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Tagged: contracts, embedded services, queensland
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16/11/2023 at 5:46 pm #71390
A story in last weekend’s Australian Financial Review makes grim reading for anyone concerned about the spreading trade in management rights into NSW
[See the full post at: Eight billion reasons owners are ripped off]The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
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18/11/2023 at 11:02 am #71430
The imposition of unfair management rights and other financial commitments on unsuspecting new entrants into apartment ownership in Queensland is scandalous. The failure of the Queensland Government to address this long-running canker in its most recent changes to the legislation in Queensland is totally perplexing, unless you are inclined to give credence to conspiracy theories about behind the scenes donations to political parties, but I won’t go there on this occasion. However, until the whole mess is cleaned up, the blatant manipulation of off-the-plan buyers of new apartments in particular will not only continue but get worse as new practices to do with a variety of embedded service contracts in new buildings will spread. It is no accident that developers in other states, seeing the additional profit that some Queensland developers have been able to extract, seek to emulate them in various ways outside Queensland.
We live in a four story, 26 unit apartment block on Brisbane’s Bayside. Our suburb is currently the locus of a boom in the construction of new apartment buildings, marketed mainly to retirees and downsizers. It’s not a market primarily aimed at investors looking to cash in on sky high rents, students or service workers. About two thirds of the units appear to have been purchased by retired owner occupiers. However, as far as I can determine, the management of virtually all these new buildings have been set up under the Accommodation Module of regulations under the Body Corporate and Community Management Act. Among other things, this method allows for the granting of management rights – including letting, caretaking and service contracts – for up to 25 years.
Unlike genuine tourist areas like the Gold and Sunshine Coasts, letting rights in our area are a non-issue because there is so little turnover of the fewer rental properties available in each building, but the caretaking and service contracts are another matter entirely. When we bought our apartment off the plan and moved in over six years ago, we found the developer at the first Extraordinary General Meeting and before the first AGM at which the Body Corporate Committee was elected, had given a contract to a related company to provide caretaking services for the next 25 years. This contract came complete with in-built provisions for annual price rises according to CPI and five yearly price reviews where a new benchmark price might be set. We estimated that over 25 years, the unit owners were going to be up for more than $700,000 for what was nothing more than a twice weekly cleaning service. When we queried this, we were assured that this was standard practice, perfectly legal and there was nothing that could be done about it.
Well, as it turned out, there was something that could be done about it and we chose to do it. As a result, we have now been able to extinguish both the caretaking and letting contracts and we now manage the building ourselves. In the process, we have saved hundreds of thousands of dollars and the building is maintained to a far higher level than was ever going to occur under the previous arrangement. If you are an owner or body corporate committee member in a new apartment block in Queensland, I am happy to share a paper I have written about how our body corporate managed to extract itself from this iniquitous arrangement.
In the meantime, the challenge facing new apartment owners only appears to be getting more perilous. In a growing number of new apartment buildings, embedded services tied to long running service contracts are appearing that are going to lock owners into expensive arrangements that they cannot change or get out of. Contracts for not only caretaking and cleaning but rubbish removal, pool maintenance, electricity and gas supply, internet connections and repairs and maintenance to all manner of specialised equipment to name just a few. There has never been a better time to remind people of the old maxim: BUYER BEWARE!
08/12/2023 at 4:05 pm #71823Tim,
I am an owner and ex body corporate committee member in a 32 year old apartment block of 100+ apartments on the Gold Coast.
I read with interest on the Flat Chat forum as to how you were able to exit out of both the caretaking and letting contracts and take over the management of your building.
We operate on a 10 year Standard Module however our current 2002 outdated caretaker & letting agreement 10 year (Standard Module) has never been reviewed and has had top up extensions/variations added at 8 of our AGM meetings between 2007 to 2022 and is now out to 2032.
Yes a 10 year outdated agreement out to 30 years! Apparently if nothing changes it will continue forever! Our owners are committed to approximately $2 million that the body corporate will levy off our owners over the next 8 years to pay the Management Rights Owners, who ever that may be then. As you know Body Corporates have no say in who this will be in the future.
Since 2002 our Strata CTS has had 5 different Management Rights owners between 2002-2022 and our caretaker & letting agreement no longer reflects the current needs of our strata community. In fact it should have been reviewed over 10 years ago. Who knows out of date it will be when we get to 2031-2032 if nothing changes?
That being said I would be very interested in getting an understanding of how your body corporate managed to extract itself from this situation.
Regards
Othani
08/12/2023 at 4:07 pm #71825That being said I would be very interested in getting an understanding of how your body corporate managed to extract itself from this situation.
Yeah, me too! I will run the paper in full on the Flat Chat website and maybe outline it in the AFR, if Time cares to send it over.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
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