Podcast: Life savings lost thanks to dodgy dealing

In this week’s Flat Chat Wrap we discuss the awful story about the young woman who put her life savings into a deposit on a flat in a block that’s turned out not only to be riddled with defects, but was certified by an unlicensed tradie and subsequently OK’d by the local council.

Now she faces the very real choice between losing her $60k+ deposit or finalising the purchase of a flat she knows is seriously defective and with no legal approvals.

---

Listen here

[powerpress]

---

Then there’s the local council that’s telling developers they can build higher if they don’t install gas but do put solar panels on the roof to supply 40 percent of the block’s electricity needs.

This is a clear example of a council taking positive action on climate change – and if you wonder if that’s an over-reach, ask the people being rescued from floods right now.

But can electricity ever be as good as gas for cooking?  One celebrity chef thinks so.

We also hear about government plans to make it harder for developers to build “affordable” new generation boarding houses. 

Why would they make it harder?  Because developers are getting planning concessions and then charging top dollar for the bed-sits.

Wow!  Developers taking advantage of planning concessions to make some extra dosh?  Who’da thunk it?

And finally, there’s the couple who were so worried about the potential noise from proposed renovations in the apartment block next to their luxury beach-side home, that they bought the whole block.

Is it so they can, if they want, shut the renos down? Or do they just want to be able to choose their neighbours?

That’s all in this week’s Flat Chat Wrap.

Transcript In Full

Jimmy  00:00

They say it never rains, but it pours. It’s certainly pouring outside at the moment, and it’s been raining stories on your computer, Sue Williams?

Sue  00:09

It sure has.

Jimmy  00:10

We have a lot to get through today. We’ve got a story about a woman who’s going to lose a deposit on her apartment because somebody certified it, who wasn’t entitled to certify it. We’ve got a story about a developer, building apartments with no gas for cooking. We’ve got a story about developers wanting to develop… what do you call them?

Sue 00:20

New generation boarding houses.

Jimmy 00:24

New generation boarding houses, and the couple who have bought the apartment block next door, so that it doesn’t get renovated and disturb their peace and quiet. If only we had that much money!  I’m Jimmy Thomson. I write the Flat Chat column for the Australian Financial Review.

Sue  00:58

And I’m Sue Williams and I write about property for Domain.

Jimmy  01:01

And this is the Flat Chat Wrap. Okay, Sue, a terrible story about somebody who put a deposit down on a flat and discovered that the apartment had been certified by somebody who was not in fact, a certifier?

Sue 01:33

Yeah, I think he was an unlicensed tradie, wasn’t he?  He was a bricklayer or something like that, who no longer had a license.

Jimmy  01:43

So, he just signed off on this certification, and so that meant that the council gave them a certificate of occupancy; is that correct?

Sue  01:49

That’s right, even though they discovered there were considerable non-compliance’s in the building. There were huge faults in the building, but poor Marianne has no option really, but to carry on with her purchase, because otherwise she’s going to lose her deposit.

Jimmy  02:07

I mean, what’s the point of having certification, if anybody can come along and certify, and there’s no comeback? The council just goes, ‘oh, yes, certified.’ Then you say, ‘well, the certifier shouldn’t have certified it,’ and the council say, ‘yeah, there’s all these compliance issues, but we’re going to allow it to go through.’ Where is the consumer protection?

Sue  02:26

Yep, it’s a ridiculous system; private certification always has been. It was just really a poorly thought-out idea, you know, getting developers to certify their own work with third parties that they pay. I mean, it’s crazy!

Jimmy  02:40

Well, it’s crazy, because there’s no comeback. There’s nothing there that says, ‘oh, by the way, if you muck around with this, we are going to take you to jail,’ which is where they should be.

Sue  02:50

You look at this poor young woman. The apartment that she was buying in Kellyville (in the northwest of Sydney), was $625,000 and she paid 10% of that. Now, that’s a huge chunk of money to lose if she decides not to go ahead with it, but what choice does she have?

Jimmy 03:10

$62,000

Sue 03:12

Well done! What would you advise her to do, Jimmy?

Jimmy  03:14

Well, I don’t know, because I would have hoped that somewhere along the line, Fair Trading would step in and say, ‘hang on; this is corrupt and wrong and this woman has been defrauded of this money.’ But we know that Fair Trading isn’t going to do that.

Sue  03:33

I think they earlier told her that the matter wasn’t within their jurisdiction.

Jimmy  03:37

Well, if that’s not in their jurisdiction: a. what is in their jurisdiction and b. whose jurisdiction is it in? Is it a police matter? The police will say ‘no, no, no, it’s a Fair Trading thing.’ They’ll go along to the attorney general’s office (they look after NCAT.) They’ll say ‘no, no, no, it’s Fair Trading.’ They’ll go to Fair Trading and they’ll say ‘no, no, no, it’s not us.’ I mean, really, this has been going on for years and years and years. And our politicians; okay, they’ve got David Chandler running around, shouting at people, to fix the next generation, but this poor woman has been caught in the middle, where she is having to buy an apartment that she knows is faulty and nobody is protecting her.

Sue  04:33

It’s a terrible situation. I mean, there’s nothing really, she can do. Both options are horrible.

Jimmy 04:37

Is there something in the story that says, the developer said nobody else has complained, or some nonsense like that?

Sue 04:40

Well, it was a China-based developer. They’ve been working with the local builder, but the developer wasn’t budging when she asked for her money back. They said ‘no.’ They said, ‘well, the certifiers issued an occupation certificate, so therefore, there’s nothing to worry about, really.’

Jimmy  05:05

So, here’s what I think should happen. The person who signed the certification must have known that they were not entitled to do that. They should be arrested and charged with fraud. Then the council people (who knew that the building was non-compliant but then issued the certificate of occupancy), should be sacked. They should just be kicked out of their job immediately, because they’re incompetent and they’re costing people money. The developer should be struck off, never allowed to develop another building; them or anybody connected with them, should never be allowed to develop another building in New South Wales, or Australia ever again. I think somebody should go to jail for this, just to teach everybody a lesson, but we all know that none of those things are going to happen because our government is addicted to developer money. They’re wedded to this idea that if they do anything at all to interfere with development of apartments, then the whole economic system of the state will collapse (which we know it won’t). So, we the consumers are the ones who end up having to pay, and in extreme cases, somebody loses their entire life savings.

Sue  06:26

One hopes, the nexus has been broken for the future, but we’ve still got many people trapped in the old system.

Jimmy  06:29

You’ve got buildings that are just coming on-stream now, that were built under the old conditions, where anybody could just create a company for $2.00, call themselves a developer, hire tradies, make it as cheap as possible to build the thing and then walk away as soon as the problems arose. Now, those buildings are coming on-stream now and the changes that are being made now; we’re not going to see the effects of that for at least another year or two years, when the improved standards have actually been imposed.

Sue 06:49

And also, for the other states; they don’t have Building Commissioners, and they’re going to have similar problems. They are having similar problems; they’re really struggling. A lot of people are now saying all those other states should also have this system of having a Building Commissioner in, and they should.

Jimmy 06:55

They’ll be watching New South Wales and seeing what happens here, but I just think, after all this time, (you know, 20 years, we’ve been talking about this), they know that they’re cheating. They know that they’re deceiving people, they know that they’re selling shoddy goods. They’re taking people’s life savings. Somebody should go to jail.

Sue 07:05

I think you’re right and I think a lot of developers would agree with you as well, because they don’t want to all be tarnished with the same brush. There are probably, maybe 10% of developers out there that are really dodgy, and they’re doing bad things, but unfortunately, they’re polluting the whole sea of development. Not giving people confidence to buy apartments, and making the future really shaky.

Jimmy  07:25

Right. When we come back, we’re going to talk about why…

Sue 07:28

We’ll calm down.

Jimmy 07:30

Yeah, I’m going to go and have a cold shower and when I come back, we’re going to talk about why a council in Sydney is saying you can build your buildings higher, provided you don’t put gas in them. That’s after this.

MUSIC

Jimmy  08:28

So, Sue, high rise buildings with no gas for the cookers?

Sue 08:34

Yeah, it’s really interesting, isn’t it? The developers are being offered a tradeoff; they can build their buildings higher, if they agree to have them all electric and at least 40% of that is solar panel generated. So, at least 40% renewables.

Jimmy 08:39

Where is this?

Sue 08:42

This is in Canterbury/Bankstown in the southwest of Sydney, and they’ve pinpointed two areas. One is Bankstown itself (where there are lots of towers anyway). They’ve said that developers can build 25 storey towers; they can build more 25 storeys’, because they’ve already got a few, and in the area of Campsie, where there are no really high buildings. I think about the highest building so far is eight storeys’, but they’ve given them permission to build 20 storeys, if they have them all powered by electricity with 40% renewables.

Jimmy 09:08

What is the thinking? Is it all about the environment and the carbon footprint and all the rest of it?

Sue 09:13

That’s right. The idea is to move people away from reliance on gas and coal and concentrate much more on solar power, of which we have (apart from at the moment; we’re still pouring with rain), we usually have lots and lots of solar power.

Jimmy 09:25

And if we don’t have solar power, we have dams and things full of water. But yeah, to me it feels like the council has decided renewables (wherever that comes from. Whether it’s a roof of the building or the electricity grid), that’s the future in Australia. The National Party and the coalition (to a lesser extent), is saying, ‘we’ve got to keep the coal mines open,’ and we shouldn’t be doing that anymore, and we don’t need to. We should be putting money into renewables.

Sue 10: 10

Yes, that’s right. I mean, coal has served us well in the past, but coal mines are shutting down all over the world now. People are not looking at starting new coal mines. I think Australia is one of the few countries that’s actually still investing in coal mines. As you say, we’re really rich in sunshine and in wind and I think your hobbyhorse is hydrogen. You think that’s the way of the future?  

Jimmy 10:14

Absolutely, it’s transportable energy. What’s that idiot government minister, who keeps saying…

Sue 10:17

There are so many of them, Jimmy!

Jimmy 10:19

When the wind doesn’t blow and the sun doesn’t shine?

Well, you store it in batteries, or you use the electricity to create hydrogen from water, which we have plenty of at the moment, and when the hydrogen burns, it becomes steam. I think the most positive piece of information I’ve come across recently is that Rolls Royce have built a jet engine that can work on hydrogen. That means that this horrendous future that we’ve been told about, (international travel, we’ll have to give it up; if we ever get back to it, because of the carbon footprint of airplanes), well, there will be no carbon footprint.

Sue 10:30

Yeah, they’d be powered by Rolls Royce engines, and we’ll all be driving Rolls Royce engines.

Jimmy 10:35

And steam will be coming out, rather than carbon dioxide.

Sue 10:40

It’s interesting that it started with a council in the southwest of Sydney as well. Hopefully others will be looking at that and trying to emulate it.

Jimmy 10:45

It’s been years since I cooked with electricity from a microwave, but I’m sure some of these new induction tops are as responsive as gas. I know that most chefs will say you’ve got to use gas. Was there a chef, that’s been quoted on this?

Sue 11:00

Yeah, Neil Perry.

Jimmy 11:04

Oh, he’s quite famous.

Sue 11:09

He is. He’s just converted his Rock Pool restaurant, all to electricity from gas, so a lot of chefs now are using a lot more electricity than gas, too.

Jimmy 11:15

Because it’s cheaper?

Sue 11:18

Yeah, and he says it’s just as responsive as you say.

Jimmy  11:21

All right, well, he would know. I mean look, it’s a start. It’ll be in new buildings; there’ll be a couple of new buildings. Everybody’s having to start; you’ve got to start rethinking these things somewhere and this seems like quite a significant thing. When we come back, we are going to talk about new generation boarding houses. That’s after this.

MUSIC

Jimmy  12:55

Sue, I’m going to put you on the spot again. New generation boarding houses; what are they even?

Sue  13:03

Yes, new generation boarding houses. We all kind of think of the old boarding houses, where people would go straight from prison.

Jimmy 13:08

That’s a halfway house.

Sue 13:10

Yeah, they were traditionally very grimy, grim, cheap places for people to live. It was just a room and a tiny little kitchen in the room. They’d be really, really, really small and there might be somebody at a desk downstairs. The new generation boarding houses are small apartments; they’re often studio apartments or maybe they’re one-bedroom apartments. They’re allowed to be built because they are much smaller than usual, and the trade-off is that they have communal areas as well. They might have a theater room, where people can sit and watch movies or tv together.

Jimmy 13:24

Or, a kitchen? Would they have a shared kitchen?

Sue 13:28

Well, yes, they could have a commercial kitchen as well, because they’d have small kitchens in their studio, but they’d have to have a big kitchen and maybe a big dining room as well, so they could go and eat together if they wanted to. These were traditionally designed to be cheaper homes for people. I mean, you think students might go there, or young single people or couples starting out. The idea was that they will be much more affordable, but in fact, a lot of developers started developing them because they found that they could make quite a profit from them. They could build them on much smaller sites because the rooms themselves were smaller, and they could get quite a good rental yield from them as well.

Jimmy 14:05

This story in the Sydney Morning Herald refers to them as being $400 a week for a 15 square meter apartment.

Sue 14:09

I think the controversy has arisen because they’re not actually particularly affordable, but they are really popular with young people, because some people (and older people as well, depending on where they live), might not want to cook for themselves. They might want to go out a lot. They might want to eat out all the time. They may want to socialize all the time and not spend very much time at home. It was another housing option. I think the government felt that they were giving developers leeway to develop these place, but in fact (because they were the rents were so high), the developers weren’t really giving anything back.

Jimmy 15:30

So, they were not affordable, particularly.

Sue 15:32

That’s right, but there was still demand for them. I kind of feel a bit conflicted, because there are new planning regulations that are being foreshadowed to come out that may force developers to build much bigger apartments to the new generation boarding houses, or have much bigger rooms and areas, so therefore, they won’t have the same appeal for developers. Lots of developers are now putting in applications ahead of the new rules coming in for them, so that they can get them in.

Jimmy 15:40

But isn’t there also a provision that these new generation boarding houses have to be run by community housing organizations?

Sue 15:45

That’s what we’re talking about.

Jimmy 15:47

So, that forces them to be affordable?

Sue 15:50

That’s right. Our niece used to live in a new generation boarding house, and she really liked it because it was a small space. Even though it was a bit more expensive, it was still cheaper than alternatives and she still had her privacy, rather than sharing a house with other people. She really loved it, and although I thought it was a bit tiny and a bit uninspiring, she really liked it. It was a choice and there are some architects who have been developing new generation boarding houses and the designs are fantastic. Although the floor space is quite small, it’s really good, usable space. We’ve talked about them before; with one developer building furniture into the fabric; integrated into the apartment, so it didn’t really take up very much room. I feel in two minds about this. I don’t want new planning regulations to come in and to say that developers can’t do these anymore.

Jimmy 16:15

The developers will still be able to do them. It sounds to me like what they’re planning to do is say, ‘okay, if you can get a community housing association to run the apartment block when it’s built, then you can have these new generation boarding houses.’  You cannot just build it and then rent it out to whoever wants it and take whatever profit you can get, because they’re popular and popularity leads to demand and demand pushes the prices up, and they’re no longer affordable.

Sue 16:35

But then developers (if they’re not allowed to hold onto them and take the rentals), might not find them worthwhile doing anymore.

Jimmy 16:45

It sounds like it would be the community housing people who would step in and say, ‘well, we will be the developers,’ but they’d need the money.

Sue 16:50

Yeah, that’s right and it’s a sector that’s not very well resourced from government.

Jimmy 16:53

Well, that’s again where we need to see some changes in attitudes and policies.

Sue 17:02

Yeah, and we need a lot more housing options, and this was an option. I think it’s being squeezed out a little bit. There may be a new option coming out with community housing associations running it, but we need myriad options out there. People have different lives; they have different wants; they have different needs. We need to ensure that they have a huge range of housing options.

Jimmy 17:30

I think there’s room for both models. I think there’s room for the developers to be allowed to develop these boarding houses and I think there also should be a provision for community housing, that will deliberately keep the rents low for the essential workers that we need to have in our city centers, like policemen and nurses and teachers and people like that. Especially when they’re starting off; they’re not making an awful lot of money, but the people who live in the expensive accommodation need these people around. When we come back, we’re going to be looking at the other extreme of affordability. That’s after this.

MUSIC

Jimmy 17:55

Okay, this is a funny little story, which I don’t think we’ll name names…

Sue 18:05

Apart from Lucy Macken.

Jimmy 18:07

Apart from Lucy Macken, who wrote the story. Where is this happening?

Sue 18:09

This is in Bondi. It’s Australia’s youngest billionaire (the founder of Afterpay), who bought a fabulous home in North Bondi for $27 million. Oh, he must have fantastic views! There was a unit block just next to him that was sold to be redeveloped. We’ve talked about this before; lots of older blocks around Bondi and those eastern suburbs, are now being sold off wholesale. They’re being retro-fitted and they may have new penthouses being put on top; they may have a basement being drilled below so they have parking, and they turn out to be much nicer buildings than they were originally.

Jimmy 18:50

Or, they could just be demolished and replaced completely.

Sue 18:53

They could and it’s a shame though, because there’s so much carbon embodied within the structure, that it’s much better to adapt and reuse them. I think this building was probably going to be adapted. He and his wife weren’t happy with the prospect of so much work going on next door, so they just bought the block (as you would). I wonder what they’re going to do with it now?

Jimmy 19:20

Airbnb.

Sue 19:22

They don’t need the income, really!

Jimmy 19:24

It would be a shame for it to sit empty. Maybe, they could accommodate some of these people who can’t afford to stay in the high-priced, new generation boarding houses we were just talking about?

Sue 19:40

Yeah, absolutely. It’s great seeing some of these blocks redeveloped. It’s fantastic, when you look at how they were when they were built, and how they are when they reemerge like butterflies from the chrysalis. Really fabulous places, and the people who own them can make some money or they can move back in. The people who are renting them, can never afford to rent the new ones. They can’t afford to move back in, but it’s nice to see old housing stock being renewed. It always gladdens my heart.

Jimmy 20:01

I remember the place where we had our first investment, down in Bondi, which we very quickly sold, when we realized that one corner of the building was subsiding.

Sue 20:10

We sold it to somebody who realized that, we might point out!

Jimmy 20:13

I often thought that with the new renewal laws that came in, in 2016, we could have (because there was a huge area at the back and we could have gone in there), sold that to a developer or developed it ourselves and made a really nice apartment block. Lots of space; lots of light in a very popular street.

Sue 20:20

It was interesting, because in the backyard (do you remember), there was a bomb shelter and we had a few people come and look at it and say to us that it was so soundly build, it will be really hard to knock down.

Jimmy 20:28

Every couple of years, somebody would buy into the building and say, ‘let’s redo the backyard and make more use of it,’ and we’d go ‘yeah, off you go. See what you can do with the bomb shelter.’

Sue 20:36

With apartment building, it was really interesting, because we had an idea about putting balconies on the facade, and improving it, but it kind of taught the lesson that it was really hard to get agreement from so many residents. That can be really, really difficult for so many of these buildings.

Jimmy 21:04

That’s why they brought in the law about 75% you know.

Sue 21:10

75% is a big percentage, really. There are some people who were living in that building, who’d lived there for a long time, and they didn’t want anything to disturb their peace and enjoyment of the building. They were happy to die there, really.

Jimmy 21:24

Probably still there, slowly sinking into the backyard. Okay, that’s plenty of stuff to be going on with for this week. Thank you again, Sue.

Sue 21:30

Thanks, Jimmy.

Jimmy 21:33

And thanks for listening.

Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website, www.flatchat.com.au  And if you haven’t already done so, you can subscribe to this podcast completely free on Apple podcasts, Google podcasts, Spotify, Stitcher, or your favorite pod catcher. Just search for Flat Chat Wrap with a W, click on subscribe, and you’ll get this podcast every week without even trying. Thanks again. Talk to you again next week.