Eight billion reasons owners are ripped off

The imposition of unfair management rights and other financial commitments on unsuspecting new entrants into apartment ownership in Queensland is scandalous. The failure of the Queensland Government to address this long-running canker in its most recent changes to the legislation in Queensland is totally perplexing, unless you are inclined to give credence to conspiracy theories about behind the scenes donations to political parties, but I won’t go there on this occasion. However, until the whole mess is cleaned up, the blatant manipulation of off-the-plan buyers of new apartments in particular will not only continue but get worse as new practices to do with a variety of embedded service contracts in new buildings will spread. It is no accident that developers in other states, seeing the additional profit that some Queensland developers have been able to extract, seek to emulate them in various ways outside Queensland.

We live in a four story, 26 unit apartment block on Brisbane’s Bayside. Our suburb is currently the locus of a boom in the construction of new apartment buildings, marketed mainly to retirees and downsizers. It’s not a market primarily aimed at investors looking to cash in on sky high rents, students or service workers. About two thirds of the units appear to have been purchased by retired owner occupiers. However, as far as I can determine, the management of virtually all these new buildings have been set up under the Accommodation Module of regulations under the Body Corporate and Community Management Act. Among other things, this method allows for the granting of management rights – including letting, caretaking and service contracts – for up to 25 years.

Unlike genuine tourist areas like the Gold and Sunshine Coasts, letting rights in our area are a non-issue because there is so little turnover of the fewer rental properties available in each building, but the caretaking and service contracts are another matter entirely. When we bought our apartment off the plan and moved in over six years ago, we found  the developer at the first Extraordinary General Meeting and before the first AGM at which the Body Corporate Committee was elected, had given a contract to a related company to provide caretaking services for the next 25 years. This contract came complete with in-built provisions for annual price rises according to CPI and five yearly price reviews where a new benchmark price might be set. We estimated that over 25 years, the unit owners were going to be up for more than $700,000 for what was nothing more than a twice weekly cleaning service. When we queried this, we were assured that this was standard practice, perfectly legal and there was nothing that could be done about it.

Well, as it turned out, there was something that could be done about it and we chose to do it. As a result, we have now been able to extinguish both the caretaking and letting contracts and we now manage the building ourselves. In the process, we have saved hundreds of thousands of dollars and the building is maintained to a far higher level than was ever going to occur under the previous arrangement. If you are an owner or body corporate committee member in a new apartment block in Queensland, I am happy to share a paper I have written about how our body corporate managed to extract itself from this iniquitous arrangement.

In  the meantime, the challenge facing new apartment owners only appears to be getting more perilous. In a growing number of new apartment buildings, embedded services tied to long running service contracts are appearing that are going to lock owners into expensive arrangements that they cannot change or get out of. Contracts for not only caretaking and cleaning but rubbish removal, pool maintenance, electricity and gas supply, internet connections and repairs and maintenance to all manner of specialised equipment  to name just a few. There has never been a better time to remind people of the old maxim: BUYER BEWARE!