EXAMPLE 1: Story of Painting Project and taking owners for a ride

Hello esteemed members of the forum,

It took me seven years to collect this evidence, and this is just one of
the shocking proofs about (mis)management of the complex where I live.

So far, two DFT mediation attempts failed because the EC members refused to
attend and CTTT cases are going almost nowhere or very slowly.

I even received a serious anonymous threat as it is obvious that
I am uncovering serious breaches of law and duty of care.

Now the story. You are welcome to tell me openly if you have seen worse case of the financial abuse in NSW complexes. On a scale 1 to 10 (1 being terrible), how would you rate this Executive Committee and the Strata Manager? Note that almost all members of the EC and the Strata Agency are still “in action” and due to passive attitude by most owners, their “business is thriving”.

Quite early after the large strata complex was registered in 1997, it became apparent that a few serious defects were going to become reoccurring problem for owners. To name a few:

Serious cracks in the walls of the buildings (part of common property);
Paint on the buildings started peeling and cracking to extreme levels;
Frequent problems with hot-water system and pipes;
Leakages on the balconies…

At around fourth/fifth year of the complex life (before year 2000), we realized that the painting on the buildings was very bad and unsightly.

Attempt to engage the Department of Fair Trading failed and the builder
ignored the requests to repair the complex under warranty. However,
owners were not told that they could generate individual claims against the builder and put more pressure that way…

We obtained the initial quote for the painting of the buildings, which was around $270-280,000.00, close to Olympic Games period. We did not have much money in the Sinking Fund to proceed immediately.

I proposed the following:

To ask the owners to introduce a special levy of around $1,000.00 per unit,
which would cover almost whole painting project. The proposal was based on
the fact that it would take around one year to paint all buildings, which would give owners time to collect extra $250 per quarter over four quarters. So, the special levies would be split over four quarters, each amounting to $250 per owner. Not an unreasonable choice. This was, of course, not going to be a popular option, as nobody liked increased expenditures. However, it was a sensible option.

My proposal was not accepted by members of the committee because the
Chairperson had a very different view:

The Chairperson, with his “experience in business”, stated he was positive
that, after the Olympic Games period settled, the builders’ quotes would
drop down significantly, and in the meantime, we would collect enough money
in the Sinking Fund. He was “absolutely sure” that we would get cheaper
quotes, two-three years later when the building industry slumped! Therefore,
the committee not only did not ask owners for their preferences (as we should
have had in case of such a large and costly project), but accepted the
Chairperson’s recommendation BLINDLY.

In the meantime, the Chairperson also said that soft wash would help. In
2000/2001 we spent around $20,000.00 and that was a short-lived solution.
In fact, one of the worst choices we made. Soft wash only increased the
speed at which the paint started falling off the walls. Plus, any metal
furniture that was left on the balconies when the soft wash was carried,
started rusting very quickly (I know, because two benches had to be thrown
away).

A member of the executive committee strongly protested against the soft wash
and gave reasons. Purely on “authoritative advice” from the Chairperson the
rest of the EC accepted his option.

The complex showed serious neglect in regards to proactive maintenance. Failure and delays to maintain them were in direct breach of SSMA 1996, Part 2, Section 62 3(b). But, owners did not even know their rights and nobody told them.

Four years later (in June 2004), we finally had more funds for the proper painting of the buildings. However, the shedule and costs for building painting was NOT listed at AGM 2003. In other words, we did not have any approval
to proceed with the project during 2004.

Three quotes were obtained from different painters:

  First Company: 16 June 2004, $446.380.00, including GST. This company
  was favoured by the Managing Agent.

  Second Company: 10 August 2004, $446.380.00, including GST.

  Third Company: 2 August 2004, $480.010.00, including GST.

Note the amazing “coincidence” that two completely independent companies
had generated identical quotes. Nobody saw that discrepancy at the time because the quote from the second company was itemized and full figure not listed in the quote.

Without any general meeting or general consultations, the members of the EC decided to make decision on their own. The Strata Manager did not even attempt to advise the EC that such decision should be left to the owners at a general meeting. Half a million dollar project certainly deserved attention of
all owners.

The so-called paper EC meeting was held on 14th of September 2004 (just one
month before the Annual General Meeting). This was a deliberate plan to by-pass owners. The EC voted to accept the first company and quote on $446,380.00 (the company that the Strata Manager favoured).

However, there was another hidden agenda: the Chairperson wrote on 13th of
September (the day before the EC paper-voting was completed) but sent to the
owners for AGM 2004 on 15th of September that the approval was given on amount of $464.000.00 plus GST ($510,400.00). That was a false statement and premeditated action to act against the SSMA and breach of duty of care and transparency! In other words, the Chairperson (who is still in the same role) and the Strata Manager made a unilateral decision to make a final decision.

Even worse, the Chairperson’s note in his AGM 2004 address stated that other quotes were exceeding $600,000.00! This was a false statement too, with clear intention to justify the quote him and the Strata Manager approved without the OC or the EC.

Had this happened in a corporate world, somebody would be in jail by now.

Then, at AGM 2004 ((one month later – October 2004) they persuaded owners to remove NSW SSMA By-Law which required owners to vote on any item if the cost grew more than 10% of the projected value. The Chairperson and the Strata Manager claimed the difficulties to “predict” future costs and owners accepted their proposal.

By removing the 10% regulation that would force decisions to be approved at the general meeting, the Chairperson and the Strata Manager achieved another significant benefit:

In addition, due to “new costs” later on (third coat of paint was “suddenly” needed), the final cost of the painting project grew from $446.000.00 to more than $556.000.00 without any review or approval by the OC at any meeting!

In short, these are the sad facts about failures and mismanagement:

Negligence by the Strata Manager to notify owners and the EC about
statutory warranty and the possibility to repaint the buildings without
any expenditure because the external walls showed excessive deterioration
beyond normal wear-and-tear.

Negligence by the Strata Manager to investigate and notify owners about
the issues with soft-wash approach to clean the exterior walls on the
buildings as an interim measure to make the buildings look more presentable.
It was a short-lived decision which cost OC between $10,000.00 and $20,000.00.
 
The Strata Manager and EC failing to maintain the buildings, and notify OC
that in spite of the lack of funds the maintenance must be carried out, unless
a different decision is made at the general meeting.

After having enough funds to proceed with painting in 2004, we had three
quotes in 2004 (two of them coincidentally and quite strangely identical in
price ($446,380.00), whilst the third one was $480,000.00.

The Strata Schemes Management Amendment Bill was assented on 17th of March 2004 (six months before the building painting was approved). The Bill
introduced alterations, of which some specifically affect buildings with over
100 lots. Apart from the fact that almost half-a-million-dollar project was
not approved by the OC at general meeting (which raises lot of concerns),
the OC silently, and without any advice from the Strata Manager, approved to
remove SSMA 1996 Division 3 Restrictions on Spending, Section 80A about 10% limit above the planed expenditure at AGM 2004 AFTER the building painting project was approved by the EC alone. It was a premeditated step, which had serious consequences later on and increased the costs to more than
$556,000.00.

Negligence by the MA and EC to inform the OC that the value of the contract
was approved by the Chairperson and the Strata Manager alone! The decision
made by the EC was useless. Even worse, such a large amount of money should have been approved by the OC, and whether the SSMA enforced it or not is irrelevant.

Negligence by the MA to notify owners about Dulux consultant resigning from
the project and not acting upon his advice; the reason Dulux consultant left
the project was because he strongly disagreed with the processes used by
painters and warned that he could not guarantee the quality of the job.

The EC, without the involvement of the OC at a general meeting, voted to
approve the quote from the First Company in the amount of $446,380.00 GST on 14th of September 2004, but a different one was agreed by the Chairperson and the Strata Manager after the “renegotiations” alone (listed in the AGM notice on 13th of September 2004 – $464.000.00 PLUS GST = $510,400.00), which makes this quote the SECOND MOST EXPENSIVE OF THE THREE and the MOST EXPENSIVE IF TOTAL COST WAS INCLUDED.

How I rate the Strata Manager and the EC: 0 out of 10. Not even 1 mark
they deserve.

Am I wrong? And can you give an example of more horrible financial story in
a complex…

In the next post, I will talk about even longer-running abuse: unapproved
water and gas rebates for some owners over 14 years. Nobody knew about
them until I accidentally found out about them in November 2011.

Maybe somebody from CTTT and the government reads about these issues.
Or a person with good legal skills comments… Owners hould not need a degree in law to be able to protect their investments and hard-earned money.

Bottom line: I told my children never to purchase any property that has strata management or shared responsibilities. When money or power is involved, some people fail the basic tests of ethics and dignity.

Fchat55

PS. The Chairperson and his “team” still operate in the complex. The Strata Manager still runs the business but not in our complex (ran away in April 2011).