Podcast: NCAT still crazy after all these years

This week we look at why so many strata disputes are getting stuck between NSW Fair Trading’s mediators and NCAT’s tribunal adjudicators – maybe it’s because they don’t talk to each other.
And maybe it’s because some disputes are between right and wrong and mandatory mediation can be a big fat waste of time.  
As if that weren’t bad enough, NCAT doesn’t even communicate internally.  Why else would a strata manager sacked from not one but two large buildings be given total control – with no owner input allowed – of another scheme?
We look at the places where rent is more than mortgage repayments and we look at moves to get gas cookers out of apartments.
They’re coming for your stoves! Well, no, they’re not – unless you believe the rabble-rousers and dog-whistlers at Fox News.
That’s all in this week’s Flat Chat Wrap.

TRANSCRIPT IN FULL

Jimmy  00:00

There’s a lot going on…

Sue  00:01

There sure is; there always is in strata land.

Jimmy  00:04

It seems to be. There was a report last week in the Sydney Morning Herald; stuff that we have covered many times before, about how hard it is to get a case through NCAT and through Fair Trading. But the one thing it did reveal was… Well, two things; that the number of cases are going up, but the number of mediators that Fair Trading have to deal with them has not gone up. There’s a real log-jam there. I also want to talk about this amazing thing that’s come up… We’ve got to be careful about not naming names, but a strata manager who was sacked from two buildings (which had huge problems and they’ve been quite prominent in the press)… He was removed as strata manager and replaced with a statutory manager and now he has been appointed statutory manager of another building.

Sue  00:59

Oh, my goodness…

Jimmy  01:00

Which is ridiculous and a real indication of how the right hand does not know what the left hand is doing in government strata. So that’s something for the Strata Commissioner. You’re going to tell us about how feasible it is these days with rising rents, to actually pay your rent as a mortgage, or at least compare them. And we’ve got a little piece about a movement to get gas cookers out of apartments. A lot to talk about. I’m Jimmy Thomson, I write the Flat Chat column for the Australian Financial Review.

Sue  01:34

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

Jimmy  01:37

And this is the Flat Chat Wrap.

[MUSIC]

Jimmy

Okay, so the whole log-jam at Fair Trading and NCAT… They will throw all sorts of statistics at you, but the reality is that people are going to Fair Trading (as they must do, to have a hearing at NCAT), and they get held up at Fair Trading, because there aren’t enough mediators. You’ve gotta have a mediation before you can go to the tribunal and then, you get to the tribunal and there are months and months of waiting for a hearing. This is something that the new Strata Commissioner, who has not been named or appointed yet; that would be the first thing they’ve got to deal with, wouldn’t you think?

Sue  02:31

You’d think so, because that’s the really critical part of the strata puzzle, isn’t it? When people have problems, where do they go to? If they can’t sort it out themselves, or with the help of other professionals, they have to go to NCAT.

Jimmy  02:44

And one of the problems is to get to NCAT, as we’ve said, you’ve got to go through Fair Trading and get your mediation. And you would think that when you get to mediation, or when you get to Fair Trading, somebody in Fair Trading would say “you know what, you’ve got zero chance of success with this;” that you are the person who’s on the wrong side of the law… That the bylaws in your building say x, y, z and you, or the other person, has breached the bylaw, or hasn’t. So you know, you’re wasting your time; you’re wasting your money… You’re wasting your emotional energy, in pursuing this. Don’t bother. But they don’t get that at Fair Trading.

Sue  03:23

Well, maybe they don’t have that kind of expertise.

Jimmy  03:26

You mean the Fair Trading people? Well, they should have, or they shouldn’t be in the job. And the fundamental problem is you go to Fair Trading for mediation, and the mediators are there to get a resolution. They are there to stop people fighting, which sounds like a great idea, except sometimes, there are people who are right and there are people who are wrong, and somebody has to tell them that they’re right or wrong, rather than saying “oh, can’t you just learn to live together?”

Sue  03:58

Well, that would shortcut the whole process, wouldn’t it really?

Jimmy  04:00

Well, that’s it. And we’ve actually suggested in Flat Chat that a very simple solution would be a fast-track resolution, where basically, you have a panel, or actually a couple of panels of people working in a chain, and you go in, you present your case, the other side present their case, the panel says “look, here’s our decision.” If the panel is unanimous, then that’s the decision that you’ve got to abide by. If the panel is split on their decision, then you can take it to the tribunal. But if the panel has told you you’re in the wrong, and you still take it to tribunal, then you run the risk of costs being awarded against you.

Sue  04:47

That sounds like a good idea. Or maybe when you go into that mediation, you have to sign something to say that you will accept the verdict, if it’s a unanimous verdict.

Jimmy  04:56

Absolutely. And I think that for most people, if they did go into NCAT, having been told by a panel of experts, you are the person who’s in the wrong here… NCAT has in its legislation that it can award costs for one party. It’s supposed to be a cost-free process, but they can award costs for one party or the other, against the party that has raised a frivolous case that they know had no chance of winning. So that’s already there; you don’t have to change the legislation. All you have to do is put in a process in the middle, where people can go and get a fast answer to a difficult question, rather than being expected to sit there and smile and shake hands and say “oh, let’s just get on with our lives.” They say that the statistics are that a lot of people go for mediation, and they don’t pursue it. They don’t say why. Because in a lot of cases, if you take a case to Fair Trading for mediation, the other side doesn’t even have to turn up… You have to turn up, but the other side doesn’t. So I’m sure a lot of people decide, we’re not going to pursue this, because it’s just hopeless. The other people are just digging their heels in and it’s gonna get expensive and ugly. But you don’t get that in the statistics that are coming out from Fair Trading. So I do think that there should be something; I think one of the things the new Strata Commissioner should look at is a fast-track resolution system. A process where people can get a very clear idea of whether they’re on the right track or not and that also allows for, have they been told they’re on the wrong track; that if they take it to NCAT, to the tribunal, then the chances are they might get costs awarded against them. I just think that would clear out the whole system.

Sue  06:53

That would be a fabulous first new step for the Strata Commissioner, wouldn’t it? Or maybe Jimmy, you’d like to apply for the job?

Jimmy  07:01

I think it’s too late; I’m sure they’ve already approached the person. If they wanted me, they would have called me by now. The panel that I envisage, is a strata lawyer, a strata manager and a former or current member of a strata committee, with some experience. Two panels of three, that would work in tandem. So you’d go in and present your case, the other side would present their case, there’d be 10 minutes for questions, so that’s a half-hour. The panel go away for half-an-hour and discuss it and at the end of the half-hour, you get the result. In the meanwhile, there’s another panel in there.

Sue  07:45

So how many cases could you get through in a day?

Jimmy  07:49

In an eight-hour day, if you had two panels working in tandem, you would get through 16 cases a day.

Sue  07:56

That’s not bad is it really?  80 cases a week… It would be quite quick, to clear that log-jam.

Jimmy  08:06

Absolutely. And I mean, in some of those cases, people would decide “well, I don’t like the verdict. I don’t like the process… I don’t agree with this.” You know, people, especially conspiracy theorists, can always come up with reasons for not accepting facts as they’re presented to them.

Sue  08:21

But it’s great having one person from strata on that panel, because they’ve probably been through something similar and they actually understand.

Jimmy  08:30

You mean from a strata commitee?

Sue  08:31

From a strata committee, like another owner.

Jimmy  08:33

And that would give some work to all the strata lawyers that we’re going to make redundant by fast-tracking stuff that doesn’t go to NCAT. Okay, a story came across my desk recently… An unbelievable thing has happened… We have to be very careful about not identifying this person, because some of the criticisms of this person or this company, are quite lurid in a way. Let’s just say they were strata managers for a couple of big buildings that had serious problems and those buildings discovered that the strata manager was not pursuing defects as diligently as they thought and then they discovered that the strata manager was using social media; WeChat, to influence overseas investors.

Sue  09:52

So they were contacting only overseas investors and weren’t contacting all owners as a group?

Jimmy  09:58

Right, and what they were telling the overseas investors (apparently), was that the local owners and residents were creating a fuss over nothing…. They were damaging their investment and they were saying there’s going to be bad publicity, and that will affect your investment, so when we come to a vote for what we’re going to do about this, you should vote against these things. That’s the allegation. It’s pretty bad and this company is not the only company that has been in indulging in that kind of almost racially-based control.

Sue  10:39

Politics…

Jimmy  10:40

Yes, politics and especially using overseas investors, who don’t have the opportunity to walk into the building and see what’s really happening.

Sue  10:49

And presumably, this strata manager isn’t a member of the SCA, the Strata Community Association Australia?

Jimmy  10:56

I don’t know.

Sue  10:58

We should check that out.

Jimmy  10:59

We should. You would hope that if they are a member of the SCA, the SCA would be jumping on them right now. But the trouble is with the SCA (which is a great organisation and they’ve really improved their standards and their professionalism); you don’t have to be a member of the SCA to practice as a strata manager. It’s not like being a doctor, where you have to be a member of the Australian Medical Association. So this person; and of course, he’s using these votes to make sure he gets his contract renewed, every time it comes up for renewal… The local people on the committee decide they’ve had enough. In one building, they apply to NCAT to have this strata manager… Now, you can apply under the law to have a strata manager removed, but 99 times out of 100, what NCAT will do is say “alright, we are putting in a statutory manager,” so that strata manager takes over all the roles of the owners corporation and the committee. The owners corporation, it doesn’t cease to exist, it just doesn’t have any power anymore. The strata manager is like god; he or she can decide whatever they want for the duration of their term. They make all the decisions. Now, this is one of those ‘be careful what you wish for’ moments, because a lot of strata managers in that situation; the diligent ones will say we have to do everything by the book. Now, we know living in strata, that there are situations that need to be finessed in strata, where the strata manager will come in and offer compromise solutions. When you’re a statutorily appointed strata manager, a lot of them think “well, I don’t have that leeway, because I’ve been appointed to enforce the strata law as it exists and enforce the bylaws as they exist and that’s my job and I don’t want to deviate from that.” Which is fair enough. Then there are the strata managers who get the statutory appointment. I mean, I’ve spoken to one tradie, who has a relationship with a strata manager, who says that when that guy got statutory appointment for buildings, “it was like rivers of gold for me, because he wants work done… I put in an inflated invoice; nobody questions it.”

Sue  13:32

Oh, my god!

Jimmy  13:33

Yes. So giving somebody that power, it has to be somebody who is going to be absolutely diligent and honest, and most strata managers are in that situation. So we get ‘chummy;’ he’s been playing fast-and-loose with his powers in one building. He’s got another building, where he’s doing exactly the same thing. The people in the first building get him replaced by a statutorily -appointed strata manager, then they go to the second building and say “you’ve got this guy running your building as well; this is how you get rid of him.” So they did and they got a statutorily -appointed strata manager. We know the people involved and they’re rock-solid; they’re really good, high-quality people. Then, the tribunal turns around and appoints the guy who’s just been sacked as statutory manager on another building. So they’ve  got this guy that they got rid of in two buildings, and they’ve said “oh, you can become god in this building.”

Sue  14:40

How does somebody become a statutory manager? Does the committee choose someone?

Jimmy  14:48

It has changed over the years and I’m not sure what the principles are. It used to be that there was a panel, like a list of names and the tribunal would just go down the list of names and pick the next strata manager on the list. That didn’t work for some reason and then it became a case of, if you applied for the appointment of a strata manager, you had to go along with somebody who was willing to take the job, because a lot of strata managers don’t like taking that job. They say they go in and everybody hates them… They work for two years to sort things out or, they get an appointment for one year; it’s usually renewed for a second year to work things out. They know that they’ve got zero chance usually, of being appointed on a normal basis, because everybody hates them and usually, nothing has changed in the politics of the building.

Sue  15:45

Because there’s always so much conflict and past hurts and stuff.

Jimmy  15:50

When the two years are up, and they open it back up, and the building gets to choose it’s own strata manager, then the old political stuff comes out again. So a lot of strata managers don’t particularly want to do it. There was a time when you would go to NCAT and say “we want a statutory appointment and here is a strata manager who’s prepared to do it.” The problem with that is, often the committee is, almost by definition, in cahoots with the new statutorily-appointed strata manager; not the committee, but the rebels let’s say, are in cahoots. So you’ve basically gone from one warring party, to another warring party. But this time, the warring party has absolute power through the strata manager. So I don’t know what the system is at the moment, to be honest. It’s so hard to get anything out of the Attorney-General’s Office. The Attorney-General’s office, and this is another problem in this area; the tribunal is run by the Attorney-General’s office, it has nothing to do with Fair Trading. It’s not just a gap; there’s a gulf… There’s a canyon.

Sue  17:03

And in the past, we’ve discovered you might go to the Attorney-General’s office for a comment and they’ll refer you to Fair Trading… Fair Trading will refer you back to the AG’s office and it’s just a never-ending…

Jimmy  17:16

And the last time that I got caught in the loop, I was talking to somebody at the AG’s office, and I said “okay, can we just be clear, you are fobbing me off. This is your responsibility, this is your area of expertise and if you tell me again to go back to Fair Trading, I am going to say that you refused to fulfil your duty to give me information.” There was a silence on the phone and then it was “okay, we’ll get back to you.” I finally got a quote out of them, but I’d been bounced back and forth three-or-four times. It’s just too convenient for them to say “this is nothing to dowith us.” And so that gap is actually clogged full of people, who are trying to get a result, get an answer on something that shouldn’t even be going to the tribunal in the first place, in a lot of cases. So now we know; here’s proof-positive that the Attorney-General’s office either doesn’t know what it’s doing in its own department, or doesn’t care. You would think if somebody has been removed from their position as a strata manager, they’d be the last people to be given a job as a statutory manager in another building.

Sue  18:36

Something else for the Strata Commissioner to sort out?

Jimmy  18:39

Absolutely and the Strata Commissioner; the first thing they’re going to find out, is that the Attorney-General’s office does not care about strata, it is just a function that they do. They do care when they think their power is being taken away from them; they get very upset then. But the Strata Commissioner is going to have to sit down with the Attorney-General and say that things need to change. When we come back, we’re going to talk about the difference between renting and buying an apartment, because those figures are getting quite perilously close to each other. That’s after this.

[MUSIC]

Jimmy

Sue, you’ve been doing some comparisons in the Sydney Morning Herald and Domain, about the cost of renting an apartment, or buying an apartment?

Sue  19:33

That’s right. A new Domain rent report came out, which showed that rents have been soaring hugely to new records in most capital cities. We started comparing the rents that people are paying, to how much they would pay in mortgage repayments and it was quite amazing, because unit rents have gone up hugely, even more than many house rents in some cities. We discovered that renters that have units in Brisbane, Perth and Darwin, are now paying out more weekly than it would cost them generally, to buy an apartment. And in other cities, it’s actually quite close; the differential was quite close. Brisbane, for example, has a unit median price of $450,000, and a median rent of $530 a week, whereas the weekly mortgage repayment using a 20% deposit, would be only $498 a week. So that would be $32 less than it would be if you rented a unit in Brisbane. And then in Perth, you’d be saving $91 a week, if you bought, rather than rented. And in Darwin, you’d be saving the most; $120 difference between a mortgage repayment and the rent. So you’d be $120 better off a week by buying, rather than renting.

Jimmy  20:53

You have to come up with that 20% deposit, for a start. I mean, that’s probably critical in there. But you also think in the way these things shift (and they tend to be shifting quite quickly these days); at some point, probably in the next year, the interest rates are going to start going down. Will rents also go down, as for instance, more product comes on the market; more homes are available?

Sue  21:24

But there’s very limited supply of new homes coming to the market really. I mean, development applications have picked up recently, but it’s still going to take maybe three years before that supply comes online. Vacancy rates are still incredibly tight.

Jimmy  21:43

And we’ve got more and more people coming into the country.

Sue  21:48

Absolutely. But also, it’s a very simplistic way of comparing rents and mortgage repayments, because you also have to remember that with units, you’ve also got strata levies you’ve got to fork out. There are costs involved when you’re buying property, as well.

Jimmy  22:05

It’s not just your mortgage.

Sue  22:08

That’s right. So you have to bear that in mind, too. But it’s amazing, this differential. I mean, maybe it’s much better to be paying off your own mortgage, rather than paying off somebody else’s mortgage. I think that’s the general philosophy; I think that’s in the Australian Bible, that that’s what you want to be doing. Sydney is the exception, really. Sydney is a lot more expensive to buy an apartment than it is to rent. Whereas, in other places like Melbourne, it’s still more expensive to buy an apartment than to rent, but it’s only $84 a week extra,  which is not really that much.

Jimmy  22:42

Another big difference in the whole equation is, once you’ve bought an apartment, you can settle. By settle I mean you can start establishing yourself in the community and you don’t have to deal with this constant concern, that every six months…

Sue  23:01

You’re going to be turfed out.

Jimmy  23:03

They’re going to change the law; they say they’re going to get rid of the no-fault evictions. The Rental Commissioner’s only been in the job for about a week-and-a half, so we should have patience. But that could change. But then also, you know, we’re in the middle of winter now; what’s going to happen… Unless they change the Airbnb laws; the short-term letting laws radically, then that will become a factor in the summer, as well. And those rentals are going to go up even more, so it really is an opportunity for people to get in there and grab themselves a bit of real estate. Especially first time buyers, because they get lots of advantages on grants and they wave stamp duty. It all depends; different states have different ways of helping first-time buyers, but that adds into the equation quite significantly, I would think.

Sue  24:02

And buying property in Australia is the one way to create wealth, really. I mean, the baby boomers did it and they’re the wealthiest generation Australia’s ever seen. So once you get into a property, usually prices continue to rise. And I mean, we’re seeing prices firm up all around Australia now, particularly in Sydney. Melbourne prices are kind of improving much more gradually. But the forecasts say Sydney prices are likely to go up; I think apartments are 2%-to-5% over the next financial year. So it’s a good time to get into the market, in lots of ways. I sound like I’m spruiking, like a real estate agent. It’s heartbreaking when you look at many of the renters; they just don’t have control over their homes and they don’t really have control over their future, as you say.

Jimmy  24:54

If you’ve got kids and you want your kids to stay at the school that they’re at and things like that… That becomes really difficult if your landlord suddenly turns around and says “oh, I’m putting your rent up by 20%.” And the measure for that currently, is how are the other rents in that area? It’s not is this fair, or is this unfair? And people think “oh, the there’s a limit on the percentage they can add to rents…” Not in New South Wales; they will look at rents around about the area and say “well, that’s a fair rent,” even though it seems like an unfair increase. And the other aspect of that is yes, you can challenge a rent increase, but three months later, the landlord can come around and say “at the end of your lease, you’re gone and I’m putting somebody else in, who will pay that increased rent.” So it’s that sense of insecurity; which I think has a social consequence, as well.

Sue  25:52

Absolutely. And maybe you’ve got a pet, and it’s much harder for renters to keep pets; sometimes owners will say no.

Jimmy  25:58

They say they’re changing the law on that, as well.

Sue  26:01

 About time too, but it’s taking a while.

Jimmy  26:04

When I talk about the social cost, I think it’s also the whole of society… If you’ve got a big chunk of people in society, and in apartments; it’s 50% of the population in apartments, who don’t feel connected with their local area, with their community… I think it creates an underlying sense of impermanence and unease in society, which I think we could all use to be calmed down a bit.

Sue  26:34

Absolutely. Renting per se, isn’t a bad thing, but the rent industry, as it is at the moment, is such an unstable place and the laws don’t really protect tenants to any degree. That’s the difficulty. I mean, a lot of these build to rent places are fantastic places to rent into and there is permanent tenancy. There are secure leases there. I think most of them have agreements that they will only go up by CPI, or 5% a year, so you know where you are. Those may change the whole rental industry, but it will take a while.

Jimmy  27:16

At the moment, the property investment industry is based on making profit. It is not about giving people homes; it’s about the investor making the most of their profit that they can, and that means that it builds in impermanence. But you create a system where the person who is paying the rent has a sense that they can stay where they are, then that will change everything.

Sue  27:41

 Absolutely.

[MUSIC]

Jimmy  27:48

And finally, before we go, we just noticed today, there’s been a push from a group called the Global Cooksafe Coalition, who are promoting not putting gas cookers into new apartments. It’s a big global thing now. If this was America, Fox News would be running around screaming “they’re coming to take your gas cooker away.”

Sue  28:19

I think they’re putting pressure on all new apartment developers, and there’s lots of developers who are a part of this group, like LendLease.

Jimmy  28:27

Frasers is another one. They’re saying they are not going to put gas cookers into a new building. No.

Sue  28:32

It’s all going to be electricity. And I think there’s plans later on to retrospectively refit apartments that do have gas cooking. It’s just gas cooking isn’t it? It’s not gas heating yet?  But they would retrospectively refit them with induction cookers, and induction seems to be a great way to go. People say it’s a fantastic way; I’ve never cooked on induction.

Jimmy  28:56

Me neither. You’ve barely cooked on gas, Sue! They’re saying that one gas burner creates as much benzene as passive smoking.

Sue  29:08

Wow!

Jimmy  29:10

It’s a pollutant. The asthma people are saying this is overdue. It’s quite ironic that in our apartment, our investment apartment, we asked them to put an induction stovetop in and they said the local council didn’t allow it. In their planning; their development approval, the local council said you’ve got to put gas in.

Sue  29:35

It’s incredible, isn’t it really?

Jimmy  29:37

And now they’ve changed; the local council has changed. So if they were putting the same DA in now, the council would say that electric was okay. Electricity is the future, isn’t it? And gas is definitely not. Right, we have covered so many issues… We’ve gone way over time. Thank you for your diligent research into all the rents and we look forward to meeting the new Strata Commissioner, when he or she is appointed, even if it’s only talking about them and harassing them.

Sue  29:50

About time too; a bit late, though.  We’ll have them on this show.

Jimmy  30:17

We should; we definitely should. All right. Thanks very much, Sue.

Sue  30:21

Thank you.

Jimmy  30:22

And thanks for listening. 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.