government

Sometimes being responsible means pissing people off too

By | Uncategorized | No Comments

Opening of 2015 NSW Parliament

If the mark of good law reform is that all stakeholders are a little pissed off, then the new strata laws introduced last night to the NSW parliament is on the money. After 15 years in gestation, strata is about to get a bit harder for everyone; developers, owners corporations and strata managers alike. Mercifully, strata lawyers seemed to have been spared.

Developers are probably the hardest hit. They have to deliver an initial maintenance plan before settlement, put 2% of sales on deposit for building defects claims, fund a defects report in the first two years and become liable for understated estimates of future levies. For good measure they can’t become the strata manager for at least 10 years. The big boys won’t like that.

For strata managers the reforms are all about more disclosure. There must be annual disclosure of insurance and other commissions. Gifts and ‘soft dollar’ benefits from strata suppliers are out. Free training by lawyers and donations by banks and insurers to the manager’s annual seminar are also in scope.

Strata committees, as they will now be known, have tougher duties of disclosure and due diligence but they get immunity from personal liability for anything done in good faith. The twist is that the liability for their negligence or breach of statutory duties gets passed on the owners corporation as a whole so no-one is off the hook.

The headlines about this reform will focus on the historic attempt to allow owners to force co owners to sell their home and investment properties if 75% of owners by number, not voting entitlements, so decide. This is ground breaking: a first for any Australian parliament that has been more than 12 years in gestation. I’m proud to be one of the co-creators of ‘Renewal Plans’ that will safeguard all owners in these tricky situations (Teys, M and Russell, P, 2000, Renewing Our Strata Titled City: The Beginning of a Better End).

While renewal plans will be the focus of the media and the lobbyists as they try to increase the required level of support from 75%, it’s the more mundane matter of repairs and maintenance that will in practice be the most significant of the 90-odd reforms. Owners corporations become liable in damages to its members for breaches of statutory duty if they don’t maintain and keep common property in good and serviceable repair.

This is set to bring an end to the procrastination and ineffectiveness owners corporations and their strata managers, who are running around in ever-decreasing circles trying to avoid the inevitable responsibility and expenditure required to fix cracks and leaks.

Claims for breach of statutory duty rather than contests over strata renewal plans will be the real strata lawyer’s picnic and will fund many renovations and trips to Aspen. Just wait and see.


Michael Teys is the author of ‘Growing Up: How Strata Title Bodies Might Learn to Behave’, a specialist strata lawyer and the founder of Block Strata. You can follow him at www.michaelteys.com and on Twitter @michaelteys.

*The title quote is sourced from Colin Powell on the topic of leadership

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

By | Uncategorized | No Comments

corn-snake-645979_640
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

By | Uncategorized | No Comments

rescue-642561_640

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.

Negligence in good faith and other gems from new strata laws

By | Uncategorized | No Comments

unsure-315080_1280

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.

Want to get in touch? Contact me