Ten top consumer groups demand strata inquiry

A coalition of 10 leading consumer and strata advocacy associations has called for a national public inquiry into the strata management industry, in the wake of the ABC TV Four Corners revelations about alleged systemic corruption and lack of meaningful consumer protection.

The consumer and strata groups – including highly influential publishers and campaigners Choice – claim systemic harmful practices within the industry are compromising consumer rights and community expectations.

Federal Treasurer Jim Chalmers has been urged to initiate a government-directed inquiry, led by the Australian Competition & Consumer Commission or the Productivity Commission.

Apart from Choice, other signatories include Owners Corporation Network of Australia (OCN), Australian Consumers Insurance Lobby Inc, he Consumer Action Law Centre, Unit Owners Association of Queensland, Financial Rights Legal Centre, Financial Counselling Australia, Queensland Consumers Association, NQ Strata Action Group and Mortgage Stress Victoria.

According to a press release issued this week, the groups have called for a comprehensive examination of the industry’s governance, conflicted remuneration models, harmful financial hardship and debt recovery practices, and the adequacy of consumer protection mechanisms.

“It should shine a light on the significant financial and safety risks faced by consumers due to current industry shortcomings,” said the press release which outlined the proposed scope of the inquiry”

• Investigate practices within the strata management industry that are unethical and potentially unlawful, including assessing both the transparency of remuneration models and the adequacy of existing regulation.

• Evaluate the effectiveness of consumer protection mechanisms and the need for reform.

• Evaluate the role of industry bodies, and the adequacy of government oversight in enforcing legal and ethical standards.

• Focus on identifying and referring instances of unlawful activity for appropriate enforcement action and ensure the compelling of evidence and protection of witnesses to facilitate thorough and effective oversight.

“This action is necessary to safeguard the interests of millions of Australians currently living in strata-titled properties, and to protect the interests of future strata owners,” said the media release.

“We are witnessing an alarming trend in strata management practices that are not only unethical but potentially unlawful,” said Karen Stiles of Owners Corporation Network of Australia.

“It’s time for the government to step in and ensure that there is a robust framework protecting consumers who are currently at a disadvantage. The lack of transparency and accountability in the current system has left many of us vulnerable.

“We need a thorough inquiry that not only highlights these issues but also leads to substantial reforms,” she added.

The question of undisclosed insurance commissions, which sparked the whole ABC TV inquiry, is at the forefront of strata consumer claims.

“We have already documented and referred 146 cases where strata managers appointed insurance brokers to manage policies without obtaining informed consent,” said Tyrone Shandiman, chair of Australian Consumers Insurance Lobby Inc.

“Additionally, we are currently investigating significant misconduct involving five strata managers and five brokers, anticipating that these investigations will lead to further referrals to ASIC & ACCC.

“Given this evidence of widespread unethical practices, one must question what further proof is necessary to prompt a government inquiry into these serious issues.”

As the Four Corners episode The Strata Trap revealed, the problems are widespread and affect every state.

“The Unit Owners Association of Queensland (UOAQ) has long been a vocal critic of the strata management industry, particularly concerning practices that have proven to be extremely detrimental to Queensland body corporate schemes,” said Bob Boundy, UOAQ Treasurer.

“These practices not only undermine the integrity of our communities but also place an unnecessary financial burden on unit owners. We continue to advocate for reform and greater oversight to protect the interests of all Queensland body corporate members.

“The ongoing viability of the Strata Industry is underthreat due to the lack of recognition of the interests of Lot Owners, the people who pay the bills!”

And it’s the issue of how and how badly strata owners are being overburdened with unconscionable costs that are at the heart of this demand.

“[We are] deeply concerned about a range of issues in the management industry, including strata insurance” said Alexandra Kelly, ccting CEO of the Financial Rights Legal Centre.

”Quite simply, strata managers should not be getting paid by an insurer for recommending their products. Conflicted remuneration should not be allowed to continue, as even when disclosed – we already know that disclosure doesn’t alert people to the conflict.

“We want the ACCC to take a good look at this industry, and state governments to be vigilant in making sure consumer rights and interests are upheld and protected.”

One increasingly common issue is companies with close ties and even vertical integration with law firms, funnelling lucrative debt collection work to their cohorts for profits and kickbacks.

Strata schemes don’t realise they are being used to profit from their neighbours misfortune because the debt collection process costs them nothing and they are happy to see levies debts cleared.

Meanwhile, families are losing their homes as their debts mount and are multiplied thanks to law firms adding “reasonable costs” to their existing burdens.

“Financial counsellors see the harm caused by aggressive legal action,” said Lody Stewart, National Strata Levy Reform Lead with Financial Counselling Australia.

“We see forced bankruptcy proceedings over relatively small arrears and other actions that can cripple people financially and even leave them homeless. We must introduce consumer safeguards and the right to hardship arrangements for every Australian apartment owner.

“In NSW we have proposed the introduction of proper safeguards and rights for all owners. We’re pleased with the progress we’re making with the NSW government in this space. However, obtaining fair outcomes should not come down to a postcode lottery. It’s now time for a truly national approach,” they said.

When governments across Australia are desperate for apartments to fill the gaping hole in their housing needs, owner-occupants, investors and renters need to have confidence that they aren’t going to be ripped off in dubious schemes that are passed off as “standard practice”.

“Strata management is in need of root and branch reform – it’s expensive for everyone and doesn’t seem to be working for anyone,” said Nadia Harrison, CEO of Mortgage Stress Victoria.