Strata management needs attention in ACT property clean-up

Readers might remember that residents had to move out of their homes into temporary accommodation. Different arrangements for paying for such accommodation and repairs existed - depending on whether residents were renting or resident owners.

NSW has also recently appointed a strata and property services commissioner to oversee and drive reform across the entire strata sector. The commissioner's particular focus is strata management and governance.

Are these reforms something that should be replicated in the ACT? It is estimated that around 20 per cent of Canberrans live in apartments. One-fifth of our population is thus affected by legislation around defects in such developments.

In November 2023, the ACT government introduced the Property Developers' Bill which has as its focus the protection of the public and increasing confidence in buildings.

This is incredibly important as there are numerous developments in the city and suburbs that are undergoing "defects projects" that require millions of dollars of support from unsuspecting purchasers. Once the defects projects become known, owners have enormous trouble selling their properties. The ability to obtain appropriate building insurance at a palatable rate is also jeopardised.

The proposed ACT legislation will include a public register about developers (they will need to obtain a licence to be a developer), enable government to have defects fixed by developers/builders, incorporate a code of practice, require a rating report for potential licensees and "encourage" developers to take out insurance covering a building for 10 years after people move in.

Not surprisingly, the ACT Property Council is opposed to the legislation, claiming that the government's approach is overkill and will deter investment. The Master Builders' Association of the ACT has a variation on this theme whereby it wants individual trade contractors held accountable, rather than developers who contract them.

I live in a development that is going through a defects project and I only wish that this legislation was in place, or indeed something similar to NSW attempts at regulation, prior to purchase. We have recently clocked up $300,000 of owners' money being expended on a project without a hammer or screwdriver being used as yet.

Developers and their builders should not be able to shrug their shoulders and walk away from shoddy work such as water ingress issues or exhaust fans being connected to ducting that goes nowhere.

Neither should they be able to string owners along through tortuous court processes that are aimed at draining pockets rather than fixing defects.

Apartment developments are generally governed by an owners' corporation with an executive committee appointed to act on behalf of owners in between meetings.

While executive members are well meaning, nevertheless often they have little or no skills in building, engineering or indeed the all-important governance arrangements that must be complied with. They are, however, legends in their own lunch box.

Added to this, strata managers are often appointed to assist the executive and owners.

They are generally appointed by the developers at the start of the occupancy of the development. Because of this, strata companies are often deeply ingrained with developers in the ACT - possibly with the developers' interests more of a priority than the owners.

My observation is that strata managers are a level of management that do not have building, engineering, or governance skills at their core.

Rather, they can negotiate contracts for, say, insurance, because they are acting on behalf of several developments and therefore have the "contacts". This enables them to obtain a commission from the insurer, in addition to the management fees paid by individual owners. But compliance with governance requirements is a steeper hill for some strata managers and executive committees.

Lack of governance skills has been highlighted in the ACT for simple issues such as not complying with legislation.

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Other executive committees around Canberra have just ignored the plight of owners and have had to pay dearly for a head-in-the-sand approach. In one case, this included ignoring resolutions from two annual meetings. It was evident that the executive committee and strata manager had no understanding of governance responsibilities.

The ACT's proposed legislation probably goes further than NSW, but "encouraging" developers to take out insurance for 10 years needs to be firmer.

There is currently a consultation process under way, and owners can lodge submissions by March 30, 2024 to the ACT standing committee on planning, transport and city services.