Thinking of investing in a unit in Covid-free Queensland? Be careful. It seems those familiar helicopter shots of glittering high-rise apartment blocks marching up the sands of Gold Coast beaches apparently belie a world of bullying, community turmoil and financial corruption.
More than 35 per cent of Queensland strata residents surveyed earlier this year described their communities as “disharmonious or toxic” with 65 per cent claiming they had been bullied by committee members and caretaker managers.
Calling for changes to the state’s Body Corporate law back in 2019, a Gold Coast Sun editorial said: “Thousands of people are migrating to paradise every year for our weather, clean lifestyle and pristine beaches. In reality, what some of them are walking into is a living hell.”
But finally, after decades of little significant action, the state government is setting up a working group to examine its strata laws, including those contracts.
The Unit Owners Association of Queensland (UOAQ), which conducted the survey of 1700 strata residents, will have a seat at the table. Number one on its priorities is dealing with the pre-sale of management rights.
A large part of the systemic disharmony is surely caused by that multi-billion-dollar financial structure that would be illegal anywhere else in Australia.
Under that system, the developer sells the right to manage buildings for up to 25 years to individuals or companies, before the eventual apartment owners even have a chance to meet and make their own collective decisions.
Thus, the owners of the apartments have no say in who their managers are or what the terms of the contracts might be. According to the UOAQ, KPIs tend to be either non-existent or unenforceable and the terms under which managers can be sacked are so vague that they are irrelevant.
This system, at its most basic levels, exists for one reason only – to pour more money into developers’ coffers with absolutely zero benefit for apartment owners. In fact, there are additional costs as managers must inflate fees to pay off their investments.
On top of that, there is a lively trade in management rights, worth literally billions of dollars a year, according to government figures. Again, owners don’t get to choose their managers when the contracts are sold.
It’s a huge business and there are reports of managers who hope to sell bullying owners into converting 10-year contracts to 25-year deals, or renewing contracts that are coming to their end.
Why would they agree? Apparently, threats of legal action for restraint of trade will get reluctant apartment owners over the line.
It gets worse. Some managers take kickbacks from contractors and favour landlords over permanent residents because they get commission on rentals.
Owners who are favoured by the managers are likely to strongly resist neighbours’ attempts to change the status quo. Little wonder that so many of those surveyed reported conflict and felt they were living in toxic environments.
Queensland strata was originally based on holiday rentals and residential strata was very much an afterthought. When demand grew for residential units that weren’t invaded by holidaymakers all year round, the government created a two-tier system of residential and accommodation blocks. The former had management contracts limited to 10 years, the latter to 25 years.
Then along came Airbnb which has managed to persuade every state government in Australia that “residential” includes apartments that are let out in their entirety to tourists for the most part if not the whole year.
This pretzelizing of legal definintions has grown Airbnb into a multi-billion dollar company that is also responsible for for massive social problems, such as driving local residents out of the centres of world cities, due to grossly inflated rents.
Queensland was not immune to this, and the “residential” module blocks were soon infected with the short-term-letting disease. Even buildings that were constructed on the proviso that they would never be used for short-term lets, suddenly were subject to steady streams of holidaymakers.
Queensland councils, generally, were not even slightly interested in policing their own planning laws while, according to UOAQ, some caretakers started building portfolios of illegal short-term let properties in their residential blocks, creating side businesses by providing linen change, cleaning and key-holding services.
So much for residential-only unit blocks. But the whole of Queensland strata seems to be a huge hot mess.
So what are the prospects for meaningful change when Queensland’s apartment owners sit down to try to unpick the multi-billion-dollar industry that is effectively holding them hostage?
Across the table will be representatives of the caretakers, developers, strata managers, strata lawyers, real estate agents and management rights traders, many of whom may have benefitted greatly from this fundamentally immoral business.
Good luck to them. But we shouldn’t feel too smug about southern state strata laws which insist that all contracts be ratified by apartment owners. There are reports that some developers down here are hustling naïve owners into accepting similar long-term management contracts, telling them that it’s “standard practice”. Well, it is in Queensland. You can find out more on www.uoaq.org.au.
Shortly after this article appeared in the Australian Financial Review, I received a response from a Queensland business executive basically arguing that apartments are less expensive in Queensland because costs are offset by the sale of management rights. You can follow that thread HERE on the Flat Chat Forum.
If you like this post or find it helpful, please share it with interested friends using the social media buttons. If you wish to respond, registered readers can add a comment at the foot of the story or, we’d prefer, on the Flat Chat Forum.
To subscribe (for free) to our weekly Flat Chat newsletter, bringing you the latest posts from this website, just click HERE
