Podcast: Council cops unit block defects orders

We’re going interstate and all-ages in this week’s mixed bag but we start with a council on Sydney’s North Shore that has been served with a repair order for defects in a block in which they were co-developers.

According to this story in the SMH, Lane Cove council is finding out the hard way what happens when you get into bed with a developers who goes bust.

After that we look at serious rumblings from Queensland where the government is trumpeting a plan to see 600,000 new apartments in the south-east corner of the state – doubling the number of units in the state in the next 20 years.

Somewhat ironically, that time span is less than the onerous, presold, 25-year caretaker contracts that owners will be saddled with, whether they like them or not.

Queensland’s strata managers want to know what happened to the state government’s plans to change the laws into something less… um… corrupt.

And finally we look at how over-55 downsizers and retirees could save between 20 and 80 per cent on the cost of a home by moving into schemes where doof-doof music and screaming kids are effectively banned.

Sounds like a win-win-win to us, and it’s all in this week’s Flat Chat Wrap.

TRANSCRIPT IN FULL

Jimmy  00:00

Lots of odd little stories coming onto our desk this week, Sue.

Sue  00:05

Oh my god…

Jimmy  00:07

Well, it keeps us interested and interesting, I hope. You’ve discovered a story about a council that’s been ordered to fix a building that is built on land that they used to own; it’s all a bit murky. There’s a big move from SCA, the strata managers in Queensland, to try and get their government to do something about the pre-sale of management rights, and an alternative for people who are over 55, who don’t want to pay the ridiculous prices that people are paying for apartments, when they decide to downsize. So we’d better get into it. I’m Jimmy Thomson, I write the Flat Chat column for the Australian Financial Review.

Sue  00:55

And I’m Sue Williams and I write about property for Domain.

Jimmy  00:58

And this is the Flat Chat Wrap.

[MUSIC]

Jimmy

That’s a weird little story, that you found…

Sue  00:59

Yes, that was in the Sydney Morning Herald this week, about a council in North Sydney being ordered to fix up a building that  has defects. It’s kind of weird, really, isn’t it? The Building Commissioner issued a building work rectification order against this building, but the developer has been wound up. And I think the Building Commissioner’s Office are arguing that the local council was the co-developer of the project; they owned the land, and it kind of somehow worked with the developer, on developing the place.

Jimmy  01:51

Reading the story, it throws up one of those typical things about strata, where the council is saying “okay, we’re one of the owners in the building, but that doesn’t mean we’re responsible.” Well guess what, folks? It totally means you’re responsible, or partly responsible.

Sue  02:08

Why would they be responsible more than any other owners?

Jimmy  02:11

Well, they’re not necessarily responsible more than any other owners legally, but they have the money in their coffers to fix it, which most ordinary owners wouldn’t have. Now, if they are going to then go to the other owners in the building and say “hey, we need to fix this common property and you need to pay your share of it,” that’s fair enough; that’s what should happen. But as significant owners in the building, and with significant power, and with a big chunk of money lying around somewhere, then it’s absolutely right that they should be primarily told “you’ve got to fix this,” even though they’re going “oh, it’s got nothing to do with us.” Well, it sounds like it’s got everything to do with them.

Sue  02:14

And it must be good for the other owners in the building to know that they’ve got a council there, because it’s awful when a developer goes down, and you’ve got nobody to pursue for money. At least if you’ve got a local council on your side, that would be good company that you’re keeping. And I think it’s a bit more than that, because I think they acted as a developer on the building, with the development company as well. I think that seems to be an increasing trend, that local councils form partnerships with developers, to develop things. You know, it might be a library, or a swimming pool, or something that the area really needs. So therefore, if they throw in a bit of money, and the developer throws in a bit of money, then together…

Jimmy  03:13

What somebody at that council needs to do, is sit down with somebody who knows something about strata law, and have the facts of life explained to them; that if you are owners-even if you’re a council, or a company- if you are owners in a strata building, then you have responsibility. And the responsibility is related to the amount of property you own in the building. I’m assuming the council doesn’t own one studio flat on the ground floor. Throws in a bit of permission.

Sue  04:10

And then together, they might come up with a good result. But I suppose this emphasises the difficulties, because if you’re dealing with a smaller developer-and you never quite know whether they’re going to be a fantastic boutique developer, and they’re going to produce something wonderful, or whether they’re going to be a small developer who doesn’t really have an awful lot of funding and can’t see the whole process through. So that becomes a real issue, I guess.

Jimmy  04:37

I mean, what we’re talking about here, once you get past all the legalities; we’re talking about people’s homes. And this council has gone into this development… The Building Commissioner has said this building is not up to scratch; it needs to be fixed and hey, it’s your job, at least partially. You are partially responsible for fixing it. They can’t just walk away from that. And that’s so  typical of an attitude of investors and developers and builders, which is, people who live in strata; it doesn’t really matter as much. If there was a row of houses in a street that were all falling down, it would be on the six o’clock news every night. But because it’s strata buildings, you’ve actually got to have them evacuated in an emergency on Christmas Eve, for anyone to pay any attention.

Sue  05:30

Well, you’re talking about that evacuation… I mean, we’re talking about Sydney Olympic Park; the building there.

Jimmy  05:37

The Opal?

Sue  05:38

Yes, that’s right. And I think the Sydney Olympic Park Authority were involved in the decision to try and fix up the building as well, at first. But then, of course, the developer came good and went in and fixed the building. They had an obligation as well, to make sure the building was okay. I mean, a local government would have enough expertise to be able to (you’d imagine), go in and inspect buildings at every opportunity, to make sure that they were up to scratch.

Jimmy  05:55

It simply comes down to, if you put money into a project, and then put people into that project, then you have responsibilities and you can’t just say “oh, we didn’t know that we would have to do this… It’s not our fault.” Well, maybe it’s not your fault, but it’s your responsibility. A lot of that expertise has gone from local authorities, sadly.  You’re right, in that should be the case. But ever since they…

Sue  06:35

Introduced self-certification, and lost all their certifiers…

Jimmy  06:39

All their certifiers went private, because, well, they didn’t have any work to do anymore, but there was work that needed to be done, so they were picked up by private certifying companies and then the whole disaster started from there. But you know, a lot of this is legacy from those terrible decisions that were made all those years ago. When we come back, we’re going to talk about rumblings in Queensland; more than rumblings… I’d say a storm is brewing, over caretaker management rights and the sale thereof. That’s after this.

[MUSIC]

Jimmy

We got a message this week, from SCA, Strata Community Association Queensland, which is the strata management-strata service providers organisation, up in Queensland. They are getting very frustrated with the government up there, that they keep making noises about doing something about caretaker management and pre-sales of contracts, and then not doing anything. And then the government up there has announced that they’re going to build 600,000 new apartments, doubling the amount of apartments in Queensland, I think over the next 10-or-20 years; something like that.

Sue  08:04

Well,  I think everybody in Sydney, and Melbourne; we all kind of looked at those apartments in Queensland during COVID, during the pandemic, and lots of us bought them, thinking it’d be  fantastic to go there for holidays, or go there and retire. I’ve got a friend who took early retirement… She was able to work from home, so she went and relocated on the Gold Coast, in an apartment, and she thought it would be fantastic. But I guess the difficulty is, all these new apartments are being built and we’re all looking at them and thinking “oh, they would be great to go and move into,” but if there’s caretaking management rights, it could be a huge trap, couldn’t it?

Jimmy  08:44

Well, yes. One of the problems with new buildings going up there is that the SCA can see that what I call ‘legalised corruption’ of pre-sale of caretaker management rights is getting even more locked into the system. And the government has been nibbling around the edges of this for years. And in fact, the new CEO, or General Manager of SCA Queensland, Laura Bos, she’s come in and said “we think this is a disgraceful situation; we want it fixed.”

Sue  09:17

Which is fantastic, that she’s done that.

Jimmy  09:19

Her predecessors basically said “nope, we’re not interested.” In fact, they criticised me once, for writing; I think the phrase I used was ‘hunky dory.’ They threatened to take us to the Press Council, because they said they’d never said it was ‘hunky dory.’ I said “well, what is your opinion?” And they said, we don’t have an opinion, because we’ve never discussed it. I’m not gonna call them liars…

Sue  09:47

Of course, you’re not, Jimmy!

Jimmy  09:49

But it kind of sounds odd, that they would never have discussed one of the biggest issues in the state. Anyway, so a lot of bosses come in and she is saying “it’s all very well to talk about stuff you’re gonna do; what are you going to do about it?” Now, this does affect a lot of people outside of Queensland, because right now, migration in Australia… There are an equivalent number of people leaving Sydney, as there are going into Queensland every year. So there’s a big migration from the southern states. As you mentioned earlier, people buy apartments there, thinking “well, I can go up there two-or-three times a year and rent it out and then that will cover a big chunk of the mortgage.” And then they discover that all the management costs and things like that; the rental costs and all that stuff, and the restrictions on what they can and can’t do… It doesn’t make economic sense at all.

Sue  10:49

We had friends who invested in Queensland in an apartment, and they thought they’d get a good return for their investment and it ended up costing them so much every year, because the management rights were so expensive.

Jimmy  11:03

And here’s the other thing… You cannot negotiate the management rights. And this is the real iniquitous side of this… There are two different kinds of residential properties in apartments in Queensland; one is called ‘accommodation module,’ and the other one is a ‘standard module.’ The standard module is supposedly, for owner/occupiers and for them, you have a maximum term of contract of 10-years. Still pre-sold by the developer, to whoever they choose under the terms that they want. And then you’ve got for the accommodation module, 25-year contracts, which is basically the notional life of a building (even though most buildings last a lot longer than that). 25-year contracts… So, you buy into one of those as a first-time homebuyer and you’re almost ready for retirement, by the time that management contract comes up for renewal. But at any time, that manager can sell that contract to whomever they like. It’s just disgusting and it’s simply so that developers could make more money at the start of a building. That money went straight into the developer’s pockets and then people are saddled with these 25-year contracts. What’s happening now is that developers are saying “we are building this building for accommodation purposes; ie for holiday rentals,” because that’s a big part of the trade in Queensland, obviously. So they’re saying “this is an accommodation module; we want a 25-year contract, where we can sell the contract,” but then you look at the building (and even the advertising around these buildings), and they’re all about being residential, for owner/occupiers. It’s so profoundly corrupt; it’s so dishonest. So now SCA Queensland have come out and said it’s time the government actually acted on this, because as they can see, with more and more and more apartments coming onto the market, this whole iniquitous system just gets further and further embedded.

Sue  13:19

Absolutely. And you kind of think developers would look at it and say “well, you know, the time has passed for this kind of arrangement and we need people to have confidence in buying apartments and this only erodes confidence.”

Jimmy  13:35

Absolutely.

Sue  13:36

You’d think it would be in their interest, really.

Jimmy  13:37

This is what Laura Bos said in the last week… “There must be an end to new 25-year management rights agreements being sold and additional consumer protections must be introduced for owners trapped in existing arrangements.” So she’s saying stop it now and fix the stuff that’s already in place. We are expecting a much larger section of our community to live in body’s corporate; we cannot sacrifice their quality of life, for the sake of the commercial interests of a small portion of our community. Those commercial interests are worth hundreds-of-millions of dollars a year, in trading caretaker management rights. She says “the sooner the government passes legislation, the better for all stakeholders. Uncertainty kills confidence,” which is exactly what you just said.

Sue  14:29

Oh, good on you, Laura. We wish you lots of luck with that. Isn’t it interesting? Each state has their own issues with apartment buildings and they’re all very, very different.

Jimmy  14:41

So there’s never going to be a one-size-fits-all. I mean, Laura Bos points out that the previous Attorney-General in Queensland committed to introducing two reform packages this year. And she’s saying, well, we’re in August and we haven’t seen any sign of either of them. And she’s saying that nearly 1.5 million Queenslanders are impacted by the body corporate law and they need some certainty in their lives, coming into the future. So it’s a big turn-around for SCA; whether it will have any effect on the government… They seem to be absolutely deaf to this stuff in Queensland. They almost take it as a parochial attack (maybe it’s because I use words like ‘corruption’), but they take it very much as an attack on them as Queenslanders, rather than the fact that they’ve got this embedded legislation that affects so many people now, and in the future. We’ll keep an eye on that one and let you know how it goes. When we come back, we’re going to talk about something that should be more attractive than it is. Just because you say it’s for over 55’s, there’s a sense of “oh, getting old.” That’s after this.

[MUSIC]

Jimmy

Sue, you’ve been writing about over 55’s developments. Now, I’m over 55; should I be in one?

Sue  16:11

Maybe you should be, Jimmy; bye bye! It was kind of interesting; these figures have come out from a new retirement census that’s been taken. It shows that the median price of a two-bedroom place in a retirement village is now sitting at $516,000.

Jimmy  16:30

Wow! What’s the median price for a normal two-bedroom?

Sue  16:33

The median price for a house in the combined capitals, is $1.049 million. It’s nearly $1.05 million, really, and an apartment is nearly $609,000. So it’s appreciably cheaper. Well, it’s kind of nearly half the price of the median house price of Australia and it’s substantially less than the median apartment price. They call them ‘independent living units,’ but basically they’re villas, or freestanding houses, or apartments, because more and more, they are kind of vertical buildings, retirement villages. It’s kind of like a big apartment complex. They have lots of amenities, and they have a building manager on site and maintenance people on site; that kind of thing.

Jimmy  17:23

And what they don’t have, is young people playing ‘doof doof doof’ music at three o’clock in the morning, I’m guessing.

Sue  17:30

That’s right, unless their grandkids come to stay, perhaps. They’re kind of quite a small slice of the housing market, but they’re a growing slice. And as baby boomers age, they’re going to become more and more popular really, because they offer everything you need. They’re often in places that are very close to shops and amenities and train stations; things like that. They can be great places to live. And of course, with our housing crisis, there’s lots of older couples, or even singles, who are now in the big family homes. That’s right. And they’re having to spend all their time cleaning and mowing lawns. If they moved out into some of these retirement villages, those houses will be available for young families (if they could afford them, of course). I mean, it would really add to the housing stock, if they did move out.

Jimmy  18:09

Bouncing around in these empty rooms.  Underpinning all this is the idea that over-55’s developments; basically the developer has to sign some sort of agreement, and the purchasers have to agree to this, that nobody under the age of 55 can live there permanently. I don’t know if the council’s are compelled to ease their planning restrictions, but they certainly do. So places are built higher, wider, and they’re in places that might not otherwise be developed, simply because there is a restriction on the ages of the people who can move in.

Sue  19:09

You might have some really great places… I talked to some people in a fantastic development in Ashfield, in the innerwest, but I remember there was a place at Bondi Beach that was built. I think originally, they wanted to build regular apartments there, but because of the floor size ratios and stuff, it just didn’t make sense, so then they went and built a retirement village there.

Jimmy  19:31

Is that the one around the Bowling Green?

Sue  19:34

Oh, no, that’s in Waverely.

Jimmy  19:37

That’s over-55’s as well, isn’t it?

Sue  19:39

It is too, yes. So some of them are really in great positions and they offer some great amenities, sometimes. I was talking to some people; they have a hairdresser who visits every Monday and Tuesday they have a nail person who visits, they have doctors; they have podiatrists… Actually, I thought “it sounds pretty cool!”

Jimmy  20:02

But you know, the other thing is that obviously, because you’re restricting the number of people who are allowed to live there, then you’re restricting the demand. Like, the general population cannot even bid for these things, which must be what’s keeping the prices down?

Sue  20:18

That’s right. And as well, the monthly fees… You pay monthly fees, rather than the quarterly strata fees if you were in an apartment and they can be quite high, in some instances. But then again, they cover things like rates, water rates, sewage; everything. They also obviously, cover all the maintenance.

Jimmy  20:40

Do they cover levies, as well?

Sue  20:42

That is the levie, the monthly payment.

Jimmy  20:46

Right. And, you know with the governments around the world (and around Australia), suddenly realising that the least efficient way to look after older people, is to take them out of their homes and put them into retirement homes, before they’re really ready for that…

Sue  21:06

You’re talking about aged care, which is quite different to retirement villages. Well, that’s right, because some of the vertical villages… I mean there’s one near us, in Rushcutters Bay; it has this fantastic cafe underneath, which we go to quite a lot and it’s just really beautiful. You can see there’s quite a lot of elderly people in this cafe, because they go down there, and they meet their family there and have Sunday lunch with them. The place itself is really beautifully done.

Jimmy  21:10

But this could be an opportunity for people who are still capable of looking after themselves, but need a little bit of help; move into somewhere like that, because that help will arrive. What I was trying to get to, was that a lot of state and local councils are saying “we will move heaven and earth, to keep you out of an aged care facility.” It’s like a quarter of the cost to the council. We have a friend whose mum lives up in Newcastle and she gets a phone call from her carer saying “I’m just buying some stuff at the shop; would you like a bottle of wine?” So you know, it’s not like you’re under house-arrest, or anything like that. And I would think these places, once these two strands of living combine, they could be really nice places to live. It’d be like living in a resort, but without young people to annoy you. I thought that was an aged care place?

Sue  22:40

 No, not at all. It’s a retirement village.

Jimmy  22:42

It’s a retirement village, but it just happens to be an apartment building.

Sue  22:46

And you know, you look at lots of apartment buildings, especially ones that have things like concierges and building managers, and you think well, that’s a good place to get a bit older in, because there’s always going to be somebody around to give you a hand. A vertical retirement village is an apartment, but just with much more amenity, really and, as you say, no really young, noisy kids, or anything. In some of them, you’ve got cafes downstairs, where the noisy kids can go and you can see them, and then you can get rid of them.

Jimmy  23:18

Great! There was some talk a couple of years ago, about the cradle-to grave development, where some parts of a development would be studios and one-bedroom places for people just starting out and then there’d be larger apartments for families. There would be preschool facilities, as part of that block and then the next block along would be an over-55’s retirement place. So people could actually start off; spend their whole life in the same unit development, just moving from one block to the next. But importantly, not losing connection with the community.

Sue  23:58

Because the only thing really against retirement villages, to be honest, is you kind of think, I’d quite like to be among families and kids and all sorts of different people. But then, if you have a vibrant social life, then that would happen anyway. And the good thing about lots of these retirement villages, is that they do actually encourage a good social life. You’ll have get-togethers every so often. Some of them have things like cribbage rooms and craft rooms. We’ve got a friend who’s just gone into one in Victoria; she’s an artist, and it’s got a fantastic craft room, where she can paint, which she never had at home. And so they have lots of activities; they have card afternoons and afternoon teas and all that kind of thing. That’s, great, because I think the worst thing about getting a bit older can be isolation, and that’s something that ages people, more than anything else. Absolutely. Those average prices; if you’re selling the average apartment or house and moving into the average over-55’s development, you’re putting 400k in the bank. Well, yes. I mean, if you look at the average apartment price; in Sydney, it’s $773,752 and these retirement places, as I said, are just $516,000. That’s a huge difference; that’s over $200,000 you’ll save.

Jimmy  25:30

That’s handy; that’s a couple of cruises, right there.

Sue  25:33

That’s right. And Melbourne is $553,000; that’s the the median price, so you’ll still be saving $40,000. Canberra is $545,000, so  that’s a saving of $30,000. So you’re actually saving quite a lot of money by going to these places.

Jimmy  25:52

Good idea; book me in. Great, thank you, I’ve got to go and write my column for the Fin Review this weekend, which will be about the state-of-play in Queensland, which does affect, as I’ve said, people from other states, because a lot of people are thinking, sea-change, tree-change… It might be nice to live in an apartment; it might be nice to transition to an apartment by buying one that you can let for a holiday lets, before you move in.

Sue  26:25

They’re calling them ‘downsizer investors,’ and they are people who are buying apartments (maybe in Queensland), because they think they will be a good investment and they plan to let them out (not necessarily on short-term platforms, but as a proper residential let), and then they’ll move into them maybe, three, four or five-years down the track, when they’re ready for a bit of a sea-change or tree-change.

Jimmy  26:49

And if they’ve changed their minds, then they’ve still got an investment, provided they can sort out the caretaker management rights. Thank you again, Sue. Tuesday morning; we’re bright and bubbly. We’re recovering from the Matilda’s, last night. England and Nigeria were amazing, too.

Sue  27:13

What a great game!

Jimmy  27:14

And then that penalty… I can’t stand that; I don’t think my heart can take another penalty shootout. But hopefully it will and I’m off to Hobart this weekend, to sign some books in Launceston and Hobart.

Sue  27:31

Because that’s where your your book,  Mole Creek is set, isn’t it?

Jimmy  27:34

My book is set near Launceston in Tasmania, so I’ll be there this weekend. But I’ll be back in time for our next podcast. I’ll talk to you all then.

[MUSIC]

Jimmy

Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website flatchat.com.au. And if you haven’t already done so, you can subscribe to this podcast completely free on Apple podcasts, Google podcasts, Spotify, or your favourite pod catcher. Just search for Flat Chat Wrap with a ‘w,’ click on subscribe, and you’ll get this podcast every week without even trying. Thanks again. Talk to you again next week.