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If crumbling buildings in Sydney and towering infernos in Melbourne are doing nothing else, they are drawing attention away from a sneaky scam that could cost new strata owners a small fortune over the years.
The problem is “embedded networks” and they represent long-term owner pain for developer and service provider gain.
The term initially came from deals …
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Long-time maintenance or any other sort of service contracts are almost impossible in the ACT. They are generally limited to 3 years. From memory I think they can be a perhaps two years longer for the first five years of a new OC but nothing like 99 years.
Also, I think an embedded network is something quite different and there are strong consumer protections around them already. The embedded network I am aware of is where the OC negotiates a better price for an energy supply, usually electricity, on behalf of the owners. Rather than each unit paying a separate account with a retailer, the OC has an electricity meter for the whole site and pays for that one supply. Then the individual owners pay the OC pro rata for their consumption. This requires the OC to read meters but it might be able to that at lower cost than the retailer and multiples of supply charges are avoided. If the OC has a solar electric system behind its meter, the common property of the building and all the lot owners are likely to consume the entire solar production, thereby avoiding the retail price of electricity to the extent the building generates its own. The benefit is shared by all the owners since they collectively only have to pay for their share of the import by the building and the common property electricity costs are lower too.
The Australian Energy Regulator has strict requirements that enable people to opt out of such embedded networks if they feel they can get a better deal by signing up with a conventional retailer.Embedded networks?!? How crook are they?? We moved into a new 106-unit block in Sydney in early 2018. The nice young man said that it had an embedded network, but that was a good thing because the operator bought electricity at wholesale rates and would sell it on to us cheaply – the contract guaranteed cheaper power than any other that was commercially available.
When we booked the day to move in, we were sent a contract via e-mail to sign and return. If we didn’t sign and return, the power and hot water would not be turned on and we could sit in the dark! We signed.
The situation now is that the roof is totally covered with solar panels that are NOT common property but belong to the energy supplier. His (or her) workpersons have triggered three false fire alarms in six weeks. The panels power the lifts/fans etc. during the day and any excess is sold back into the grid, to the profit of their owner.
It is not really possible to accurately measure the cost of energy to any one unit, as the system supplies electricity and gas and charges unit owners to heat their hot water for them. Disentangling these prices is very difficult.
The alternative to the current arrangements is to install a whole new power and gas supply, which would cost many thousands of $$$. The meters, valves and piping all belong to the supplier.
To be strictly fair, the gas that comes out of the bayonet fitting is a lot cheaper than the gas that heats the stove! We bought a gas heater and have been pleasantly warm all winter.
My point is that we have no effective choice as to who supplies us and how much we have to pay.
Were you advised of this when you signed the contract to buy the unit? I expect you were due to vendor disclosure provisions and/or a search of the strata roll. If so, you could have chosen not to buy it.
I take it, SC, that you fully admit the points I have raised and also the general thrust of my post since you did not attempt to contradict them. Good. Thank you.
To address what you did say – there was no hard information available from anyone connected with the sale as to how the arrangement would work out in practice. That sort of information is only available post facto from experience and sources like Flatchat.
No-one who takes the plunge in the property market has any guarantee that everything will be just exactly as one would wish. Seek the perfect deal and you’ll rent forever.
Great work, Jimmy! I hang out for your weekly smorgasbord. I ticked the box that asked if I wanted to be notified if my post was replied to, but didn’t get one. Hmm?
Some experience in WA from a 2018 build of a 26-unit apartment building:
- By the first AGM that owners attended, the developer had signed up all the contracts, including the embedded network for electric sub-meter reading which was 5-year contract.
- The meters and infrastructure were all owned by the Strata Co, so it appears that was all paid up-front as part of the development.
- The Strata Co buys electricity from Synergy – there is one Synergy meter and we get one bill to pay.
- The meter-reading contractor sends the Strata Manager periodic statements for each apartment, which are used to bill the owners. There was also a cloud-based repository so owners could view their energy usage online. There was also a portal where the Strata Manager/Council of Owners could view all the meters, view trends, download reports etc.
- The first year’s meter monitoring fees were included in the contract. The fee for metering was about $5,500 per annum – quite expensive considering the electricity bill for the whole building is only abut $35,000 per annum.
- We then found that despite the first years fee being included in the contract, the contractor was nevertheless submitting invoices for it from day one – double dipping. Pays to read your contracts and check your bills – don’t leave it to the strata manager. After a fight they conceded they were double dipping and we got a 12-month holiday on payments.
- Then, nearly a year before the end of the contract, the portal stopped working. Turns out that the company had been bought by another company and the contract was novated to the new company – without telling the Strata Co. They decided to scrap the original portal and all its features – again without telling anyone and without offering an alternate solution – blatantly in breach of the contract terms.
- After another fight, they too agreed to waive fees to end of the contract. However they were in the process of being taken over by a 3rd company – this time one of the big energy providers – and they could not even provide us with an offer for a new contract. Uninspiring.
- That meant we were stuck with no meter readings unless we did it manually ourselves – possible, but not too practical in the long term.
- The next problem was finding someone to take over the meter reading service. In the end we found one company (in Queensland) that knew what they were doing and we have a cloud portal operational again. And at a cost of about 1/3 of the original fees.
- In the process we also found a company that offered to buy our solar array and take over supply of electricity from us entirely – so each individual owner would have a direct contract with them. Energy supply and metering to owners would have nothing to do with the Strata Co. This required us to sign up to a 10-year contract and would have cost us about $180,000 more over the 10 year period than if we stuck with our status-quo. Needless to say we did not proceed with that.