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09 Apr to Min. Bleijie - Misclassification

9 April 2014·

You can view the original letter here
Mr. Jarrod Bleijie
Attorney General
GPO Box 149
Brisbane QLD 4001

Dear Jarrod,

I refer you to my letter of 30 November 2013 and your response dated 23 January 2014.

My letter raised UOAQ concerns and presented evidence regarding the application by developers of applying Accommodation Module to residential developments.

This practice disadvantages the future unit owners of a development as it provides the developer with the means to access a 25 year management agreement, as opposed to a 10 year agreement under Standard Module, for residential schemes. In doing so, the developer will impose a 25 year obligation upon future owners, to maintain excessive management fee costs without the knowledge or approval of those future owners. The Arrow asset management case in NSW prevents this conduct in that state and in USA this conduct is considered unconscionable

Evidence has now come forward from the office of the Commissioner of BCCM, detailed in the attached documents, as to the extent of this misclassification which is concerning to the Association.

·These documents demonstrate that up until December 2012, “the historical ratio of schemes in Queensland under Standard Module was 27,981 to 3,098 under Accommodation Module.” That is a ratio of 9 to 1.

During 2013, 212 schemes were added to Standard Module, while 109 were added to Accommodation Module. These numbers represent a 3 to 1 ratio, clearly demonstrating a change or spike in the manner in which developers are classifying schemes.

The UOAQ would respectfully suggest that a greater level of supervision must be exercised by the department registering schemes to ensure that the correct classification is made by the developer. The UOAQ acknowledges the obligations on local governments by Section 60 of the BCCM Act, but these obligations seem to be disregarded.

It may be of interest to you to know that when I recently registered a new CMS, the Department of Natural Resources and Mines (DERM) required, by virtue of Section 66 (db) and (dc)of the BCCM Act, an explanation as to why certain principles had been decided. Surely DERM could have the same responsibility to ensure that the correct module was decided as it has equivalent or even greater impact on owner’s contributions to levy costs.

Section 66 Requirements for community management statement
(db) ··· (i) the contribution schedule principle under section 46(7) on which the contribution schedule lot entitlements have been decided;
(ii) if the contribution schedule lot entitlements have been decided in accordance with the equality principle and are not equal—explain why they are not equal;
(iii) if the contribution schedule lot entitlements have been decided in accordance with the relativity principle—include sufficient details about the principle to show how individual contribution schedule lot entitlements for the lots were decided by using it;

Intending purchasers unfamiliar with Strata legislation, have a right to expect that a developer is acting lawfully and that adequate consumer protection is in place to protect their rights. This is a principal objective of the BCCM Act as stated at Section 4(g). That a developer can impose a 25 year obligation on owners when currently 10 years applies adds millions of dollars in living costs on those owners over the 25 years. Understandably those owners will not be happy as they become familiar with their body corporate and Queensland strata law.

Finally we must raise the issue of lack of certainty. With the V77 project the developer is representing that “The scheme is intended to operate as a residential community” and “All lots in the scheme are to be used for residential purposes”. Yet the scheme is being incorrectly classified Accommodation Module as denoted at Section 3 of that module:

3 Application of this regulation—Act, s 21 [SM, s 3]
(1) This regulation is a regulation module for the Act.
(2) For this regulation to apply to a community titles scheme—
(a) the lots included in the scheme must be predominantly accommodation lots; or [s3]
Body Corporate and Community Management (Accommodation Module)
(3) In this section—
accommodation lot means a lot that is either or both of the following—
(a) the subject of a lease or letting for accommodation for long or short term residential purposes, or immediately available to be the subject of a lease or letting for accommodation for long or short term residential purposes;
(b) part of a hotel

Section 3 of the Accommodation Module permits “short term residential purposes”. An intending purchaser could be misled to believe that a residential community would not permit short term rental, yet by classifying the development Accommodation Module, a future Caretaker/Letting Agent could offer short term rentals, and owners may find it difficult to prevent this from occurring. This argument is supported by the current misuse of Class 2 developments for the purposes of short term rentals.

As the incorrect classification of Standard Module buildings as Accommodation Module has very serious implications for future owners it is only fair, reasonable and responsible for the Government to address this developing problem as a matter of priority.

Yours sincerely,

Wayne Stevens
President

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