In this week’s podcast we take a look at Sues story about people buying property, not only with the help of Mum and Dad, but with investment from extended family and even friends through a kind of crowdfunding.
And we look at some real-life issues that occurred when family members based their deals on trust but then, years later, fell out. Ouch!
But before that we look at NSW Building Commissioner David Chandler and how he’s ramping up his efforts to get his message across.
And that message is, basically, if you are buying off the plan right now and you don’t go with a developer who has an iCirt gold star rating, you’ve only got yourself to blame when it all goes pear-shaped.
And finally we take a look at some quirky tales from the Flat Chat Forum, including strata managers who are trying to get round the three-year limit on contracts, the AGM election that never happened (so there is now no committee) and the strata management contract that says they get the frequent flyer points from payments by credit card.
All that and more in this week’s Flat Chat Wrap.
Transcript In Full
Jimmy 00:00
So David Chandler has been on LinkedIn again this week.
Sue Williams 00:04
Oh, yeah,
Jimmy 00:05
And it’s kind of a negative story with a positive spin. You’ve spoken to him,
Sue Williams 00:09
I have Yeah, because he’s only got five weeks left as a New South Wales building Commissioner as well. So he’s not long left in the job.
Jimmy 00:17
Okay. Well, we’ll talk about that. We’re going to talk about how people are using finances from their extended family. You’ve done a piece about that for Domain,
Sue Williams 00:27
Prestige Domain, yep, in the AFR, yep.
Jimmy 00:30
And I’ve got a few things that have popped up on the forum that are strata curiosities. I would call them. I’m Jimmy Thomson. I write the Flat Chat column for the Australian Financial Review.
Sue Williams 00:42
And I’m Sue Williams, and I write about property for the Sydney Morning Herald, the age the AFR and Domain.
Jimmy 00:47
And this is the Flat Chat Wrap.
Jimmy 01:03
So you’ve been talking to David Chandler,
Sue Williams 01:05
Yes. And also Equifax, right, which is the company that organizes the ICERT ratings. As we know. David Chandler was the architect of these, this new ratings tool where developers could apply for a rating.
Jimmy 01:21
Yeah.
Sue Williams 01:21
And if they earned over three gold stars, that would be a gold star rating. If they own two or one, you know, maybe they’re not quite as
Jimmy 01:30
Not ready yet.
Sue Williams 01:31
Well, yes, that’s right. And there is one five star developer in the mix, somebody who’s won five gold stars.
Jimmy 01:37
Wow is that a first? Mirvac
Sue Williams 01:39
They’ve won that two years running, and there are a number of other developers that have won 4.5 stars. And it’s quite interesting, because you kind of think, well, five stars is obviously better than 4.5 different ways it is. But some of the 4.5 star developers, they might have their headquarters in Malaysia, or they might have their operations distributed around the country. So it’s actually quite hard for them to get a five star rating because their corporate governance structure doesn’t fit within the regime, right of the five star
Jimmy 02:11
Because it’s not just about the buildings and how many defects you’ve got. It’s like, how many members of biking gangs are there. Your board.
Sue Williams 02:20
Well, that would be interesting. Yeah, that would be a story. But yeah, that’s you’re dead, right? It’s about the quality of buildings, but it’s also about the resilience of the corporate governance structures, and it’s about the companies being there for the long haul, having a good finance dream and good background, and also that if there are defects, there will always be defects, but they will come back immediately and fix those defects.
Jimmy 02:44
It’s interesting that David was saying that they’ve had people from Victoria up from the building authority, or whatever the equivalent of the Building Commission is in in Victoria and other states in Australia, just to see how it works. Because now they know it works, they’re well, I think, I think they’ve got two problems in fundamentally. One is they’ve got problems in their building industry, and which has been largely ignored, certainly by the media in Victoria and Queensland, has kind of just drawn a veil over the very, very many problems they have in apartment building in those states. But there’s also the problem, which may only be in my imagination, that all the developers, the 20% of developers who are officially dodgy and couldn’t get an icert rating, you know, if they, if they paid for it, which they wouldn’t or wouldn’t be able to, they may be heading to other states to do their business there, where it’s much easier to build crap buildings and walk away from it.
Sue Williams 03:53
Wow. So they would be getting the remnants, yeah.
Jimmy 03:56
Well, there’s a danger if these people. If the only way they can make money is by building crap buildings, then they need to find a place where it’s easier to do that.
Sue Williams 04:05
Yeah, absolutely.
Jimmy 04:06
I mean, that could be my little conspiracy theory, but I think it’s got legs.
Sue Williams 04:11
Well, Brad waters, who’s the head of product and rating services of Equifax that runs the system, the rating system. He was saying that there’s an awful lot of interest. Say from Victoria now about the rating system, and they’ve seen a huge spike of interest as a result of the Porter Davis building company collapse. Because, as you know, they were mostly in Melbourne and mostly in Queensland,
Jimmy 04:33
Right…
Sue Williams 04:33
So people have been really hurt by that, consumers, Property Buyers, because they left the company left enormous debts and
Jimmy 04:41
124 million or something like that,
Sue Williams 04:44
146.5
Jimmy 04:48
Going up, going up by the second, Yeah so people are much more keen now in Victorian Queensland to have a look at the system and see if they can have it over there as well. So it’s often kind of a consumer driven thing now, which is.
Sue Williams 04:59
Absolutely,
Jimmy 05:00
Which is what David Chandler has been going on about for the past week or so. You know, he’s been on LinkedIn well, and we’re going to run the content, or most of what he said on LinkedIn, and the video that he posted with it, basically saying, He’s saying, “what more can I do for you? I’ve created this system. You know who to buy your apartments from? If you are buying apartments from people who don’t have an ICERT rating? Well, you’re you get what you deserve”
Sue Williams 05:30
Yeah,absolutely. And some of these apartment developers who’ve got the 4.5 and the five stars are now saying that they’re seeing a lot more people coming into the display suites and saying, Do you have an ICERT rating? What is your ICERT rating? Great. I can buy from you. I’ve been to other places, and, you know, I’ve seen developments off the plan that I really like apartments that look really look as if they’re going to be really good, but the developer didn’t have an ICERT rating. So I’ve decided not to buy there.
Jimmy 05:56
Yeah. How do you find out if a developer has an ICERT rating?
Sue Williams 05:59
You look on the Public Register, right? And it lists all the developers and the builders who’ve applied for a rating and been given a rating. Easy to find. The register is easy to find, but then it doesn’t say whether which star rating they have. So on that register is everybody who’s got over a three gold star rate. So they’re all kind of credible, good developers. But if you want to find out if somebody’s got a three star rating or a five star rating, you then have to look at the company’s own website, because obviously, if people have got a really good star rating, they’re going to start advertising their rating.
Jimmy 06:35
That strikes me as a gap in the information chain. I think there should be a button on a fair trading website that takes you to a website that shows you who’s got what rating.
Sue Williams 06:49
Well, I talked about to Brad about this, and he’s basically saying, Well, you know, it’s not like a TripAdvisor review, where if a hotel gets a five star rating, Oh, that’s fantastic, and if it gets a three star rating. Oh, it’s not so great,
Jimmy 07:02
Not quite so fantastic.
Sue Williams 07:03
It’s kind of like anything that has a three star rating is still good enough. And some people may not have the money to go to a really five star developer.
Jimmy 07:13
Yes, but…
Sue Williams 07:14
And it, it does indicate that it’s a really good developer.
Jimmy 07:18
I’m not buying that at all. I think, I think he’s raised the specter of TripAdvisor. That’s exactly what people were looking for. They want to go on a website that says this developer has a rating of this and what’s the incentive for the really good guys, the Mirvacs, to get there? There are people to get an equivalent rating, is to look at that thing and say, well, people will probably go to those other developers first, I’m going to lift my game.
Sue Williams 07:49
Well, apparently that is happening. You know, when people get, well, obviously, when they don’t get a three star rating, they’re often inspired then to change their operations to try and get a gold star. Yeah, so that’s absolutely
Jimmy 08:01
That’s a start, yeah,
Sue Williams 08:03
But I don’t know. I disagree with you, Jimmy, because I want to know if a developer is good, and I want to know if I can invest my money there really,
Jimmy 08:12
Yeah.
Sue Williams 08:12
And this is a register. All these developers and builders on this register are good, and they’ve been through a really incredibly rigorous and expensive process to get this rating. Yeah, so then it’s up to us to go and have a look. And you know, we’re looking around at different developments. We’re looking around to different developers, and then it’s up to us to decide if we’re going to check out a five star one or we’re going to check out a three star one.
Jimmy 08:37
Yeah, I noticed that in David Chandler’s Post this week on LinkedIn, he’s named some of the areas that they are looking closely at, the whole ICERT rating system. One of them is the Illawarra, which, as you will recall, we were told by the developer that they’d had, quote, David Chandler came through here last week and gave us a five star rating. And it turned out that David Chandler had never been near the development, and neither had any of the people who worked for him. Yeah, it caused a bit of a controversy, didn’t it?
Sue Williams 09:10
It certainly did. But it’s interesting, David said he’s going to visit colleges now, and he’s saying to the students there on your CV, when you’re kind of going out into the world, entering the world of work. Do you really want to go and work for a developer who doesn’t have an ICERT rating? Do you want to have that developer on your CV? Yeah, so he’s kind of making people think twice about working for some of these unrated developers.
Jimmy 09:33
Yeah.
Sue Williams 09:34
And also, he’s talking to salespeople, and he’s he’s hearing from them agents that they don’t particularly want to work with unrated developers either, because they’re selling stock that they can’t be absolutely confident about and they might not get commissions for. But then again, there are some developers who just haven’t applied for ratings yet. Some good developers haven’t applied because they have work all over the country, or they have a corporate structure that doesn’t quite fit in with the rigors of the ICERT rating. So there are some good developers out there that haven’t applied yet, but one would imagine they’re going to have to apply in the long run.
Jimmy 10:12
I noticed on the LinkedIn one of the responses to David’s post was somebody saying, it’s outrageous that we have a private company Equifax, determining whether or not apartment developers are good, like it’s hiving off the quality control for apartment buildings to a private company. And we shouldn’t be doing that. The government should be doing it. And you, you look at you go, come on, just, just have a look at yourself. Have a look at what’s happened in New South Wales for the past 30 years, and see how much better it is now. And it’s that old thing, don’t let perfect be an enemy of good.
Sue Williams 10:53
And, I mean, this is a company. This is their business ratings. Yeah, that’s really and they’re independent, which is really important, if it was a government doing it. I mean, can you imagine the outcry, really, whenever a developer got turned down, they’d be saying, you know, it’s not fair. They’re biased against us. But this is an independent, private company, and they went through a rigorous tender process as well,
Jimmy 11:14
Absolutely,
Sue Williams 11:15
To operate this system. So I think the system is David’s fabulous legacy, really, yeah, really changed the industry for the better. Yeah. And I think he can be very proud of that.
Jimmy 11:27
You your article, your interview with him and the Equifax guy, Brad Walters, that’s right, yeah, that’s in the Sydney Morning Herald this weekend, is it?
Sue Williams 11:36
I think it’s this weekend, yeah,
Jimmy 11:38
You never know until you see it in print.
Sue Williams 11:39
Yeah. Absolutely. Itwas interesting. I talked to a number of some of the top rated developers as well, and talked to them, and they’re sort of saying that they’re hearing from their peers and competitors, that consumers are now really kind of starting to shun unrated developers and coming to the top rated ones. So it’s really interesting that they’re all kind of getting on board.
Jimmy 11:58
And there’s a whole question of the 10 year insurance that comes along with a lot of these buildings. And David referred to the fact that a lot of lenders, you go in for a mortgage for an apartment, a new off-the-plan apartment, and the banks or the mortgage providers are saying, Well, does it have an ICERT rating? And so it’s starting to have a very significant effect right through the system, which is good,
Sue Williams 12:28
And it really does protect consumers a lot more. They’re not on their own anymore. They know they’ve got a system that can support them if they want to get on board with it, and they know that the banks look as if they support the system as well, so they’re not going to be left high and dry, hopefully. So it’s fantastic development.
Jimmy 12:43
Okay,you’ll be able to read Sue’s story in the Sydney Morning Herald, we hope this weekend. And I’m going to steal shamelessly from David’s post and LinkedIn put that on the Flat Chat website with the video. You’ll be able to see it yourself. After this, we’re going to talk about using not just your parents money, but your extended family’s money to get into property.
Jimmy 13:13
Sue you’ve written in the Property Investor section of Prestige Domain in the Australian Financial Review about using your family’s money, not just your parents money, to get into property. How does it work? Does it work?
Sue Williams 13:26
Well, yes, it really can. And I think usually young people, first home buyers, are partnering with their mum and dad, using the Bank of mum and dad to buy a property that they can live in. But now, increasingly, because that’s working so well, lots of people are now pairing up with their brothers and sisters, their parents, their in laws, sometimes, if they’ve got a good relationship with them, and that’s a good motivation to have a good relationship, isn’t it really?. And also grandparents to invest in apartments as well, which is kind of interesting. And so whether you’re doing it because you want to live in the apartment, or whether you just want to invest in the apartment. It does make good sense, it seems. And it does work really well for people if they abide by a certain
Jimmy 14:09
Yeah, you’d have to put some legal restrictions in there, or protections, more to the point
Sue Williams 14:15
That’s absolutely right, the first thing you have to have is really frank conversations with people about what happens if somebody wants to leave, like the, you know, young couple bought the property, if they want to leave and they want to move on, what happens to the money when they sell? Who do they divide it between? Who gets the biggest proportion? You know, it? Does people just get their money back, or do they get it back with interest? Do they get it back on the sale price?
Jimmy 14:15
Yeah,
Sue Williams 14:16
What happens if they sell at a loss? Who bears the the loss? Yeah, all that kind of thing that we that perhaps you don’t think about when you go into buying an apartment, you know, in the in the blaze of joy and happiness, finally getting
Sue Williams 14:52
You’re finally getting a place
Sue Williams 14:53
Market, absolutely but you know, it makes, makes great sense, because often, when you pool your income, you. You can get a much better rate of interest on a bank loan as well,
Jimmy 15:03
Right
Sue Williams 15:04
Your but then again, somebody might want to save as an investment apartment, somebody might want to keep that for 10 or 15 years. Somebody else might want to free up their money to start a little business of their own, that kind of thing, so
Jimmy 15:17
Or buy a, you know, a set a different place that’s on their own, you know, use their equity to go and start again.
Sue Williams 15:24
Yeah, absolutely. And we know from our own family, a relative who invested in a place with their daughter and her husband. Yeah, the couple lived downstairs, the mother and father,
Jimmy 15:37
They built, they built on top of the same floor plan. They thought it was a great idea just basically put a concrete slab across, take the roof off, put a concrete slab over, and build on the same floor plan. But the problem was they didn’t strata it,
Sue Williams 15:52
So it all became one building, really, yeah. And unfortunately, when their daughter split up from the husband, the husband decided to stay, so the daughter ended up leaving.
Jimmy 16:01
They were told to get out. They were told, this isn’t your house. You don’t actually own anything here.
Sue Williams 16:05
So that’s a really good lesson.
Jimmy 16:07
Get all your contracts sorted out. Funny, I was reading in a it was, it was actually a an advice column in an American newspaper, and this woman had written, she said that her husband’s parents had given them a lot of money to help them get their first home. And then the in-laws came to visit, and the mother-in-law looked at the house and said,” You’ve turned the two spare bedrooms into two offices. That’s going to make it difficult when you have children.” And they said, “We’re not going to have children. That’s not in our plan.” So you know,
Sue Williams 16:41
And that hadn’t been discussed before,
Jimmy 16:42
Hadn’t been discussed beforehand. And the mother was outraged. She said, “The only reason we gave you the money was to help you set up and have a family.” And she said, “I’m not going to come and visit anymore. It’s too distressing for me to know that I’m not going to have grandchildren.”
Sue Williams 16:58
See, such money sometimes has strings attached that you might not know about.
Jimmy 17:01
Absolutely,
Sue Williams 17:02
Until you actually thoroughly discuss those things
Jimmy 17:04
Sit down and talk about your plans. And if the if you say, “Why are you giving us the money?” If the answer is “So that you will do what we want you to do and you don’t want to do,” then you’re probably going to have problems.
Sue Williams 17:16
Yeah, but if it works well, and you’ve got, you know, if it’s family, I was talking to Judy Sahey from Crowd Media Group. And she was saying, you know, coming from an ethnic background, often ethnic families do tend to invest together. In the old days, it was buying gold together, but these days it’s maybe buying apartments. And she was saying, it can be a really good thing to do, because it brings you all together. And you have, you know, joint interests, yeah. And you know, you can chat about the home over the dinner table, and it kind of can be a lovely thing to do as well.
Jimmy 17:45
You reminded me of a story from years ago, of a woman who’d I think she was an ethnic family. They were either Greek or Italian, Mediterranean background, and the parents just wanted everybody to stay in their house until they got married, and she wanted to head out on her own. And she was in her 20s, you know, she was, she wasn’t a kid. And eventually he said, “Look, I’ll help you to buy an apartment, and if you let us renovate it, ” because he was a he had a plumbing, domestic plumbing business. And she said, great. So they bought the apartment, and he put his team in, and they ripped out all the plumbing, and then never went back. So she was stuck constantly saying to her father, when are you going to sit with the guys in to put the bathroom back in the kitchen back in he said, “Yeah, yeah. We’re very busy, very busy.” And this went on for months and months and months.
Sue Williams 18:42
That’s terrible, isn’t it, really.
Jimmy 18:44
So there are pitfalls.
Sue Williams 18:45
Oh, absolutely. But there’s even a new new company come up with a new plan. This company is called My bricks, and then they’ve got this concept called Social funding, and they provide this platform where you kind of advertise to all your family and all your friends and everybody that you want to buy an apartment or a property, and they all come in and maybe make a little bit of an investment. So in a perfect world, if you had rich friends and lots of people wanted to, well, if lots of people wanted to invest a little bit of money, you’d end up with enough money so you wouldn’t actually even have to get out of bank loan.
Jimmy 19:19
It’s kind of like Kickstarter or something like that. There’s a crowdfunding,
Sue Williams 19:24
Yeah, crowdfunding for equity, which is kind of interesting. You know, you wonder if people will start doing that kind of thing. You know, young people, they love this, this stuff.
Jimmy 19:33
People have enough trouble adjusting to strata. I mean, people having to adjust to the idea that they can’t come around and look at the apartment that they own a part of we thought we’d use your balcony for our birthday party next week. Sorry. I thought we’d use our balcony. They’d be saying. When we come back, we’re going to dive into some of the stories from the forum that’s after this.
Jimmy 20:03
Flat Chat Forum is a weird and wonderful place, and I’ve been doing it for about 15, no, maybe 20 years now, on and off and but mostly on written a piece that I’m going to post on the website this week about all the different kinds of people who ask questions like, there’s the quiffers. They want a quick fix fast. They come on and say things like, “Oh, I’ve got an AGM tomorrow night. Can you tell me how I can get a motion to do? You know?” You go, No, you can’t. You can’t just too late, things like that. And then the they demand an immediate answer, and then you never find out what’s happened, which is,
Sue Williams 20:45
Bad
Jimmy 20:46
Yeah, but here’s a few that have come up this week, and there’s always something new. This is the amazing thing about this. You think in 20 years you’ve seen there’s something like, you know, 20,000 posts to the forum, 20,000 questions. We must have seen everything. As she said, Somebody wrote this week and said, We found in our strata management contract it says that they’ve got to get all the frequent flyer points for credit card payments.
Sue Williams 21:15
What? Wow, and that’s astonishing.
Jimmy 21:19
I’m not sure how that’s supposed to work, but I’m thinking with my positive “I love all strata managers” hat on that they’re saying, if they pay your bills with their credit card, they get the frequent flyer points.
Sue Williams 21:37
Well, I suppose.
Jimmy 21:39
Well, it’s your money.
Sue Williams 21:40
Well, yeah, yeah, they’re just doling stuff out from a trust fund really,
Jimmy 21:44
Yeah. So they’ve covered themselves in case somebody comes back and says, you know, you paid for these builders and that $30,000 bill you got paid on your Amex card. And what happened to the frequent flyer points? Because they should be mine. Wow. So I don’t think it’s as bad as if you pay them,
Sue Williams 21:59
OK, but then you phone up your strata manager, ask me a question, exactly? Questions. They say, I’m sorry, it’s in Italy at the moment.
Jimmy 22:04
Yeah, he’s got a free flight business class to Europe. Yeah, it’s interesting, because who do those points belong to? The the frequent flyer people, the credit card people say they belong to the person who’s got the credit card. Yeah, so. And I think it’s just, it sounds like it’s one of these things that the strata managers are just covering their backsides in case somebody comes along and says, Oh, do you pay with credit card? Then we want the frequent flyer points. They’ll say, No, it’s in the contract. There’s another one. Somebody is in a small block where they’ve got this, they’ve had the same three people on the strata committee like forever, and they’ve recently discovered the joys of electronic meetings, so they decided to have an electronic AGM. They sent out the agenda and put on the agenda. “These are the three people who are applying to be on the committee.” Can’t do it. You can’t elect your committee. with pre-voting and see what has happened, I think, in the past, is that nobody else has offered to be on the committee. So they’ve done the thing of saying, how many people are on the committee who have three will have three seats on the committee. How many people want to be on the committee? We’ve got three people who want to be on the committee. There’s no election. But as soon as somebody else says, I’d like to be on the committee, you have to have an election, and you cannot have an election with pre-votes. So that’s a curious one,
Sue Williams 23:32
Yeah,
Jimmy 23:33
And oh yeah, here’s another good one. Once again, our strata managers, who we love and admire and adore; rolling contracts. Now we know that they’ve been made illegal in pretty much in New South Wales and elsewhere. It’s one year at the start, and then three years thereafter. This guy has discovered that every year on his AGM agenda, there’s an item that says, renew the strata manager’s contract for another three years. So that would be fair enough if that happened every three years. But this is coming up every year
Sue Williams 24:09
Oh I see. So it’s kind of like
Jimmy 24:12
so the strata manager slips that into the agenda. They just renew the contract for another three years. And
Sue Williams 24:20
So nobody ever gets a chance to tender really, because they’re always,
Jimmy 24:24
they’ve always in contract
Sue Williams 24:25
Three years. wow,
Jimmy 24:27
Sneaky. Yeah,
Sue Williams 24:29
Absolutely is.
Jimmy 24:30
But you know, as we often say on this podcast, most strata managers are honest and decent and aren’t trying to fiddle the books at all,
Sue Williams 24:39
And never attribute to malice, what you could attribute to stupidity
Jimmy 24:43
Yeah, this isn’t stupidity. This is sneaky
Sue Williams 24:45
Deliberate act okay alright then
Jimmy 24:47
This is sneakiness. You know, it does occur to me if these dodgy strata managers spent as much time ingenuity and effort at being good strata managers, their profession would have a much higher reputation.
Sue Williams 25:01
That’s true.
Jimmy 25:02
On reflection, I seem to recall that there’s been change to the regulations that mean that there’s now a limit on the time before a contract is due for renewal that either party can give notice of termination. I will look into that, because there’s a discussion about that on the forum right now, and on that note, having annoyed the vast majority of strata managers in New South Wales and Australia, again, I think we should take our leave. Thanks. Sue
Sue Williams 25:33
Pleasure Jimmy,
Jimmy 25:34
I look forward to reading your article about your interview with David Chandler and Brad Walters, and we’ll talk to you again next week. Thank you all for listening. Bye,
Sue Williams 25:45
Bye.
Jimmy 25:47
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 favorite 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.
› Flat Chat Strata Forum › Current Page
Tagged: Chandler, crowdfunding, family, forum, friends, funny, iCIRT, podcast
In this week’s podcast we take a look at Sues story about people buying property, not only with the help of Mum and Dad, but with investment from exte
[See the full post at: Podcast: How to crowdfund your new flat]
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
› Flat Chat Strata Forum › Current Page
› Flat Chat Strata Forum › Current Page