Strata law changes – but not where it really matters

As governments in our three most apartment-heavy states ponder changes to strata laws, the question is, will it be enough to restore confidence in the sector.

In NSW, while developers are being pressure-tested over defects by the sterling efforts of Building Commissioner David Chandler, the management structures around strata schemes are as shaky as a shed in a shanty town.

In Victoria, according to many observers, there are massive problems going unreported and unremedied because owners don’t want to draw attention to defects.

Meanwhile the government has relaunched its Dispute Settlement Centre and is due to review its policies that saw apartment blocks in desirable areas turned into Airbnb hotels.

In Queensland, new laws passed late last year could be activated any time now.  They include an end to “no-pets” bans, the ability to pass by-laws banning smoking on balconies, new rules on when bodies corporate can tow cars, and allowing entire blocks to be sold off with just a 75 percent vote of the owners.

However, there is no mention of the iniquitous, $8 billion trade in 25-year management contracts that trample over apartment owners’ right to make decisions about the properties they own.

As NSW prepares legislation for the next tranche of strata reforms – the previous batch became law in December – the signs are hopeful … up to a point.

If the currently mooted laws survive the scrutiny of powerful pressure groups and pliant politicians, strata owners will no longer be able to delay or defer essential maintenance, even while they are battling developers to get their defects rectified.

Plans to match owners corporation laws with other corporate laws – such as those governing unfair contracts – should have a knock-on effect. They could start with the get-out-of-jail-free clauses that mean strata managers can’t be held liable for decisions they make regardless of how detrimental they are to owners.

At the same time as the Strata Community Association (SCA-NSW), the strata managers’ professional body, is telling media outlets that they “represent” owners, prominent SCA members are denying owners their legal right to access strata rolls and records.

To be clear, the SCA doesn’t represent strata owners, even if they have an owners section, any more than airlines with frequent flyer programs represent passengers. Hell, the SCA doesn’t even represent all strata managers.

Truly independent representation of apartment owners is only offered by the Owners Corporation Network (OCN) in NSW (and soon in Victoria, I hear) and the Unit Owners Association of Queensland (UOAQ).

Now, to be fair, there are many, many strata managers who are totally professional, community minded and have their clients’ best interest at heart.  They may even be in the majority.

However, the industry still has too many agents recruited with the promise of inflated “schedule B” charges, for everything from answering phone calls to reading letters, with barely a week’s training in some cases and safe in the knowledge that they are virtually untouchable by the authorities that are supposed to regulate them.

Meanwhile they are often in cahoots with developers, shepherding unwary owners into lop-sided contracts.  So it will be interesting to see if the proposed unfair contracts provisions extend to them.

Another area the NSW government is promising to look at is the complete lack of advice and assistance offered to owners in financial trouble.  Instead, some strata managers aggressively pursue levies through favoured lawyers, racking up ever increasing fees, all of which are paid by the debtors at no cost to the rest of the apartment owners who are usually happy just to get their money. 

Little wonder that so many owners under levies stress end up bankrupt and having to sell their homes.

At a recent NSW government round table on levies debts a representative of the banks said apartment owners should stop paying their mortgages before they defaulted on their levies – because at least banks have a support system for mortgagees doing it tough.

So while we wait for the next wave of law changes, what can the savvy investor do if they don’t like the cut of their strata manager’s jib?

In NSW, Victoria and Queensland strata managers are appointed for a maximum of three years at a time.  That means you probably have time go through your contract with a forensic eye and if it looks dodgy, either ask for it to be changed or start looking for an alternative service provider.

Once you’ve found an honest strata manager – and there are plenty around – contact the other owners at least three months before the end of the incumbent’s tenure and prepare to replace them at the next AGM.

That only works, of course, if the strata manager has followed the law and given you access to the other owners’ email and postal addresses.

The NSW proposals are due to be tabled for comment in April.

This column first ran in the Australian Financial Review.