Monthly Archives: September 2015

7 habits of highly ineffective strata managers… that are about to cost their owners corporations dearly

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We live in happy times where owners corporations and their strata mangers can procrastinate to their heart’s content about fixing leaks and cracks that cause mould inside apartments. Thanks to the Thoo decision of the NSW Court of Appeal all owners can do in these circumstances is go to NCAT for orders for the owners corporation to do the work.

That’s little comfort when your kid’s bedroom looks more like a mushroom farm than a place for nighty-nites and your lawyer tells you that a NCAT application is likely to cost $3,000, take up to 12 weeks for an order that can then be appealed and restart the whole process.

Come 1 July 2016, the rumoured commencement date for new strata title laws in NSW, all this will change and owners corporation will be liable in damages for failing to take reasonable steps to fix these sorts of problems.

Here are the top 7 habits of the highly ineffective strata managers when it comes to delay and obfuscation on repairs and maintenance that will soon be punished by damages awards:

  1. It’s not the owners corporation’s responsibility! Come on – the owners corporation is responsible for the common property and it’s almost always the floors, walls and ceilings that are the source of the leak. This isn’t rocket science. All you’re required to do is to know how to read your strata plan.
  2. The mould might have been caused by the tenant! I don’t know too many parents or carers that complain to their landlord or property manager about mould growing in their kid’s bedroom who have caused the problem by leaving a dryer running in a confined space. Tenants aren’t the problem here; it’s to the builder you should be looking.
  3. The builder’s coming to fix it! Beware the man with the silicone gun I say. He caused the problem in the first place, a blast of plastic is not going to fix this – water has a way of finding its way out at the next weakest joint.
  4. We’ll sue the builder and then get it fixed! Sorry, that’s not the law. The law is that it’s your place, you fix it, fix it now and worry about who ultimately pays when that’s done.
  5. We need three quotes first! Ah, no you don’t; you need to get rid of the mould first, that’s the thing that makes people sick. Then get your quotes.
  6. There’s something wrong here; there’s so much disparity between the quotes! That might be so, that might be because reputable people weren’t asked to quote or they were and not given the right instructions.
  7. We can’t proceed without the insurer’s say so! Not true and not relevant. The obligation to fix the work is the owners corporations and it’s not dependent on whether the owners corporation insurers approved the claim. That’s a matter between the owners corporation and the insurer, it’s got nothing to do with the lot owners or the tenants.

Strata managers should put a stop to this nonsense. Get your executive committees to put themselves in the shoes of the person living with this nightmare and do the right thing. If you don’t get this right by mid 2016 expect the lawsuits to arrive thick and fast.

How D&C went from ‘Design & Construct’ buildings to ‘Drowning & Choking’ – Dr Jon Drane @ Griffith 2015

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Nothing was to prepare him for what he saw the day he crossed over from 35 years of commercial construction and property development to advise on a leaking apartment building in Sydney’s Inner West.

Just 10 year old, the building looked like a ‘drowned beast’. Mould–affected rooms from continuous leaking and damp intrusion, gutters installed back to front, precast panels not joined properly; the car parks had flooded several times. Every apartment owner was demoralised and in a state of resignation. They joked despondently about internal water features when there was a storm.

This is how Dr. Jon Drane introduced his paper at the Griffith University Strata Conference 2015, Building Defects – A Builder’s Perspective, in which he traces the history of the erosion of architect-designed-and-supervised apartment buildings to developer-dominated design-and-construct projects. The author compares the horror of the leaking apartment he inspected with a more traditional and largely defect free development in which he was involved and concludes with a way forward – a defects detection matrix. This tool uses nine criteria to predict the likelihood of defects not pretty reading for owners in most new projects:

Low risk of defects High risk of defects
Client /Architect led design Developer led design
Experienced team and leader Inexperienced developer
Traditional Architect /master builder delivery D&C delivery system
Local council certifier Private certifier
Project management No project management
Separate builder Developer is builder
Clerk of works No quality supervision
Detail design by architect Detail design by architect
Independent contract arrangements Unscrupulous arrangements

 

Dr. Drane’s paper is a helpful explanation of how the residential apartment sector arrived at this sad point in history and the benchmarks against which unit owners might assess risk when buying apartments.

There remains one problem. The investing public still thinks buildings are signed off as fit for occupation by local authorities and they’re ‘drowning and choking’ as a result.

Heard @ Griffith 2015 – ‘Thank you, your call isn’t very important to us’

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A colleague called a strata manager recently to arrange the collection of books and records for a building that’s switching to Block Strata and the message went, ‘There’s no one here to take your call’. Yes, it was in business hours. No, there was no explanation for the abandoned ship.

Little wonder then that in the Griffith University 2015 Strata Title Conference survey of strata owners, ‘low quality strata management services’ was number 2 on the list of the most significant challenges confronting strata title living and management, second only to building defects.

In the discussion that followed it became clear the time honoured model for strata management has all but had its day. One respected elder put it this way, ‘the days of strata managers charging based on inputs rather than outputs has to end.’ This was a reference to the typical strata management pricing model based on charging for additional time and disbursements like photocopying and even sending email. As I put it, ‘people in this room must stop charging people for things they don’t ask for, don’t want and don’t need’.

At industry conferences agreement on problems is more common than agreement on solutions. There were the usual calls for more government intervention and education and my eyes glazed over. Government policy and learning doesn’t deliver reform, markets do.

Chris Irons @ Griffith 2015 – Getting the wrinkles out of strata disclosure

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I always feel for public servants asked to speak at industry conferences. Theirs is a world of policy, process and politics and ours is one of strategy, outcomes and the bottom line. One is no more right nor wrong than the other, there’re just different.

Inevitably then the public servant presenter can’t say as much as he or she may like and the audience wants. That was probably the case for Chris Irons, Commissioner for Body Corporate and Community Management (Queensland) speaking at the Griffith University Strata Title Conference, September 2015.

The Commissioners paper, ‘Strata title ownership and requisite knowledge – How to get disclosure and education right’, traces the history of statutorily prescribed disclosure and warning statements on land and unit sale contracts in Queensland noting it began with little, grew too much and has pulled back to less. He argues that this might be due to a changing need for paper information in a more electronic world and that the ultimate effectiveness of this disclosure and information regime might be the demands on his offices services which he says remain fairly constant year to year.

The paper doesn’t offer any empirical evidence to support these conclusions. However, the Commissioner does record some of the most basic questions his team are asked suggesting the regime hasn’t quite hit the mark for example, ‘I didn’t know I was part of the strata – how do I get out?’ Welcome to our world Commissioner.

The paper promoted me to check the current Qld warning statement for property buyers. It talks about cooling off and getting legal and valuation advice, all of which is sound but rather unremarkable particularly in terms of understanding the strata condition. I would go more with this –

When you buy this property you become part of the body corporate and have to pay your share of the common property expenses. With this type of property there are restrictions on your proprietory rights. It’s different from owning a free-standing house so if you’re not good with sharing go and live on a farm. That’s all!

Dr McKenzie @ Griffith 2015 – Institutions may save strata before government

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American Professor Evan McKenzie [1] opened his keynote address to the Griffith University strata conference ‘Changes confronting the strata world’ with a line from physicist Neils Bohr:

‘Prediction is very difficult, especially about the future’

and he then, of course, went on to do just that.

The professor spoke to us of connectivity and big data and the way YouTube videos of unpleasant things about community living might embarrass committees much like video footage of unfair treatment of citizens has embarrassed police in the US.

Among other changes the professor touched on were the profound social, political and economic consequences of ‘radical life extension’ which might see us live for up to 120 years and the contribution of ‘gated communities’ to income and wealth stratification and segregation of society.

In his view cultural and political changes of diversity and demographics would see developers respond with different forms of community housing. Energy and climate change he thought too would present challenges for the elected representatives of home owner associations.

For all the big issues ahead for strata it was the inadequacy of financial and human resources that our keynote speaker thought the most serious. Citing large scale fraud of US condo schemes and home owner entities that have unsuccessfully filed for bankruptcy only to be left with personal debt, we were reminded by our guest of the importance of personal involvement and diligence in our community housing organisations.

Despite the gargantuan schemes in the US, relative to the average size of strata schemes in Australia that’s reportedly just 9 lots, it seems the full implications of shared ownership are not well understood in the United States either and there are calls there just as loud as those here for more government and institutional support for owners.

Unsure of governmental ability to presently achieve anything meaningful and effective, my interest piqued at his suggestion of institutional support. Perhaps it is to the banks financing purchasers in buildings with defects, and the insurers of committees paying out claims for bad governance, that we should turn for help?

Mitigating the institutional risk of future loss by stipulating acceptable building and operating standards may be a more commercial solution to the problems ahead here and abroad.


 

[1] – Professor Evan McKenzie is the head of The Political Science Department University of Illinois, Chicago and author of Beyond Privatopia; Rethinking Residential Private Government. Washington, DC: Urban Institute Press. 2011.

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