Building defects

Towards the end of ‘build it, flick it and run’ strata development

December 14, 2022

I was recently invited to participate in yet another ‘roundtable’ about strata law reform, triggering memories of frustratingly long and futile meetings and butting heads with angry, disaffected minority groups in the ‘strataverse’. It’s all so predictable: the usual suspects gather, the same issues are traversed, entrenched positions are maintained, and the outcomes are always the same - plaintive cries for more disclosure, more education, more regulation. Why do we keep going down the same path expecting a different result without really assessing what, if anything, works?

I’d made a promise to myself some years ago that I wouldn’t do ‘this’ anymore...but only fools and dead people don’t change their mind. So, with equal measures of deep scepticism and fresh ideas from a couple of years asa university researcher, I did accept the aforementioned invitation from the NSW Property Services commissioner, John Minns to attend, The Future of Strata Living, Expert Working Group No 1: Empowered Representations,Establishment and Management of Strata Schemes.

I’m glad I did.

Unlike my previous experiences this was well convened and chaired, the group was diverse and representative of consumers, industry, government, and academia. The discussions were respectful, considered, and inclusive. Better still, the meeting finished on time! We were all heard on an extensive but targeted agenda, and the draft minutes were out before we had all forgotten what we had said and done. If only all strata meetings ran this way.

The focus of the session was the front end of strata. This included representations made at the point of sale, the way strata schemes are established and transitioned from developer control to the new owners for self-determined responsible management. The contributions of those in attendance are a matter for the Commissioner and his team to consider and comment on publicly if they so desire. But here are some of the points I made:

1.    ‘More disclosure’ is overly simplistic and an ineffective answer to problems associated with the developers’ formation of strata schemes. Embedded networks, long term management rights, and related party service contracts serve the interest of developers, not owners, and breach the fiduciary duties owed by developers to the buyers. Disclosure is not an automatic answer to such a breach and, in the case of new strata developments, does not meet the common law standards of fully informed consent of owners with unequal bargaining power. Long terms agreements binding on owners corporations should be outlawed. Period.

2.    ‘More education’ is similarly an unproven response to problems of engagement, ignorance and poor-quality decision making by owners, and poor skills and experience of professionals advising strata buyers and owners corporations. Before we impose education on strata owners and others serving the strata sector, we need to review what is available already in the different jurisdictions. For example, WA and QLD have online owner education material and courses. To what extent is this educational material being accessed? Is it working? If not, why not? Empirical research is much needed in strata law reform.  

3.    More regulation is not always the answer either. We need to drive cultural and behavioural change. I wrote a book about this, ‘Growing up. How strata bodies might learn to behave’ (2015 Major Street Publishing). For example, we have good laws in NSW about transferring building information from developers to strata managers. Yet, a set of as-built plans and specifications is rarely made available to the new owners when deciding how to repair and maintain their buildings. We don’t need more laws on this. We need better enforcement of current laws that will drive a change in developer’s behaviour, who must come to see that setting up their buyers and new strata schemes for success is better business than ‘build it, flick it and run’.

The NSW Property Services Commissioners office is about empowered, accountable and trusted property services sector. I’m pleased to be on board and report that my deep scepticism is trending towards cautious optimism.

Michael Teys

Strata expert

Michael is a strata expert with over 30 years experience in strata law and management. He is a strata researcher with City Futures Research Centre UNSW, a consultant to strata industry suppliers, and conducts executive education for strata managers and property processionals.