In an ABC news item on 14/4/2017 it was reported that there has been a big surge in households installing solar panels - with March installations the highest in five years. Apparently “Queensland led the way installing 25 megawatts of capacity, which is enough to power 5,500 homes and businesses”.
This surge in installations may be a reaction to high power bills after a long and hot summer season, or perhaps ever climbing electricity rates. Whatever the motivation, solar panels lower monthly electricity accounts and act in part or whole as an insurance policy against ever increasing electricity rates. It is possible to install solar panels in strata titled buildings. However, this issue may have gone off the radar for many communities, due to the dropping of generous feed-in tariffs supported by past State Governments.
In fact, Bodies Corporate can be the perfect solar panel users as they very often have a consistent base load which ensures all the electricity generated is consumed on site, which translates to maximum financial benefit. Further, Bodies Corporate can receive substantial “funding assistance”, usually up to 35% of the total installation cost via the Small-scale Renewable Energy Scheme. This scheme applies to solar panel systems that have a capacity of no more than 100kW, and a total annual electricity output less than 250MWh. Note, most household systems are typically between 3 and 5kW. Body Corporate configurations vary greatly but typically to have a roof size to accommodate a 100kW system would probably be a Body Corporate building containing 80 to 100 lots. The Brisbane Powerhouse in New Farm, Brisbane has a 100kW system on its rooftop.
Imagine if you had purchased a home and you find you must pay for your hot water system via a rental scheme. What would you think? If you buy an apartment, you may be doing just that.
If you purchase an apartment off-the-plan, you are very likely signing up to a convoluted rental scheme for your hot water system. Deep within the wad of paper given to you there is likely a letter that many purchasers do not read or do not understand. It can be quite brief but it proposes to the developer that he should adopt a serviced [gas] hot-water scheme for the Body Corporate. The letter may not mention this will be a ten-year contract and the proposed contract is not usually disclosed.
A serviced hot water scheme is where the gas utility will supply, install, and maintain the water heating plant. There is no cost to the developer. In essence, apartment residents buy hot water by the litre and usually pay a fixed daily rate for gas usage. The gas utility will recover its costs over the contract period via the rates it charges for hot water supply and gas to apartment appliances. When these contracts end the Body Corporate can choose purchase their own water heating plant & negotiate a rate for the gas supply hot in the usual way. Many do.
These serviced hot water schemes are marketed to the developer as they are the decision maker. Here is why one gas utility says the scheme should be adopted;
- Cost-effectiveness. Each of your projects will benefit with a sizeable reduction in capital cost as the … [ hot water] plant outlays are dramatically reduced - ultimately resulting in even more competitive apartment value and pricing.
- Hassle-free. Breakdown problems and maintenance costs are no longer the responsibility of the developer as … [the gas utility] professionally manages the … equipment supplied.
- Attractive to Investors. The running costs of a centralised water heating system would not be included in the Body Corporate levies, making the development even more attractive to apartment owners.
- Appealing to Residents. Valuable space is saved within each apartment when compared to developments using individual electric hot water heaters. There is also the added advantage to the resident of almost unlimited hot water.
- Automated Billing. Hassle-free metering and billing of hot water usage for individual apartments can be carried out entirely by … [the gas utility]… Each customer is then only billed for the actual volume of hot water they use.
- Environmentally Smart. By using natural gas over electric-element hot water on this development, we estimate that a reduction … of greenhouse gas emissions (CO2) will be achieved.
A gas utility will really understand how this scheme works, but it is notable that the benefit list contains a large amount of irrelevant padding. You can have a shared hot water system without a serviced scheme. Gas hot-water plants are very reliable; repairs and maintenance for most body corporates can be expected to be trivial.
The essence of this scheme is the;
- Developer avoids paying for plant they would otherwise need to purchase and install.
- The gas utility “sells” some plant and locks in a customer for 10 years.
- The cost of the hot water infrastructure is passed on to users and this might appeal to investor owners as their tenants pay the burden of this scheme.
The benefits for the apartment owner or end user are much less compelling. This plant is not enormously expensive so it’s hard to be convinced that an apartment is materially cheaper to buy because the increment is likely to be small across many apartments; could it be the real winners are the developer and the gas utility?
by Gary Wilson, Executive Committee member
Under the heading “ New strata rule to force sales in $75m complex” the Australian Financial Review (24/4/2017) records that a developer over a period of 18 months has negotiated sale agreements with 40 of 48 owners of a strata property that lies adjacent to Macquarie University in Sydney. It is reported that the developer will now negotiate to buy the remaining units under the recently introduced, so called, 75% renewal rule. It is understood the developer will construct student accomodation on this site.
Possibility the way the 75% renewal rule will typically work in practice is that developers, as in the above case, will buy sufficient lots to give them the voting power to force through their redevelopment scheme. The article seems to infer that the sellers in this instance have done very well, but what of the fate of the remaining 8 owners. The strata world throws up these problems where some lot owners assume their home is their castle, but not so in the strata world. We trust it all ends up well for these owners, but it is a most vexed issue. The elderly in particular in their twilight years don’t want this type of change, their community destroyed, or the money. Of course developers will be focussing on “irreplaceable sites” and for some all the money in the world cannot compensate for many years of memories and the lifestyle inherent in their home and location.
There have been murmurings about introducing the 75% rule in Queensland; but guess where these are coming from, property developers. Owners continue to be the patsy in this game of opaque vested interests; one day the legislators will work out that just as the general voter is getting fed-up with the conduct of our politicians and other elites, the strata lot owner is getting miffed on multiple fronts, and as every day goes buy there are more and more strata lot owners who are also voters!
by Gary Wilson, Executive Committee member
In an unpublished Master’s Thesis Sarah Hudson, (An analysis of the expenditure of residential strata schemes in NSW, University of New South Wales, 2011) conducted an exploratory study into patterns of expenditure of residential strata schemes by surveying a sample of scheme accounts. The major finding was seemingly quite intuitive, especially to those who have visited numerous strata buildings, namely;
Buildings dominated by owner occupiers spend more on maintenance than buildings dominated by investors.
Whilst this analysis looked at how much was spent per lot the value of this information is limited without extensive benchmarking and matching the expenditure against what might be the reasonable requirements of specific buildings. Whilst every building has different circumstances it nevertheless notable for the lack of benchmarks or even crude rules of thumb against which owners can reach some conclusions about the value for money they may be achieving in general for their levies and more specifically about the appropriateness of maintenance that is routine and that funded by sinking fund contributions.
That owner occupied dominated buildings spent more on maintenance than investor dominated buildings may not be saying all that much, and of course this study was exploratory in nature. Owner Occupied buildings maybe:
- Less reliant on caretakers and other third parties to identify maintenance problems,
- More focussed on maintaining the aesthetic aspect of their building and gardens
- Have more engaged committees that are more aware of day to day maintenance issues.
- More focussed on the long term “pay off” of ensuring the building is well maintained.
- Have a greater propensity to consider upgrades or outright improvements as part of their sinking fund expenditures.
by Gary Wilson, Executive Committee member
The Australian Financial review (24/3/2017) reported that JLL (known to many as previously Jones Lang Wootton or similar) has spent about 12 million dollars to buy the residential management rights of around 700 apartments spread across several buildings.
A spokesman from JLL said the management rights sector was becoming an increasingly institutionalised investment. As we understand it, JLL only entered this market in Brisbane in 2016, but now claims 1700 apartments under their management.
This announcement follows one by the Mantra Group early in 2016. In a move that was widely reported in the media it was announced that Mantra was making a move into residential management rights after buying the rights to 1500 apartments in the Newstead & Fortitude Valley area. [Gold Coast Bulletin, 13 February 2016] Since that time Mantra has also announced the acquisition of other Fortitude Valley management rights to be conducted under the Peppers brand. This apparently covers 970 apartments across three towers.
It's not entirely clear what’s driving this new trend, but low interest rates and annuity style income may make this investment as useful bolt on to other activities. Further, the growing realisation that Body Corporates can do little about innovative tenancy arrangements may be another element in their long-term thinking.
It is not clear how the stakeholders in this industry will view this development, if it is indeed the commencement of a trend. You can guarantee there will be unattended consequences. Smaller body corporates might consider this is not an issue for them, but if management rights ‘industrialised’ starts in your neighbourhood then you may be vulnerable as strategic bolt-on to the larger portfolio.
Some owners have already expressed disquiet about this trend. They never envisaged their building could be an ‘industrialised institutional investment’. That they may end up with a corporate caretaker and the service delivery that will not be dedicated to their building, but rather a clutch of buildings.
Operations on the scale above may bring more services and a more process driven facilities management approach to caretaking duties, but it may also bring a hard-headed business, less personal approach that may not be welcome by some owners. Property developers obviously find these omnibus sales very convenient.
Institutional caretakers are not new, but their relationship with owners seems to be a mixed bag. Some committees will find it a challenge to deal with well-resourced institutional caretakers with layers of management and operational staff.
by Gary Wilson, Executive Committee member
The above case, adjudicated on 12 October 2016 has attracted, (not for the first time), a lot of press comment in Queensland. This is because a relatively minor matter of one party wanting to extend a balcony into common property airspace has gone all the way to the High Court of Australia. Reports in the press sensationalise the matter, & report comments from observers, who say the parties cumulatively will have spent about $500,000 seeking to resolve the dispute. I make the observation that had some of this money been expended in other directions, possibly the dispute might have been able to have been resolved. Perhaps not, maybe this became a battle about other things?
Its interesting to the extent that in Body Corporate disputes, almost all participants "fold their cards" at the Administrative Tribunal level, and it will be possibly a long time before another Body Corporate type case (from anywhere in Australia) will surface at the High Court.
The dispute was about one party (Albrecht) wanting to extend a balcony (in fact join up two balconies). To do this the required a General Meeting vote which had to be carried without dissent, which failed to occur. There is provision in the relevant legislation that an adjudicator can approve the proposal if the opposition was unreasonable in the circumstances.
This provision is in place, presumably, to protect a minority position being thwarted by the tyranny of the majority. Nevertheless I have found this provision somewhat disconcerting because a) if there is some objective standard, why have a vote, b) adjudications that have overturned votes often seem to lack any obvious rationale, (at least to me).
In this case the vote was overturned by the adjudicator as unreasonable, that decision overturned by Queensland Civil and Administrative Tribunal, but then the original decision was upheld by the Court of Appeal of the Supreme Court of Queensland. So obviously determining unreasonableness is not an easy thing!
The High Court said that the adjudicator and the Court of Appeal were completely wrong as they tried to balance the competing interests, and in the end decide who had won the debate. (my words) This was the wrong approach said the High Court, all they had to do was decide if the vote against the proposal was unreasonable, (not to decide if their objection was inferior or superior to the alternate case). The High Court upheld the original vote finding it not unreasonable.
I have alluded to my sense that some of the adjudications I have read have been arbitrarily plucked from the air. This ruling should make it a little harder for adjudicators to over-rule votes. Certainly, the High Court has honed in on what needs to be considered, and more importantly, by default what should not be considered.
The combatants probably have done the Body Corporate world in Queensland a favour, but after a five year legal stoush there is a least one legal team bruised and battered. As for the rest of us, what can we say when great legal minds get it wrong, ... and what would have happened if this matter had terminated at the QLD Court Of Appeal, (who seemed to received a diplomatic reprimand from the High Court in the penultimate paragraph of its judgment).
Maybe you can say the system works, ... if the combatants have the resources to press and defend their positions?
by Gary Wilson, member
The Queensland unit industry is administered under the Body Corporate and Community Management Act 1997 (BCCMA) - a Queensland state government document, the responsibility of the Attorney General of Queensland. The Liberal National Party (LNP) and Labor Governments have ignored the RORTS being perpetrated on Queensland unit owners, but the clock is ticking for both parties. Both parties embrace high density living as a means of accommodating Queensland's population growth and curtailing urban sprawl and the associated infrastructure costs.
Colin Archer in Strata Update # 9 stated:
"The trend towards community living is skyrocketing in south-east Queensland's high density areas. New developments are on the rise in the region's city and coastal areas and we're getting more of an idea what the future of strata will look like."
This trend is confirmed by the statistics obtained from the Lands Registry Office, Department of Natural Resources and Mines.
As at the end of September 2015, there were 44,734 body corporate schemes (approx. increase of 4.2% since March 2014) and, 422,852 individual lots (approx. increase of 5.2% since March 2014)
The Unit Owners Association Queensland Inc. (UOAQ) estimates that 1.0 million Queenslanders are now involved in unit ownership, that is 25% of the Queensland population.
There is no doubt that this rate of increase in body corporate schemes, will accelerate into the foreseeable future as Queensland struggles to keep pace with the demand for unit living and influx of people wanting to live in the sunshine state.
Unfortunately, the BCCMA - based on 20th century thinking - is not keeping pace with the demands of existing and new unit owners. Many new unit purchasers are highly educated younger people wishing to live close to work in the central business district - not retirees looking for a final nest. The objectives of the BCCMA are excellent, but the expression of those objectives in legislation is stuck in the last century. The legislation has been overtaken by vested interest groups seeking to inflate their own income at the expense of unit owners. Thus a series of RORTS has been incorporated in the BCCM legislation that will - if not corrected - impede Queensland unit growth and the government's objective for high density living.
Tinkering at the edges of the legislation - as introduced by the last LNP Attorney General - will not fix the BCCMA. Pets in units, parking problems and smoking on verandas are all annoying features of unit living, but fade into insignificance when the RORTS of the industry are exposed. Read more here.
Inflated building replacement values cost lot owners thousands of dollars in excess premiums and can cost body corporate managers their contracts. The only protection against premium gouging is regular valuations by an independent expert.
What is premium gouging?
Premium gouging is the term used to describe setting annual increases to the Building Sum Insured (BSI) that grossly exceed the actual rate of inflation in the building industry.
It is well known that underwriters associated with the strata insurance industry frequently automatically increase the Building Sum Insured (BIS) by as much as 5% – 8% annually. By comparison, the total increase in Queensland construction costs over the past five years has been a mere 4% or an average of 1% per annum. Similar rates of inflationary increase have occurred in other states.(1)
In Queensland, NSW and Victoria, the strata legislation only requires a strata scheme to review its BSI every 5 years – leaving 4 years of compound underwriter increases. To give this scenario a sense of proportion, you need only apply the tried and tested rule of 72.
Rule of 72
If you divide 72 by the rate at which the policy increases each year, the results will be the approximate number of years it takes to double your initial Building Sum Insured - at 8% this is just nine years
Using this mathematical rule, we can calculate that over the four years of underwriter increases, an 8% annual increase will have increased the initial BSI by approximately 36%.
While at the same time, the actual increase in building industry costs over the past four years was only approximately 4% – a difference of a whopping 32%!
This is more than nine times the actual percentage increase. Is it any wonder that it is called premium gouging?
How does premium gouging occur?
You could be forgiven for thinking that the underwriting industry is deliberately ripping off unit owners by recommending annual BSI rate increases that are more influenced by the desire for corporate profit than actual cost statistics.
We suspect the problem is more complex than that and starts at the beginning of the renewal process.
Underwriters have to determine at the end of the first year cover what the rate of increase should be for the subsequent 12 months – assuming the insured party does not provide a new valuation.
One of our Building members wants to make everybody aware of the below. They seek support for their opposition to the proposed development at 443 Queen Street, Brisbane. Please support their petiton to designate the project as an Impact Assessable development with the involvement of the wider community by lodging submissions against the development proposal.
Fact Sheet - Protect Customs House Precinct
One of Brisbane’s most historic precincts
Customs House, one of Brisbane's heritage icons, is located on the river in the CBD. It is the most important building in an historic precinct representing a remnant of Brisbane's historic relationship with the river and Queen Street. It was completed and opened in 1889, when Queensland was still a British colony.
Other places that contribute to the streetscape on the western side of Queen Street include the former ‘Queensland Country Life’ now Aurora building facade at 420–426 Queen Street and the Petrie Bight Retaining Wall a 150 metre, 19th century, parapeted stone retaining wall at 443-501 Queen Street. It was built in 1881, and is important in illustrating its type. It has aesthetic significance in the contribution of its scale and texture to the Brisbane riverscape.
A Heritage Listed Precinct
Customs house was listed on the Queensland Heritage Register in 2005. The Petrie Bight Retaining Wall and the Queensland Country Life building façade were added to the Heritage Register in 1992.
A Tower in the Centre of the Precinct
A development application for the building next to Customs House at 443 Queen Street has been lodged with Brisbane City Council by Cbus Property. The proposed 47 storey tower, planned for the Queen Street riverfront will contain 264 apartments. The development is currently submitted as Code Assessable. This means the developers do not need to consult or notify the community of the proposed development and there are only limited ways to appeal any council decision made.
A Call for Transparency and Open Disclosure
There is an urgent need for the development to be considered Impact Assessable based on a number of Planning and Heritage concerns.
OFT disciplinary hearing - follow up
OFT disciplinary hearing - call to action
To all unit owners:
UOAQ received the following call to action from one of our members. Please read below and come and support the cause.
At 9.30 am on 6 July at QCAT a Hearing will be held by the Office of Fair Trading v Peterson Management Services P/L. It is a disciplinary hearing in relation to undisclosed commissions in the the Operation of the Caretaker's Letting Pool and we hope will be a landmark case if it goes in the favour of OFT.
Would you mind circulating this to fellow UOAQ owners to see if anyone can come and support us?
OFT have advised that the Tribunal is open to the public. It will be held at QCAT Address: Level 9, BOQ Centre, 259 Queen Street BRISBANE QLD 4000. An officer will advise which room.
This is the experience one of UOAQ's members went through, which at last resulted with a happy body corporate. In the words of the member : "It would be good if our story could help other long suffering owners to get rid of incompetent managers, as we feel the whole management rights scenario is just a rip off for owners."
I have been an owner of a one bedroom unit at a resort at Hervey Bay since 2003, and another 2 bedroom unit since 2007, and was on the Committee for several years through to the departure of the manager. Not long after buying the second unit I started to notice a lot of extra charges on my monthly statements for things like light bulbs, glasses, plates, cutlery and batteries with a charge to replace and install. I was a bit suspicious, but didn't really do anything about it until I received a call from the Chairman of the Body Corporate who wanted to form an owners' committee to look into things at the resort. He informed me that many owners had suspicions and some had even seen lights on in their unit and then been told by the manager no-one stayed there at that time.
The then manager threatened legal action over the formation of owners' committee, so it never really got off the ground. However, the owners were becoming increasingly concerned by the management. At the next AGM, the manager’s motion to extend his contract was defeated. The extention motion was voted down as well in the following years, during which the manager became progressively worse in carrying out his duties, and became extremely belligerent to the owners.
Things around the resort became progressively worse, resulting in less nights being booked and, consequently, lower returns to owners.
All unit owners and body corporate committees should be alert for rogue Caretaking Service Contractors and Body Corporate Managers (BCMs), both large and small operators, rorting bodies corporate.
The two BCM individuals in the below articles have been prosecuted by Department of Fair Trading NSW.
But Queensland is not immune, as demonstrated by the Queensland Office of Fair Trading prosecution of Driftcove in the Phoenician case, and Staymint in the Carmel by the Sea case, both large caretaking corporations. In both matters the unit owners had been defrauded of millions and thousands of dollars respectively.
Strata manager Jason Hext jailed as lights go out in unit block
April 10, 2015
A strata manager has been sentenced to 12 months prison at the Parramatta Local Court.
A corrupt strata manager's dodgy dealings, salting away tens of thousands of dollars of his clients' cash, were discovered when the lights went out on one of the unit blocks he looked after.
The power company had cut off the electricity after Jason Christopher Hext, of Strataco Strata Pty Ltd, had transferred the owners corporation funds into his personal accounts rather than paying their utility bills.
Hext defrauded his clients of more than $67,000 over a six-month period. On Wednesday he was sentenced at the Parramatta Local Court to 12 months in jail.
Mr Jarrod Bleijie - Attorney General Queensland: Review and change the Body Corporate & Community Management Act to protect consumers from unfair contracts and corrupt practices of Building Caretakers and management right companies.
We would like to bring to your attention the above petition started by one of our members.
To read the details please follow this link. Do not hesitate to let other owners know as well.
Due to the very nature of strata living, it will very rarely be the case that ‘one shoe fits all’. Where pets are concerned, this couldn’t be truer.
In Queensland, The Body Corporate and Community Management Act 1997 provides for by-laws that apply to the Community title schemes. By-laws regarding the keeping of animals often apply. These by-laws usually take the following form:
1) The occupier of a lot must not, without the body corporate's written approval -
a) Bring or keep an animal on thelot or common property; or
b) Permit an invitee to bring or keep an animal on the lot or common property.
There has been a growing concern that owners who choose not to live with animals are being challenged and find that the Queensland Consumer Administration Tribunal is determining whether there are grounds for or against the by – law being upheld. The following case study has been chosen to share, in the aim of helping others who might find themselves in similar circumstances.
(Mary Treblanche, GM, Fair Water Meters)
Dear apartment/unit owner
Fair Water Meters is campaigning to make individual water metering more affordable and accessible for Australians. We want to make you aware of our efforts to fix the current messy and unfair shared water billing system in many Australian apartment buildings. We're asking for your support to help change Australian legislation and make affordable individual water metering a reality for apartment owners.
Does your apartment building have only one water meter for all apartments? For most older apartment buildings in Australia this is indeed the case. When it comes to charging or paying for water, the bill is usually divided according to unit size or some other arbitrary allocation. Landlords are currently unable to pass on their water costs to tenants, and apartment owner-occupiers are stuck paying an equal portion of the full water bill, even if they use less than the other residents.
Let’s focus for a moment on “Safety in the Home” safety strategies. These should be habits that people develop to increase their feelings of safety and security and reduce the likelihood of having their safety threatened. These habits should not make people restrict their lifestyle or become dependent on someone else’s rules.
Personal Safety Plan - It is not always necessary to spend a lot of money to secure your home. Most house break-ins are crimes of opportunity, with entry often gained through an open or unlocked door or window. By developing and maintaining good safety habits, such as utilising the security you already have, you can go a long way to improving your home safety.
Neighbours – Good neighbours can be one of the best forms of home security, become familiar with which neighbours you can go to in an emergency, prior to an emergency happening. Communicating with your neighbour and formulating a safety plan may be vital to your safety and the safety of your family.
(by Greg Carroll, Executive Committee Member)
Those who have been to Hong Kong, and decided to buy a suit will recognize the truth of the title of this article. Choosing a tailor is very much a hit-and-miss affair. You will find some who will tell you: “never mind the quality feel the width” and some will say: “never mind the fit feel the quality”. All will tell you: “never mind the problems, we can fix that”. Of course you may be lucky, and find a good tailor who knows his trade and delivers a first-class product. But if you get a bad one there is little you can do about it, and you are stuck with a bad fitting or poor quality suit.
The above experience can be likened to the Body Corporate and Community Management Act (BCCMA) when a building contracts a caretaker. You never know what you are getting –- you will be fed a lot of nonsense about how good they are, and once the deal is done, you are stuck with the product. The big difference between buying a suit and employing a caretaker is that you do not buy a suit expecting it to last 10 to 25 years with no ability to choose another of your own choice.
Under the BCCMA there is little a building can do to rid itself of a bad caretaker. The move on provisions of Division 8 is a fraud on unit owners, and the termination provisions are expensive and protracted. A very senior and experienced Queensland District Court Judge stated in his judgment on the termination of a caretaker: “Because the matter arises in respect of a caretaking agreement, under the (BCCM) Act, the situation is rather more complicated than this, because the Act and Regulation under it contain mechanisms designed to make it difficult for a Body Corporate to terminate an agreement of this nature.”
Many thanks for your thoughtful letter of 28 October 2013 expressing your concerns regarding the Unit Owners Association of Queensland (UOAQ’s) position on Management Rights (MRs).
First, let me assure you that the UOAQ recognizes and respects the fact that there are some extremely competent and professional Caretaking Service Contractors (CSC) operating in the Queensland MR sectors who act with the utmost integrity, professionalism and indeed, pride, in the conduct of their businesses and their responsibilities to the Bodies Corporate (BC) they serve. ·While the UOAQ’s primary responsibility is to serve the interests of its unit-owner members this does not, by any means, puts it automatically in conflict with the interests of CSC. On the contrary, far from being disadvantageous to high calibre CSC, its policies actually stand to be of significant benefit to them by allowing their ‘value’ to be recognized and appropriately rewarded in an informed, open and transparent market environment.
The Association’s main concern in relation to the MR issue centres on what has unfortunately become the accepted ·‘custom and practice’ - ·and, indeed, an expectation on the part of most CSCs – that they should be virtually automatically entitled to an extension of their original or current contract (often well in advance of the contract’s expiry) without the Body Corporate having the opportunity to fully explore available alternatives, and proprietors (Owners) then being able to make an informed decision on the course of action best suited to their longer term interests.