Can two wrongs make a right? First of all, let’s define “wrong”. I reckon the commercial exploitation of residential apartments through online holiday letting is wrong. I also think Queensland’s pre-sale of apartment block management rights on punitive extended contracts is wrong (as does every other jurisdiction in Australia).
What’s the connection? According to reports from the sunshine state, Airbnb and other letting agencies are making such a dent in caretaker managers’ income, that the latter could eventually be driven out of business.
According to an article on the Unit Owners Association of Queensland website, increasing numbers of investors are by-passing their on-site rental managers and going directly to a much bigger market, with higher returns and more control over who rents their properties.
The strata system in Queensland has been different from Day One, with a lot of investors buying properties to use them for a few weeks a year themselves, and then letting them out as holiday homes for the rest of the time.
Long-term resident owners permanently living in their apartments has, until relatively recently, been seen as something of an aberration and has been actively discouraged by some on-site managers (caretakers) who were annoyed at losing their commission on the rents.
Bearing in mind that strata owners often did not have any choice of on-site managers, or the terms of their contracts, or the fact that until recently they had to do all their letting through the on-site manager, that discrimination could take many forms, including being last on the list for repairs and maintenance.
Meanwhile stories about of out-of-state investors who had their fingers burned by excessive management fees, off-the-scale commissions and poor rental returns grew, anecdotally, at least.
As alluded to in a recent Flat Chat podcast, the law was changed so that caretakers only had exclusive rights to run the rental roll from an office in their buildings, meaning owners could use another agency based around the corner, for instance.
But then “round the corner” becomes the world-wide web, and apartment owners in holiday areas can connect to potential guests in the tens of thousands and not been subject to the grace and favour whims of someone whose business model is based on a morally suspect premise – that contracts can be bought and sold without the people who have to pay for them having any say.
But with more and more apartment owners discovering the freedom to list their properties with whomever they want, that immoral monopoly could soon be in a death spiral.
Queensland quantity surveyor David Leary recently wrote that a large chunk of caretakers’ income could be depleted greatly, thanks to Airbnb-style short-term holiday letting agencies, while the other component of their income is locked in by those perfidious contracts, meaning their whole business model is under threat.
“Caretakers derive the majority of their income from two areas of operation,” hw wrote. “The first is from a contract with the body corporate or owners corporation to provide caretaking services, and the second is from the letting business. Whilst the caretaking income is generally stable, rising annually in accordance with an agreed formula, this is not true for the letting business which frequently provides the majority of the income.
“It is not uncommon for unit owners to bypass the on-site manager or caretaker and let their properties directly using Airbnb or similar share services,” he continues. “I know of one large complex where approximately 50% of the available units are managed and let by an independent company using Airbnb to place lettings, competing directly with the on-site manager.”
You can read the whole of Mr Leary’s article on the UOAQ website or on Lookupstrata.com.au. And some of the comments it attracted are just as revealing, with one owner saying that she appreciated being able to decorate and furnish her holiday let as she wished – her caretaker had previously cleared out all her personal stuff and dumped it in a store room. Other owners liked being able to choose the guests themselves.
The choices for caretaker managers will soon be stark – lift your game or face financial ruin.
Meanwhile strata owners in blocks deemed residential-only are fighting a whole different battle and this time short-term holiday let agencies like Airbnb and HomeAway are the enemies rather than inadvertent allies.
Opportunist owners who thought that industry disruptors had swept away all restrictions on holiday homes in Queensland are increasingly finding that some bodies corporate, local councils and courts disagree.
The likely result can only be more Airbnb hosts buying into caretaker-managed blocks that legally allow holiday lets. And that could mean the death of the legalised corruption that remains a stain on Queensland strata’s character.
This is now being discussed in the Flat Chat Forum