Podcast: Pet deterrents and the new Commish

There’s good news this week for those abandoned covid fur-babies and the apartment residents who’d love to offer them new homes.

The highly dubious tactics clearly aimed at deterring people from having pets in apartments – workarounds for the ban on blanket pet bans, if you like – will be knocked over in proposed changes to NSW strata law.

Application fees, pet bonds and demands for additional insurance cover will be no more.

These are among several tweaks to strata law on the way in NSW but if you live elsewhere, you’d better believe policy wonks in all the states watch each other’s laws like hawks and any or all of these changes could be coming your way soon (if they weren’t borrowed form your state in the first place).

Also on the way, Fair Trading will be able to recommend dysfunctional schemes have compulsory strata managers appointed to take over the running of the block, putting failed strata committees into deep freeze for a couple of years.

Opportunist developers in forced or collective sales schemes will have to declare conflicts of interest and face having costs awarded against them if they try to use strata funds to combat competing plans.

And all strata schemes, regardless of size will need to get two quotes for work that’s going to cost more than $30,000.

Finally, we have a strata commissioner at last.  Property Services Commissioner John Minns has had strata added to his portfolio.

We examine how that could be a good or bad development and pick the bones out of all the above on this week’s podcast.

TRANSCRIPT IN FULL

Jimmy  00:00

Big announcement yesterday, from the New South Wales Government.

Sue  00:03

Yes. We’ve been waiting for this for a long time, haven’t we?

Jimmy  00:07

Yes, ever since the last laws came through, but more recently, in 2021, the previous government did a review of strata laws and yesterday, the current government put forward its proposals for the first set of changes. The main areas of change are new laws about pet applications for strata schemes, Fair Trading being able to refer schemes directly, for statutory management, collective sales (or for-sales, as we call it) and costs and estimates for work. That’s a lot.

Sue  00:49

It’s a huge ragbag of stuff, really.

Jimmy  00:51

And, we have a new Strata Commissioner, all of a sudden.

Sue  00:56

Great!

Jimmy  00:56

So we’d better get on with it. I’m Jimmy Thomson, I write the Flat Chat column for the Australian Financial Review.

Sue  01:02

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

Jimmy  01:05

And this is the Flat Chat Wrap.

[MUSIC]

Jimmy

So, pets are on the agenda again, Sue?

Sue  01:23

Yes and in kind of a good way this time, which is nice.

Jimmy  01:27

Well, yes. It’s kind of like they’re tidying up the laws; that once they’d decided that they liked the idea of people in apartments having pets, they’ve kind of gone all in on it.

Sue  01:39

Yes, that’s right. I guess as a result of the changes, making it harder for people to refuse having pets in apartments, I think a lot of buildings… There was a bit of a knee-jerk reaction from some buildings and they said “we’re going to charge people incredible bonds to have their pets.”  I mean, that was really over the top.

Jimmy  01:58

They use the dubious justification that having pets in the building, and even considering pet applications, was an onerous imposition on strata committees. So the three ways they tried to deter people from having pets is; one, they made it expensive for them to apply, with application fees. Secondly, they ask people for pet bonds, so that they had to put money down, just in case the pets caused any damage or caused any problems.

Sue  02:35

In addition to the bonds that they were paying, anyway.

Jimmy  02:37

For tenants. And then they asked people to have extra insurance; to pay for extra insurance, to cover potential damage by pets, and presumably, potential legal action, if there was a problem with pets. But basically, they were putting up barriers, to stop people from having pets. And the government said (well, they proposed), that all of that gets wiped away. They’re saying that all these things are covered by resident’s strata fees, which they pay either directly with levies, or they pay indirectly through their rents. So they’ve said, right, we’re going to get rid of all that and if you want to have a pet, you can have a pet and these barriers have got to go.

Sue  03:26

Which I think is an excellent plan, really. So it hasn’t actually been passed yet, has it? These are just the proposals?

Jimmy  03:32

These are just proposals; they have been tabled this week, although I can’t find them anywhere on the parliamentary website. But I’ve been sent them, by somebody in Customer Services, or Fair Trading. They reckon they’ll basically fly through the lower house, because that’s where the government has a majority. And then they’ll go to the upper house and that’s when you get weird coalitions of people from different ends of the political spectrums suddenly joined together, because there’s something they don’t like…

Sue  04:15

But maybe, they’ll join together, because it’s something that they will like, because Animal Justice is there. They’ve always campaigned for easier animal laws.

Jimmy  04:22

The Greens and Alex Greenwich, who’s got a dog in his flat, so he’s not going to go against it. It should be plain sailing and it might even be on the statute books by December.

Sue  04:39

Oh, a nice Christmas present.

Jimmy  04:40

A nice Christmas present for somebody.

Sue  04:42

I wonder if people who have paid bonds, if they have to be refunded to them, which will be a nice Christmas present, wouldn’t it?

Jimmy  04:49

Well, yes, maybe. Maybe if they say the bonds are illegal, then they’ve got no grounds on which to retain them. That’s a thought.

Sue  04:56

Well, that could be a problem for some owners corporations, couldn’t it?

Jimmy  05:00

Well, the ones that run on the smell of an oily rag and don’t have anything in their admin fund, apart from paying their electricity bills. Yes, it could be interesting. So get ready, if you’re on the committee of a strata scheme that has been imposing bonds and insurances and things like that, you might have to find which biscuit tin you put that money in.

Sue  05:25

But for pet owners, it’s kind of good news.

Jimmy  05:28

Very good news, I think. The other one that we’re looking at is (and it’s kind of a weird one, that I think a lot of people assumed already existed)… Fair Trading will be able to go to the tribunal, NCAT, and request that a statutory manager be imposed on a strata scheme that’s dysfunctional.

Sue  05:52

And what’s the current situation; how’s it normally done? Is it people in the committee who go to NCAT?

Jimmy  05:59

Well, sometimes the committee is the problem.

Sue  06:01

Well yes, it’s true.

Jimmy  06:02

Yes. So at the moment, its the owners, or people with an interest in the scheme; i.e people who are owed money, by the strata scheme. I don’t know what the official status of that is, but they are listed in the proposed changes. So owners and creditors (and there’s a provision in the NCAT law that if a tribunal member is hearing a case, and he or she thinks no, this strata scheme is just a mess, they can decide off their own bat, to impose a statutory manager). So just to be clear, for anybody who’s not aware, a statutory manager comes in, takes over the running of the building, usually initially for a year, but it’s usually for two years, because they just renew their appointment. The existing strata manager is out and the committee is out and the owners corporation ceases to have meetings, because they have no power. All the power has been given to the statutory manager.

Sue  07:09

Who makes all the decisions? It’s kind of weird; when it works well, like in a building that has enormous problems, it can really sweep the place clean. But the problem is, that nothing really very proactive gets done. It’s all about sorting out the problems, but not moving a scheme on at all.

Jimmy  07:29

It’s quite funny, the number of emails, I get to the Flat Chat website, saying “we’ve got a statutory manager and he refuses to have meetings.” And you say “well, actually he doesn’t have any legal basis to have meetings.”

Sue  07:42

Yes, that’s right. It must be hard living in an apartment building under a statutory manager, and kind of feeling really frustrated that you don’t really have a say.

Jimmy  07:51

I have heard of situations where, for instance… I mean, this has happened in one of the buildings we’ve been looking at recently, where the committee was dominated by overseas investors, who appointed their own strata manager, who basically ran the building, for the benefit of the overseas investors, so that they never found out about any problems going on in the building. The building had serious problems; structural problems, as well as political problems. And the majority of resident-owners, who were actually in the minority in the building, went to NCAT and said “can you appoint a statutory manager here, so that this building gets run for the benefit of everybody, including the people who actually live in it?” Ironically, that strata manager (who was removed at this point), was like, two weeks later, appointed as statutory manager of another building. So it’s a pretty messy situation.

Sue  08:54

Because you don’t really have any say in who your statutory manager should be.

Jimmy  08:57

No, you do.

Sue  08:58

Oh, do you?

Jimmy  09:00

In fact, they kind of expect you to go along with somebody who has agreed to the proposals. It used to be that you went for a statutory manager and there was a list that the tribunal had and it would basically, be the next cab-off-the-rank. A lot of strata managers don’t want to be statutory managers, because they’re always associated with the problem and they’re always associated with the pain that comes with solving the problem.

Sue  09:30

And often, they don’t get taken on afterwards, do they?

Jimmy  09:32

Very rarely. It’s not never, but it’s not that common. So they kind of feel like they do one or two years of extreme pain and unpopularity, and there’s nothing at the end of it. The other end of that spectrum is, that I’ve heard tradies saying that they’re in clover, because one of their mates is statutory manager for a big building, and they just get all the work that’s going, because  nobody has to look at quotes for anything. So they get all the work around the building, and they put in inflated invoices.

Sue  10:12

If they don’t have to get two quotes, or three quotes or anything, then they just go with one. I mean, I think a lot of people, when they’re having trouble in their building, say “oh, I’m going to apply for a statutory manager,” and they don’t realise, what a huge imposte that is on everybody living there.

Jimmy  10:29

A cultural change, really. I often refer to it as one of these ‘be careful what you wish for’ things.

Sue  10:35

It really is the last resort. You know, if there’s any other way to sort out the problems, then all avenues should be explored, before that.

Jimmy  10:43

So the changes in the law will be that now, you go to Fair Trading. And I imagine this is a case where, let’s say the majority of owners in the building are absentee; not necessarily overseas, but they don’t live in the building. They might not even have a strata manager and there’s somebody in the building who’s going “this is all wrong. I don’t understand the law; I don’t understand the processes.” And they go to Fair Trading (which is the first port of call) and Fair Trading can go to the tribunal and say “you need to impose a compulsory strata manager here, because we have looked at the situation and the people who are suffering, and not able to explain properly themselves what the problem is, but we can see it.”

Sue  11:30

So that’s good having that filter, I guess?

Jimmy  11:32

Well, it’s good that Fair Trading actually get to do something, and actually get to intervene with problems, rather than just sitting there saying “oh, we’ll mediate and we’ll come to a compromise solution.” Well, sometimes problems are black and white and a compromise means that people are losing, when they shouldn’t be losing.

Sue  11:51

And it’s hard, because I went to an NCAT case recently, about a compulsory manager. And it’s hard, because the NCAT member, obviously doesn’t have much of a background on the building, and what he or she asks for are very specific circumstances, and they kind of only ask the people in front of them to outline very briefly, what the problem is. And so you kind of think, well how can they understand the immensity of a problem in a building, just by a couple of people giving their evidence? It’s a very flawed process, really, in so many ways, and it makes the outcome really uncertain. So if you’ve got somebody else involved, like the Department Fair Trading, hopefully that might lead to much better and wiser outcomes.

Jimmy  12:34

Well, we hope so. But the Tribunal is run by the Attorney General’s Office; Fair Trading is run by Customer Service Office. They sometimes don’t even talk to each other and refuse to have anything to do with each other aand I can see a situation, where Fair Trading could turn up at a tribunal and say “this building is in a lot of problems, can you impose a strata manager,” and the member can say “well, I’m not convinced that there are all these problems.” Blah, blah, blah, because they just want to retain their own power. Let’s hope the government attends to that, as well. They really need to get the tribunal pulled into line, because it’s getting like the old CTTT, which was just a mess. When we come back, we are going to talk about collective sales and how they’re going to fix that. And, their costs and quotes for strata building repairs, etc. That’s after this.

[MUSIC]

Sue  13:39

So what else is among these proposals, Jimmy?

Jimmy  13:41

Well, there’s something that you’ve been very involved in writing about recently, which is collective sales. Now you tell me what the issue was, that you wrote about just last week?

Sue  13:52

Yes, that’s right. In Macquarie Park in Sydney, there were two buildings who got together; two old buildings, kind of quite run-down and crumbling. The area was rezoned for much higher buildings. So they got together, to try to sell their building off to a developer, for it to be demolished and rebuilt. So it looked like a really good prospect. But unfortunately, there were a couple of lots in each building, that were owned by companies that were connected to another developer. So when the developer came forward and made an offer (a company called GSA came forward and made an offer to buy the buildings from the owners). The owners were delighted, but only 75% of the owners agreed. So the dissenting owners, who were loosely connected with a rival developer, refused to sell, or tried to sell at a much higher price. So the whole thing ended up falling apart. But I think these proposals aim to stop that kind of issue happening, don’t they?

Jimmy  14:56

What happened in that issue that you’re talking about; it’s in the law that the owners who want to redevelop, have to pay the costs of people who are opposing the redevelopment. So you had, effectively, one developer, and the majority of owners in the building, wanting to go ahead with the development and the developer had been blocked out, because they were in the minority, using strata scheme funds to fight their case against the strata scheme. So the strata scheme majority, were paying the costs, not of an individual, which is kind of fair…

Sue  15:38

Which was what the legislation was designed for…  If there was an elderly person in there, who really didn’t want to sell and wanted to keep their home.

Jimmy  15:45

At least they’d have the costs of objecting, paid for by the people who wanted to sell the building. And then in this case, because the law was kind of clumsily constructed, the other developer (the losing developer), was able to use strata funds, to fight their case, which is ridiculous. For a start, the building is not going to be redeveloped, but didn’t the strata scheme end up with big legal fees to pay?

Sue  16:16

Absolutely. And they’ve been locked in this battle for such a long time now, as well. They were all hoping to be able to sell their places and move on. They weren’t really looking after the building, administering it, or doing necessary maintenance work. And now they’ve faced with much bigger bills as well, because it hasn’t been maintained.

Jimmy  16:34

And Professor Hazel Easthope, of the University of New South Wales has done a paper on this. And she points out that these laws came in in 2016; something like that, allowing schemes to renew or redevelop. And she said something like, there’s only a handful that have actually gone through. Everybody thought it was going to be a free-for-all, with old buildings getting knocked down and nice, shiny new ones going up all over the place and it’s hardly happened at all.

Sue  17:07

Yes, that’s right. It’s become a real problem. And lots of buildings… I mean, even in the eastern suburbs are looking at renewal, but unfortunately, a lot of them suddenly have units owned by a developer, looking at similar kind of strategies.

Jimmy  17:24

I remember years and years ago, when I think the Macquarie Park thing came up (I think it was that one)… A local real estate agent bought two apartments in the building, probably either to profit from the collective sale, or to influence the decision. So the change in the law is going to be that anyone involved in the discussions has to declare any conflict of interest, for a start.

Sue  17:53

That’s fantastic, isn’t it?

Jimmy  17:54

And the other thing is, courts will be able to decide that if somebody is acting unreasonably, then they can award legal costs against those people. So if somebody has come in, as in this situation and said “well, I’ve lost the bid, but I’m going to make sure you can’t go ahead with this,” then the court can say “well, no, the owners corporation is not going to pay your legal bills, because you are interfering with the process.” That’s an interesting step forward.

Sue  18:27

Let’s hope that solves this issue.

Jimmy  18:29

And the other thing (while we’re on costs and repairs and renewal), is there’s a little quirk in the New South Wales legislation, that large buildings; that’s over 100 units, have to get at least two, possibly three, quotes for any work that they’re going to do, over $10,000, or something like that. They’re now going to make it that all strata schemes have to get two quotes for any work that’s going to cost more than $30,000.

Sue  19:04

That seems eminently reasonable, doesn’t it?

Jimmy  19:06

Well, at least you’ve got a competitive quotes going on, rather than… You know, you do have small buildings with small committees that are rusted on, where they have got their favoured tradies and they just go “yep, let’s get this done.” I mean, we used to own in a building, where remember, the strata manager announced that we were going to have all the windows changed to aluminium frame windows. And you knew without even asking, that he probably had a friend who ran a window company, who was looking forward to being able to install something like, 64 windows in that building. Although, the windows did need fixing, but there were other problems that needed fixing before that. When we come back, we’re briefly going to talk about the new Strata Commissioner. That’s after this.

[MUSIC]

Jimmy

Well, after years of campaigning for one and demanding it, we suddenly have a new Strata Commissioner, or newish; he’s not brand new. His name is John Minns, we don’t think he’s related to the Premier. He has been acting as Property Services Commissioner, which means that he’s got a background in real estate. He’s been working with strata managers, building managers and real estate agents. That’s his main thing and there’s lots of other ancillary things, but he’s a nice bloke.

Sue  20:43

And these proposals have come from his office, haven’t they?

Jimmy  20:46

These have come from Fair Trading.

Sue  20:48

Oh, okay.

Jimmy  20:49

He wasn’t in office.

Sue  20:51

Yes, I suppose so.

Jimmy  20:53

I mean, these have been discussed since 2021.

Sue  20:56

Oh, okay. I thought it was his first arrival and so he was saying “oh, we’re gonna do all these changes.” They’re independent of him, okay.

Jimmy  21:05

I’m sure he’s 100% behind all of them, but I don’t know if he’s been instrumental in creating these. Look, I’ll be honest, I think there’s a bit of concern. When the government press release came out and there was a quote from the Fair Trading minister, there was a quote from the Consumer Services minister, and there’s a quote from the president of SCA, the strata managers… Nothing from the Owners Corporation Network, or anyone else involved with the owners. And there’s been a rumour that John Minns was going to get this job. And there has been a concern that it’s going to put way too much influence onto strata managers, and that owners; people who actually pay for all this stuff… People who mortgage their lives and buy the apartments, are going to be an afterthought. And it kind of feels like that has happened already.

Sue  22:00

Okay, because he’s not simply the Strata Commissioner, is he? He’s still the Property Services Commissioner. So he’s got a number of different hats and a number of different loyalties, as well.

Jimmy  22:04

No.  Absolutely. And you know, the press release from one of the ministers, said ‘this put strata at the centre of thinking,’ and then they don’t even talk to somebody who lives in strata. You think no, it doesn’t put it at the centre; it tacks it onto the side. And anybody who’s thinking that John Minns might be like another David Chandler, except for strata, coming in and just kicking ass and taking names, is going to be sadly disappointed. He’s not that kind of person; I don’t think he has those powers, either.

Sue  22:45

No. But then again, maybe he’s gonna mediate better between all the different sides of strata. We all have similar interests; maybe there is room there for us all to get on well, and to smooth out the paths of communication, perhaps. I’m looking at it in a very positive way, I know.

Jimmy  23:05

Your’e a glass half-full on this one.

Sue  23:08

Your’e glass half-full. I’m… No, I’m glass half-full; yes. Your’e glass half-empty.

Jimmy  23:11

No, you’re… Maybe we just need different glasses. Just as a final note, I noticed that in the original proposals it included making it easier to get rid of poorly-performing strata committee members. I don’t have any detail on that, because that seems to have disappeared from the proposals. But you wonder how that’s going to work?

Sue  23:39

Yes!

Jimmy  23:40

I just have these visions of people, walking in like the witch hunts, sort of condemning people. “I condemn you, for being poorly -performing.” “Oh, no! He’s going to be taken to NCAT and removed from the committee!” Actually, I’d quite like to see that; with some committee members.

Sue  23:58

It’s hard. I remember, on various committees; we had one person who very rarely turned up and when we suggested to them that maybe we could replace them with someone who was more keen, they said “no,” they really wanted to be there. But they still never turned up and it was just really impossible. It was really difficult.

Jimmy  24:17

I turned up at an AGM once, with a list; a breakdown. I went through all the minutes of the strata committee, month by month and then name by name by name and put little x’s, where they’d failed to turn up. And there was one guy standing for re-election, who had turned up… I think there was like, 10 meetings over the year and he’d turned up for three of them. And he was outraged; he was shocked and embarrassed, but then he was outraged. He still stood for election; he still got elected, because he was part of the little club. There’s people who just want to be on the committee, without actually attending. And in Queensland, it’s not quite as simple as it sounds. If you don’t turn up for two committee meetings in a row without a good reason, they can vote you off.

Sue  25:12

Wow, that’s amazing. I mean, you kind of think, is it good on a committee to have some eccentric members, who kind of think in a different way? Sometimes it is, but actually they can cause enormous problems. You know, you’re always trying to get consensus and when you can’t get consensus, it can be really difficult. I remember on one committee, we had a gym in the building, and it was really a popular gym and she’s decided that she would like to see the gym become a sauna instead. The whole gym become a sauna; not like a little kind of wardrobe, where you’d have an electric sauna. We were always “oh, yes, that’s a really interesting idea, but the gym is incredibly popular.” And she kind of pushed forward with this idea, for ages and in every bloody meeting, it became this discussion of the sauna. And I mean, there’s no way it could possibly ever happen, anyway, but some people get onto a committee because they have one idea. Maybe they want to get rid of animals in a building, or maybe they want to introduce animals (which is much easier). But so often, they stand on one particular cause and they have nothing to contribute to the running of a building,

Jimmy  26:21

The woman who bought the flat above us, got on the committee, so she could get a timber floor put down, without any restrictions. And then as soon as the floor was down, she held a party, which started at midnight. And we’re still here; people stomping around on that floor. I mean, we’ve been very lucky that the people who live above us are fairly light of foot, but occasionally they have their kids coming along and they thunder around and you think “one of these days, we’re going to have to go to the committee and say ‘that floor is illegal.'” But that floor is illegal, because that person got on the committee to get it approved and then shot through and then sold the apartment.  Alright, Sue. Thank you. We’ve bashed the crap out of all the new laws. And I’m sure there will be other things come up, during the course of the next week or so and we’ll see what happens when it gets to the upper house.

Sue  27:22

Okay. Look forward to it, Jimmy.

Jimmy  27:25

And thank you all for listening.

[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.