Don’t buy in Queensland before you’ve read this

Recent state government announcements that South-East Queensland should expect to see another 600,000 apartments in the next 20 years – doubling the number of units currently available in the state – have set alarm bells ringing.

There are serious concerns among strata professionals that this rapid growth would further embed the systemic “legalised corruption” of Queensland’s management rights laws.

That in turn should prompt caution among any investors who are considering joining the annual influx of 30,000 residents to the Sunshine State. 

Laura Bos, General Manager of the Queensland wing of Strata Community Association (SCAQ), the strata managers’ and service providers’ professional body, says the government needs to live up to a promise made to fix the state’s seriously out-of-date body corporate laws.

“There must be an end to new, 25-year management rights agreements being sold, and additional consumer protections must be introduced for owners trapped in existing agreements,” she told Flat Chat this week.

“We are expecting a much larger section of our community to live in bodies corporate, we cannot sacrifice their quality of life for the sake of the commercial interests of a small portion of our community.”

Queensland, uniquely among larger Australian states, allows developers to pre-sell caretaker management rights to individuals and companies, without any input or approval from the eventual apartment owners.

The terms of the contract are 10 years for the Standard (mostly residential) module, and 25 – yes, 25 – years for the Accommodation (mostly holiday lets) module.

In neither case do the apartment owners have any say in the terms of the contracts, and find them impossible to revise or rescind, even after egregious breaches.

Thus they are collectively saddled with managers they may not want, on terms they didn’t agree, while paying inflated fees to service the loans taken out to buy the contracts in the first place.

When the contracts eventually run-out, tactics used to bully owners into re-signing, so that the contracts can be sold on, might put the stand-over merchants of Sydney and Melbourne’s underbelly to shame. The apartment owners have no say in who buys the contract.

Consumer protection in this area is effectively non-existent with rulings against the contracted managers in local courts and tribunals rare if not unknown, so loose are the terms of their engagements.

To be fair, there are many schemes where caretakers are valued members of their communities and the details of the contracts are rarely an issue.

But elsewhere, this is an often brutal affair with hundreds of millions of dollars’ worth of contracts traded every year by businesses, many of which are happy to sail as close to the wind as the state’s lax strata laws will allow.

Flat Chat has received reports of developments, clearly aimed at long-term residents, being given planning approval as holiday letting projects – allowing the developer to sell more lucrative 25-year management rights.

“The previous Attorney General committed to introducing two reform packages this year. We are now in August, and we are yet to see one’” says Laura Bos. “The sooner the Government passes legislation the better for all stakeholders, uncertainty kills confidence.”

Apartment owners agree. “Enough of the rorts please, integrity must be seen to be restored … to provide good governance of the strata sector,” the Unit Owners Association of Queensland said in a statement issued last month.

You can find the SCA-Qld full policy on management rights on its website and the Flat Chat Wrap podcast this week examines Queensland management rights.

When the Queensland Fair Trading office was approached for comment, a spokesperson from the Office of Regulatory Policy said: “We understand that management rights are a contentious issue in the community titles sector. That’s why the government established the Community Titles Working Group to examine the key issues for the sector.

“The Working Group has considered many areas of Queensland’s body corporate legislation, including scheme termination, management rights and the enforcement of caretaker duties, and how best to balance the rights of individuals with the broader community of the scheme.

“The Government will carefully consider the Working Group’s views on management rights to determine whether legislative amendments or other policy initiatives should be pursued.

“We are committed to continuing to work with stakeholders to ensure we strike the right balance between development flexibility, the viability of existing management rights businesses, and rights and protections for lot owners.”

You can hear our dissection of what all that really means in this week’s Flat Chat Wrap podcast. An edited version of this column first appeared in the Australian Financial Review.