Podcast: Contracts, advice and rotting blocks

Three big stories get most of our attention in this week’s podcast.

Firstly there’s the publication of the new Guide to Strata Living, which earns some praise, but a few brickbats from JimmyT.  You can judge for yourself HERE, where there are also links to the actual guide for you to download.

Then there’s the recent attack on unfair strata management contracts by eminent construction lawyer Bronwyn Weir.  And, once you’ve listen to the podcast, you might want to read more about it HERE and HERE (with links to the original ABC news story).

Two years ago, Jimmy wrote that apartment blocks in Victoria were rotting from the inside.  Now a report by the strata government’s Cladding Safety Victoria has confirmed that half the buildings they inspected were doing exactly that. You can read about it HERE.

And finally, would you leave a spare key with someone, in case of emergencies? Should it be compulsory?  That’s all in the Flat Chat Wrap.

Transcript in Full

Jimmy

Three major stories on the FlatChat website this week.

Sue

Oh, it’s all happening.

Jimmy

So the stories are there’s a new guide to living in Strata in New South Wales has been published.

Sue

Great, about time.

Jimmy

Yes, and there has been a report on Bronwyn Weir, the eminent construction lawyer, saying that the standard contracts issued by Strata Community Association, the Strata manager’s peak body, professional body, are disgusting and disgraceful and wrong and unfair. And Cladding Safety Victoria has revealed that more than half of the buildings where they paid for cladding to be removed and replaced have turned out to have serious hidden defects.

Sue

Oh, gosh.

Jimmy

So we’ll be talking about all those three things. I’m Jimmy Thomson. I write the FlatChat column for the Australian Financial Review. And I edit the flatchat.com.au website.

Sue

And I’m Sue Williams. And I write about property for the Sydney Morning Herald, the Age, the AFR and Domain.

Jimmy

And this is the FlatChat Wrap. So the new guide’s out.

Sue

Yes, that was kind of long awaited, wasn’t it?

Jimmy

Well, they kept changing the laws and the rules and the methods of doing things. I have to say…

Sue

This is from Fair Trading, is it?

Jimmy

Yeah, Fair Trading, New South Wales. I mean, it’s something that’s been around in some form or another for ages. And it used to be something that they would hand out to people, you know, when you just bought into a new apartment, like a brand new apartment.

They don’t do that now because most of it is online. And it would be a huge waste of paper. I’m sure there are printed versions knocking about somewhere.

Sue

But you can print it off yourself.

Jimmy

Yeah, I mean, it’s a PDF. You download it. You put it on your computer.

And it has hyperlinks to various bits of… Is it Fair Trading? Is it building New South Wales?

It’s hard to tell. Does it matter? Anyway, there’s stuff there.

A lot of the stuff is there.

Sue

And so what do you think of it? You’ve had a chance to read it all.

Jimmy

I think it’s mostly good. Most of it is mostly good. And things like explaining to people how disputes can be conducted, you know, like you make a complaint to your committee.

And if that doesn’t work, you get mediation. And if that doesn’t work, you go to tribunal and it’s all laid out. And that’s one of the things that a lot of people don’t realise.

Sue

Yeah, that’s handy because, you know, you kind of get into a dispute and you’re kind of really angry and upset and you don’t know where to turn. So that’s a really helpful thing. But where does the report fall down?

Does it fall? I mean, presumably it gives great advice about the first AGM that you go to as a new owner.

Jimmy

No, it doesn’t actually. No, it doesn’t.

Sue

But that’s one of the most important things.

Jimmy

Look, it tells you, it doesn’t change an awful lot of stuff that has already been out there in the public domain. For instance, it will tell you that at the first AGM, you will be asked to vote on your various contracts and things like that.

Sue

And does it warn you about those contracts?

Jimmy

It doesn’t warn you.

Sue

Like embedded network contracts?

Jimmy

It does not warn you about embedded networks and things like that.

Sue

But that’s one of the major issues facing Strata.

Jimmy

And it doesn’t tell you this is your one opportunity to get a lot of contracts that you could be tied up for. For the years to come. Yeah, to get them right and or not accept them.

And Fair Trading, John Minns, the sidelined Fair Trading Commissioner, he has been talking about a two-stage first AGM.

Sue

Which makes perfect sense.

Jimmy

And Tim Sarra.

Sue

Advocating that for years.

Jimmy

Yeah, Tim Sarra from Strata Choice, when he was on the podcast, he said, he agreed. He said, you have your first AGM and you elect your committee. And everybody says, okay, great.

They get all the paperwork that’s around. And everybody goes away. And then the committee comes back after three months.

And three months, he said. I thought two weeks. He said three months.

And says, look, this contract here is dodgy. Let’s not do that. And we’ve got other quotes for that service.

Sue

Yeah, and the people could look at them properly. Study them properly.

Jimmy

Yeah.

Sue

And kind of talk to other people. Talk to some experts and stuff. And work out which contracts are simply unconscionable.

Because many of them are really like that. That you’re asked to agree to on the first AGM.

Jimmy

When our first AGM of our investment property. There was one contract. It was for 15 years.

And it had a clause in it that allowed the service provider to increase the charges by 10% every year.

Sue

Wow, that’s incredible. So after five years.

Jimmy

Well, after the life of the contract, the cost of the contract would have doubled. More than doubled. And then at the meeting, when this was raised.

The service provider said, oh, well, we won’t invoke that.

Sue

Well, why put it in the contract?

Jimmy

Exactly. We said, well, take it.

Sue

And why ask people to sign it?

Jimmy

Take it out of the contract. Then it’s like, oh, you know, and it’s like. They were really shocked that somebody had actually read the contract.

Sue

Yeah, because so many people wouldn’t. They just kind of assume that people deal with them fairly.

Jimmy

And meanwhile, the strata manager is standing there looking like an absolute goose. Because they could tell it was wrong. But either they hadn’t read it or they didn’t care.

And there was another series of contracts about electricity provision, energy provision. And it was a booklet. It was a really professionally produced booklet.

The type was so small. You literally had to read it with a magnifying glass to see everything that was in it. And their contracts were QR codes.

Sue

Oh, my God, not even there.

Jimmy

You couldn’t read the contract without using a QR code. And funnily enough, ironically, this building, a lot of people who were buying into this building were retirees.

Sue

Yeah.

Jimmy

They don’t use QR codes.

Sue

No. And downsizers just probably just wouldn’t even consider doing that.

Jimmy

And they would trust.

Sue

Yeah.

Jimmy

They would trust that the strata managers and the developers.

Sue

Would have their interests at heart.

Jimmy

Yeah, which, of course, we find is not always the case. So to get back to this guide, does it warn you about the first AGM? No, it doesn’t.

It also says in the literature, it says here we give you advice on how to run a meeting. And I thought, great. Finally, finally, Fairtrade in New South Wales has said here is a template for a sending orders.

So that you know that, you know, you conduct a meeting in this way. And things like nobody gets to speak for a second time, unless everybody who wants to speak has spoken at least once.

Sue

Which is interesting. I mean, it’s very complicated. And I mean, I’ve run lots of meetings, but I’m still quite confused by the rules often.

Jimmy

Well, there are no rules a lot of the time. And this is the point. So, you know, they could say, as they do with the standard bylaws, these are the bylaws that you can adopt.

You don’t have to adopt them, but these are the bylaws that you can adopt. And similarly, they could have said, look, here’s standing orders that we think would work for strata. You don’t have to adopt them.

But if you do adopt them, that gives whoever is the chair at any meeting a complete guideline on how to conduct the meeting. Now, what they say is, is you have to address the issues on the agenda and then take notes of the decisions. That’s, that is not how to run a meeting.

No, not really. That’s the basics, you know, basic nuts and bolts stuff. So I think an opportunity has been missed there.

And this is one of the things that irritates me about fair trading and all the other state bodies. The people who are devising these things have not lived in strata or have not spent enough time in strata committees to understand where the problems are.

Sue

And why don’t they get people to consult on this? I mean, why don’t they ask you, FlatChat or ask the OCN or ask any people who are experts in this field?

Jimmy

Well, the OCN gets consulted on this and they put out, you know, they say we’re going to be doing changing the laws or whatever. And you would consultation, you know, here’s an email address, send in your ideas.

Sue

But what do they do? Do they put them all in the bin?

Jimmy

Do they never look at them? They have a big bin. They have a big shredder, especially for FlatChat ideas.

There’s a special FlatChat shredder. Look, it’s pretty good basic stuff for people who have never lived in strata before. It’s not going to help people who are looking for guidance, who have been in strata and have discovered all the problems and are looking for a bit more guidance on what they can and can’t do.

I just think it’s a bit of a gloss over.

Sue

It sounds like a real opportunity lost.

Jimmy

I think so. So it’s mostly good in most parts, but there are big gaps there that they could have filled and they’ve just chosen not to. And I don’t really understand why it would be so negative to put in standing orders as a template to say to people.

So when people come back to them and say, our meetings are absolutely chaotic and there’s always one person who’s shouting over the top of everybody else, what can we do about it? And they say, well, you could adopt these standing orders.

Sue

Yeah, simple, simple.

Jimmy

And that would give people a tool to work with to work more efficiently. When we come back, we’re going to look at… I can’t remember what the headline is on the ABC News website.

It is one of the least exciting headlines I have ever…

Sue

Oh no, it’s an exciting story.

Jimmy

It’s an amazing story. Bronwyn Weir, who is an eminent construction lawyer. She was very much behind the scenes with David Chandler when he was setting up his systems.

She’s just done apparently a devastating report into the building industry in Victoria. And her strata scheme where she lives has recently had to renew their strata management contract. And she looked at the contract and said, this is ridiculous, I’m not having it.

So we’ll talk about that after this. So Bronwyn Weir, eminent construction lawyer and all sorts of other things lawyer as well. As we were saying, she had to look at her new strata management contract for her building and found clauses in it that basically said that the strata manager could not be held liable for anything that they had done wrong.

Even if they knew that it was wrong when they were doing it within the parameters of the law, i.e. if they were doing something illegal.

Sue

Stealing trust funds. It was illegal.

Jimmy

But if it was things like, for instance…

Sue

Negligence.

Jimmy

Well, I remember years and years ago we had a strata manager in another apartment. We needed our windows replaced and he found a joiner to fix the windows that was actually involved in restoring listed buildings. And so the budget that we had for the entire building of I think 12 apartments only ran to fix the windows in one.

And when we said, well, you’ve made a bad decision here, he pointed to the thing in the contract that said, well, I’m not liable for any decisions that I make.

Sue

That’s amazing. In any other industry, could you do a job and say, okay, by contract I’m not liable for any bad decisions whatsoever?

Jimmy

I don’t think so. And the other thing is that the strata manager when she said, well, I’m cutting this out, he said, no, you can’t. This is our standard contract.

This is the SCA. It’s been approved by SCA lawyers. Our company always uses the SCA contract so you can’t change it.

Sue

Oh my goodness me.

Jimmy

And now what has happened is that the ABC reporters have gone back to SCA and said, you’ve got this mandatory contract that everybody has to sign. And there are people saying it’s ridiculous and unfair and unconscionable. And they’ve come back and said, no, no, no, no, no.

It’s just a template. It’s just a template that we advise our strata managers to use. And that is such BS.

It’s just totally, I mean, anybody who’s been in that situation, you’re sitting there with your strata manager and you say, I’m cutting this out. I’m taking that. And they go, no, no, no, you can’t.

I’m not signing it if you cut that out. And then you’re left there going, oh, we’re going to have to find another strata manager.

Sue

Sure. And they will probably say, oh, all other strata managers will have the same contract.

Jimmy

It’s standard practice is what they say. And I remember in the early days of OCN, they started devising a variation. And this was back in the days of the ISTM, Institute of Strata Title Management, which later became SCA.

And I remember the OCN people, and you might have been one of them, saying, all right, we’re going to take out this and we’re going to change that. And they said, no, no, no, that’s our copyright. That we have copyrighted the contract and you cannot change it and you cannot use it as a basis for another contract, which is crazy.

So this is why I have often say strata community association is a cartel. They use their monopoly position, it’s virtually a monopoly. They use their power, they use the fact that a lot of their clients actually don’t know what’s really going on to exploit people.

I just want to say, and I know that there are strata managers out there who are sick of being criticised and I can understand why they would be. This is not about individual strata managers, it’s about your so-called professional organisation, which we now know has been running one of the biggest scams in New South Wales in terms of insurance commissions. These are the people that you elect.

These are the people that your bosses, the people who own your companies, elect into positions of power.

Sue

To represent them.

Jimmy

To represent them.

Sue

On the national stage, yeah.

Jimmy

That old saying, everything you walk past is what you accept. So guys, I understand. I feel your pain.

I understand. I know a lot of you are doing really good work and you’re part of your communities, but you cannot let your professional organisation misrepresent you in the ways that they’ve been doing.

Sue

Absolutely, yeah.

Jimmy

And on that note, Bronwyn Weir pops up again.

Sue

She’d make a great building commissioner for Victoria, wouldn’t she?

Jimmy

She would. I think she’s in Sydney though.

Sue

Oh, is she?

Jimmy

Yeah. I mean, is anyone prepared to make that sacrifice? Right.

Bronwyn Weir’s name has come up again in this other story that we’re doing, which is about defects in Victoria. It’s after this. A couple of years ago, I actually just copied a story from the ABC News and they ran a report which was about buildings that were having combustible cladding removed.

And in one building, the tradespeople, the company doing the cladding, saying we’re having a problem here because this building, the structure of the building is rotted so much. We cannot fix the new cladding to anything.

Sue

And that was two years ago.

Jimmy

That was two years ago.

Sue

So that must have been in the heat of the moment, like when everybody was kind of really panicking about cladding after the Grenfell disaster in London.

Jimmy

And I commented that Victorian buildings were rotting from the inside and because they don’t have the diligence that we have. We think things are bad in New South Wales. At least we have people who are checking on the quality of builds and demanding better constructions.

They don’t have that in Victoria. They don’t have the press. Melbourne Age does not cover this stuff at all.

There’s not the close scrutiny of buildings in Victoria that we have had here, which gives the impression that New South Wales is the only state that has a problem with its buildings.

Sue

And I think for a long time, Victorian Queensland kind of looked at New South Wales and said, oh, you know, God, they’ve had so many problems there. There’s so many well publicised difficulties.

Jimmy

We’re okay. Like mascot towers and the Opal building and stuff like that.

Sue

But really they do have problems. Everyone has problems, but maybe theirs just hadn’t been picked up at that stage.

Jimmy

Right.

Sue

And now it’s like now that really that’s happening.

Jimmy

So, you know, earlier this year, Bronwyn Weir, we referred to earlier, issued a major report, a fairly devastating report about the building industry in Victoria, which is now being mulled over, one would assume by the Victorian government. But just this week, Cladding Safety Victoria issued a report on all the work that they’ve been doing and they’ve been spending millions and millions and millions of dollars.

Sue

Yeah, I think they’ve had a $600 million programme, haven’t they? Because they’ve had 359 buildings in Victoria, which have been identified to have combustible cladding.

Jimmy

Right.

Sue

So they’ve looked very closely at each of those.

Jimmy

And replaced the cladding in a lot of them. And they have discovered that in the process of doing this, half, more than half of those buildings had defects.

Sue

Which is incredible, isn’t it?

Jimmy

And you know, there are, and you look on the FlatChat website and we’ve linked to their report, but we’ve also carried the videos.

Sue

And they’re pretty shocking pictures, aren’t they?

Jimmy

Absolutely amazing. Just people going up and looking at things that should be structural and just being able to rip them away with their hands.

Sue

It’s horrendous. And lots of damp problems. Yeah.

Lots of black mould problems.

Jimmy

Well, you know, the damp leads not just to structural rotting, but to mould as well.

Sue

Which can be a huge danger to people’s health.

Jimmy

But here’s the thing. These 358 buildings were identified because they had cladding.

Sue

359, sorry.

Jimmy

But how many other buildings are there that don’t have cladding but have structural problems?

Sue

Oh my God, I never even thought of that.

Jimmy

It’s just by unintended consequences. They’ve gone looking to get rid of the cladding and gone, oh my goodness, look at what’s underneath here. So I don’t know if the Victorian Building Commission will be looking at older buildings especially.

Victoria does have a slightly different system from New South Wales in that they have established in Victoria that the builder guarantees last for 10 years.

Sue

Oh, okay. So a lot longer than New South Wales.

Jimmy

It’s seven years, six years now in New South Wales. But in Victoria, if there is a building defect that’s been caused by the builder, you can take them to court up until 10 years. Now we know that’s not as easy as it sounds and it can be very expensive and there’s no guarantee that you’ll get a result at the end of it and then the builder can always just go bust.

Sue

Yeah, that’s right. So it might no longer be around, yep.

Jimmy

But there are buildings there that are 10 years old and older and probably a lot newer than that that haven’t been put up tremendously well. And you wonder how are they going to find these out? Because at the end of the day, I mean, as it says in the CSV report, a lot of these buildings that have these defects, the defects have to be repaired by the owners of the apartments because the developers and the builders are long gone.

And it’s one of these things that you don’t really want to lift the stone because it’s not that you don’t know what’s going to crawl out, you do know what’s going to crawl out and it could be massive. Interesting that in the past few years, Melbourne has been building more higher buildings and Melbourne, I say Melbourne, Victoria, has been building more higher buildings than anywhere else in Australia. And you wonder how structurally sound those buildings are.

Sue

Oh, don’t even think about it. It’s horrible to think about, isn’t it?

Jimmy

All right, well, that is an action pact.

Sue

Yes, that’s a bad note to start on. Have you got anything fun or nice to end on instead of that, Jimmy?

Jimmy

Oh, I don’t know, Sue, have you? So here’s an interesting little conundrum for you. The law in New South Wales says that if you obstruct access to your apartment, when the owner’s corporation needs to get in there to repair or deal with an emergency, you can be fined.

And one of our readers in the FlatChat forum has said, well, surely if you don’t leave a key with a neighbour, you’re obstructing access to your apartment if you’re not there. I mean, I’m thinking, no.

Sue

Because they’ll just phone you, won’t they? And tell you to come back.

Jimmy

Yeah, but what if you’re overseas? What if you’re interstate? What if you’re not on the phone?

They break down the door. Her argument is, well, if they have to break down the door, then the person who didn’t leave a key with a neighbour should have to pay for the damage to the door. At the moment, it would be the owner’s corporation that would do it.

Sue

Oh, I see, yeah.

Jimmy

You seem to be, I’m absolutely 100% sure about this, which is leaving a key with a neighbour on a compulsory basis is just wrong. Having lived in an apartment where the building manager had five master keys that he used to lend out to his mates so they could go into other people’s flats.

Sue

Yes. I can see problems with this.

Jimmy

We in this building, as many other residents do, leave a spare set of keys with our…

Sue

Concierge.

Jimmy

Concierge. Not every building has a concierge. Not every building has a building manager.

But we did have a case recently where somebody’s cleaner was locked in the bathroom. The bathroom lock had stopped working and she was locked in the bathroom and she was phoning out to say, can you come in, open the front door and that apartment had… Well, if they had left spare keys, the cleaner had picked up the spare keys and taken them in to access the apartment.

We got a locksmith. I tried to pick the lock.

Sue

Did you?

Jimmy

Using my spy skills, but…

Sue

But you failed. I failed. Well, that’s kind of reassuring, isn’t it?

Jimmy

Yeah.

Sue

The locks are good enough to stop people.

Jimmy

To resist me. But yeah. So here’s a question.

Do you leave a spare key with a neighbour or with your building? And should you be compelled to do it?

Sue

Hmm. Interesting.

Jimmy

Yeah. I mean, look, there might be ways that you could have local news agents. No, that just sounds really stupid and wrong.

Anyway, that’s one for you all to ponder out there before you hear us again next week. Sue, thanks very much for coming in and recording this.

Sue

Thank you, Jimmy. Maybe the strata managers should have a key.

Jimmy

Yeah, but they never…

Sue

They’re often a long way away, aren’t they?

Jimmy

Long way away.

Sue

Yeah.

Jimmy

You need instant access. I think as a…

Sue

Maybe the police station, you could leave spare keys with the police station.

Jimmy

That could be an extra… Do you trust the police? Remember our friend got his house broken into when he was on holiday and his neighbour was on holiday and his neighbour said to him, oh, did you tell the police that you were going on holiday?

And our friend said, no, I didn’t. And his neighbour said, oh, it wasn’t them then. And on that note, thank you all for listening.

We’ll talk to you again soon. Bye. Bye.

Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website, 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, or your favourite podcatcher. 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.

 Transcribed by TurboScribe.ai.