happy to paint over

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When a respected body like Engineers Australia speaks you would expect someone to listen, but it seems not. Two years ago the peak body for the engineering profession said this to the NSW government,

‘The current system of building certification in Australia is not in the interests of the Australian people or the building industry as a whole.’ [1]

That system, to be sure, is the one that paves the way for residential apartment buildings to be occupied as having been built safely in accordance with national standards. The current system allows developers to choose and pay their own certifiers. Not surprisingly conflicts are rife and standards are slipping. It’s costing lives. [2]

Engineers Australia says 85% of strata buildings in NSW are defective at completion, there is absolutely no due diligence for private certifiers at all, and a builder who prices a job correctly is unlikely to be successful. That’s a sad indictment on a system that’s fundamental to our safety.

Instead of reviewing the certification system as recommended by the engineers, the NSW government has proposed that a building bond of 2% of the contract price be held for 2 years to cover building defects. As night follows day developers will put this on the purchaser’s tab so effectively this becomes a forced savings plan for apartment investors.

Investors in newly constructed apartments will now buy defective apartments from developers that will charge them an extra 2% for the privilege which they might get back to fix the defects if they can get themselves organised in time to fight for the deposit.

Should’ve listened to the engineers for my money, and life.

[1] Engineers Australia Multi Disciplinary Committee Submission to NSW Government, June 2013

[2] In the last 3 years: Bankstown high-rise fire leading to one death, Melbourne wall collapse killing 2, Macquarie Park death from failure of high level balustrade , ibid.

Online voting will make for lonely convenience in strata

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I voted online at the last election but, strangely, I had to be out of the state to do that. Still, it worked, and one would think soon we will all be logging on and casting away.

There are rituals about voting that are threatened by this advancing technology. The local state school election day cake stall and sausage sizzle will soon be things of the past. Political party hacks won’t have to stand in the sun all day taking snide looks and comments from those declining their how-to vote-cards, the scrutineers will miss out on a good day’s pay for crossing out names, and we won’t have to line up at a cardboard booth for the nation to decide.

Proposed laws for voting online for strata communities will change rituals too. Some will be missed, some not so much. No longer will you have to be present personally or by proxy to participate in a meeting. Proxy farming will be curtailed. You will be able to cast your vote in writing and in other ways adopted by the owners corporation and approved by government regulation. The specific details for this have not yet been released but voting online, by apps and using social media should be in the mix.

Participation levels in strata affairs should rise if these proposals become law. No longer will you have to go out at night, fight the traffic and find a park to vote on your strata issues. The sometimes laborious task of counting votes will be faster and more accurate. We will all get home earlier but like all reform this one will not be without its consequences too.

Firstly, those of us that care enough to engage won’t meet as many of our fellow owners because most will vote with their keyboard, and the already too lonely corridors and foyers of apartment buildings will become that much more isolated. Secondly, in the absence of live debate and presentations strata entities will probably be more likely than they already are to vote on price, not quality. That happens when there is nothing else for the decision maker to go on and no one believes all that stuff in the propaganda about quality and service.

When we can vote by a click of a button on the bus on the way home strata communities that care about community and quality will have to find new and better ways of meeting, forming relationships and making decisions on the true merits of a proposal rather than merely the bottom line.

New strata legislation will fall on Chicken Little by-laws

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Such is the unrestrained nature of our owners corporations’ by-law making powers that presently in New South Wales you can make a by-law requiring people in strata units to eat pizza each Wednesday night, according to Australia’s leading strata law academic, Dr Cathy Sherry of UNSW. Proposed new laws  will require by-laws must not be ‘harsh, unconscionable or oppressive. A by-law like the one used by Cathy to make her point may or may not be ‘harsh, unconscionable or oppressive’ depending on your views about personal liberty, and perhaps being force feed pizza.

The point is we are about to go from a regime where by-laws, particularly those imposed by the original developer, may be broad and expansive to one where they are subject to limitations; limitations that have been the subject of considerable judicial interpretation but will still cause confusion in their application to strata living. Australian courts have determined that ‘unconscionable’ means something more than merely being unfair or hard commercial bargaining, it means being against conscience as judged against the norms of society and herein lies fertile grounds for argument. What crosses the line might be clear to me but not my neighbour.

‘Chicken Little’ by-laws that would have us believe the ‘Sky is Falling’ or other disaster is imminent if renovations are made to a unit will fail this new test. These rather hysterical by- laws provide for hefty bonds to be paid to secure possible damage to common property and all manner of expensive consultants’ reports and supervision by interfering strata committee members with too much time and not enough purpose in their lives. Mercifully these by-laws that are stopping people from modifying their units for the frail aged will fail the new test because they go beyond what is reasonably necessary to protect the legitimate interests of strata members. There are building codes, development approval conditions and certifying authorities for that.

This reform should be welcomed and will be sweet revenge for Henny Penny, Goosey Loosey, Ducky Lucky and all that have been stymied by fear mongering.

We’re all going to foot the bill for payment plans

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Proposals before the NSW parliament to allow strata owners to propose a repayment plan for outstanding levies will divide communities. Those who pay on time will resent being used as a banker for those who can’t afford their obligations as owners of common property.

The proposal will put pressure too on strata managers and treasurers trying to balance the books. Unlike companies, and indeed the nation, there is no overdraft for strata entities.

Owners corporations are finely tuned. They are not for profit and seldom end the year with a surplus. In the case of a deficit it’s easier to dip into the capital works fund to make up the deficit rather than strike a special levy and admit to a budgeting error.

Here are five things we know from other states will happen if this becomes the law:

  1. Some people will stop paying on time and ask for time to pay because they can
  2. Strata managers and committees will spend unpaid time negotiating repayment arrangements
  3. Accounts will go into deficit if people don’t pay on time and capital works savings will be pilfered to balance the books
  4. Debate at meetings about these proposals will get heated and there will be disputes before the tribunal about payment plans that have been rejected
  5. Committees will have to watch the privacy laws if they collect sensitive information about peoples financial circumstances.

To combat the collateral damage of this kind but ill-advised accommodation strata entities will have to budget for bad debts, charge interest and implement very clear guidelines on what will and won’t be accepted when impecunious owners come looking for relief.

Smart managers will advise owners corporations to impose a discount by increasing the budget by 10% and allowing that sum as a discount for on time payment. This is in effect a penalty of 10 % for not paying on time and can be charged on top of interest on late payments. It’s always been available in NSW but seldom used. That’s about to change.

Never get caught between a strata owner and a 10 % discount on levies, you will get hurt.

Negligence in good faith and other gems from new strata laws

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An owners corporation is a curious entity for many reasons, not the least of which is whether it is essentially of a public or private nature. There are more rules for public entities because they deal with all-comers. Private entities get more latitude because your actions or inaction hurt only yourself. The difference between public and private enterprises is perhaps best illustrated by the significant costs of compliance and governance imposed on listed public companies compared with the $2 shelf companies we use for our private businesses.

Are our bodies corporate and owners corporations really the fourth level of government managing our micro communities, or are they just private entities to manage private property? The new strata laws proposed for NSW make the point that our legislators have not yet thought this through. For example, on the one hand it is proposed that owners corporation take on the role of policing how many people stay in a bedroom, something local government has traditionally done, and on the other it provides protection against committee members acting negligently, something we would never see in the public arena.

Proposals about the duty of care of strata committee members makes the point. Presently the strata laws in NSW say nothing either about the liability of, or the protection for, volunteer members of strata committees. The new laws propose that strata committee members will owe the owners corporation a duty to exercise due care and diligence (section 37). I get that but then elsewhere it says if you get it wrong you’re not liable if you acted in good faith (section 255). So I have a duty not to be negligent but there’s no consequence of a breach of that duty if I’m good?

If clear agreements make for good friends, then this needs to be tidied up.

Bronny’s out, are strata managers next?

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Strata management is perhaps the most thankless task I have ever performed. As a general rule, do your job well and indifference is the best you can expect. Put a foot wrong and you will be roundly castigated as a useless but necessary evil. It’s a rare day indeed when you awake to an email congratulating you on a job well done at last nights meeting that dragged on interminably.

It is then with some mirth I note the proposed new strata laws of NSW strike at the very heart of corruption in this industry by banning the insidious practice of strata managers requesting or accepting a gift for performing their duties. Most in this industry struggle to get a CPI rise on their annual fee let alone a bottle of Grange on the side.

To add insult to injury the proposed law links us directly to that least respected of modern callings, politics. The ‘gifts’ we will be banned from requesting or accepting are those defined in the Election Funding, Expenditure & Disclosures Act 1981.

This reform is not about banning undisclosed commissions for insurance and other financial services, that have quite properly been dealt with elsewhere. This is directed fairly and squarely at the bottles of grog, the boxes of chocolates and the tickets to the footy. What nonsense.

I’ve got to fly now, the Chairman’s outside in a helicopter to take me to a ‘meeting’ near Geelong.

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