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The decision last week by Syd Fisher to put the development company behind the troubled Gazebo apartment block into liquidation has exposed one of the major problems many apartment owners face trying to get developers to make good on defective buildings.
Fischer’s decision to scuttle the company 2EBR, wipes out $135,000 legal costs awarded to apartment owners in the Supreme and Appeal Courts, not to mention claims for about $4.5 million in alleged defects currently being sought.
The directors of 2EBR would argue, perfectly legally, that this particular company, set up specifically to convert the former Gazebo hotel at No 2 Elizabeth Bay Rd into apartments, does not have the assets to meet its debts. It has no prospect of any further income and therefore the liquidator has been called in.
It’s a lose-lose situation. Fischer loses one of his companies – any profits it may have made from the sales of the 160-plus Gazebo apartment long gone – while the owners of those apartments lose up to $4.5 million in alleged defect rectifications that they are now obliged, by law, to undertake.
The NSW government plans to plug the defects hole, in part, at least, with a two percent defects bond that was due to come in with the much delayed strata law reforms. These reforms will not now see the light of day until about this time next year.
Predictably, though, the other side of the deal – making it a lot harder for owners to claim for defects – was rushed through at the beginning of this year and made retrospective. It’s a carrot and stick approach to strata defects that is, for the time being, all donkey food for developers and no stock whip.
Much vaunted anti-phoenixing laws also came into force earlier this year. They purport to prevent building companies from shutting down to avoid their debts then reappearing weeks later under a different Australian Business Number but with identical owners.
Of course, if fly-by-night developers take their money and run, with no intention of ever pouring another millilitre of concrete, these laws don’t count for much.
In any case, all of this is virtually meaningless in the current property bubble feeding frenzy where, depending on its post code, a cardboard box with a bucket for a toilet would still attract auction bids.
And the responsible developers who have been trying to build confidence in their industry by providing quality product, not to mention supporting the defects bond, must be sobbing into their bubbly.
Why do they bother when our legislators are happy to spend the proceeds of a property boom like sailors on shore leave while turning a blind eye to the glaring gaps in protection for apartment buyers?
Beverley Hoskinson-Green, a top strata lawyer with Makinson d’Apice, says that, while the 2 percent defects bond would be a welcome addition to home buyers’ protections, what is needed is to “break the nexus between certifiers and developers.”
“As it stands, developers choose and pay for the private certifiers,” she says. “It’s little wonder then that some certifiers, looking at where their next job will be coming from, are just ticking the boxes on their current one.
“Councils should have a list of certifiers and they should be appointed to developments on the basis of next cab off the rank.”
Nowhere in our world is the phrase caveat emptor – buyer beware – more relevant than in property purchases.
Ms Hoskinson-Green suggests buyers tread warily when looking at developers that have no track record anywhere, are just the address or name of the specific development or, especially, are a variation of a tried and trusted name (like “Flat Chat No 2”).
That cardboard box may have a brand name on the side but will the parent company be around when it rains and the walls get soggy?
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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Besides electronic voting,may be AGMs held on the weekend will have more attendance of Monday to Friday working owners.In my strata,quorum was achieved only once in 9 years and that too because strata’s both funds were in deep deficit.Otherwise,4-5 owners out of 253 owners turn up for AGMs if we exclude the EC members.
After living in a major developer’s building for 9 years, I feel the new reforms are missing the most important aspect : safety.Safety assumes more importance as apartment living is becomes the norm in most suburbs.
What I saw in my building is this : installers of fire dampers / sprinklers,stair pressure fans,child safety features and annual fire safety inspectors are one and the same company and they go wherever the developer / builder goes.So what happens.Even if the dampers are not there,not installed correctly,stair pressure not right, they go unnoticed or ignored as it is human not to acknowledge one’s / their own mistakes.And conveniently,they don’t take photos and the Councils don’t ask for photo evidence of their certificate, though it is cheap,while giving occupancy certificates.
Fire safety equipments,especially dampers,is a major defect and the developer / builder escapes liability after 2 years in the new strata legislation.In our case,we did not realise it for 8 years !
Most owners of apartments are inexperienced in building safety matters and these things go unnoticed for years till there is actual fire.
The reality in OZ : there are vested interests in the building industry.So what do we do ? We must ask the Councils,at the expense of concerned strata, to undertake the FIRST annual fire safety inspection through an independent certifier with photo / video evidence where possible.Also installers of these equipments should never be the certifiers for 3 years.When is this ever going to stop? When I bought my old strata property we discovered it didn’t meet building codes in a number of areas. We couldn’t get the builder to fix anything. Our insurer said we had to get it done or else. So we, those who paid for new properties we bought off the plan, had to fork out money to get at least some of the areas brought up to building codes. That builder closed his business. We couldn’t take action against the new business because the old business built our complex.
And here we are 15 years later. No further ahead. I cannot see how anyone thinks that new owners should have to pay an extra couple percent of the purchase price to have their new homes “repaired” which is one option I have heard. When we have a lemon law for new cars, because when we pay $25,000 for a new car we should expect to have one that is built correctly and functions properly, why do we not have a law for new apartments costing hundreds of thousands! Why do we not have a “lemon law” for apartments where the builder/developer are required to have money put aside for repairs.
It is disgusting that people have to put up with this. It is ridiculous that they have to fight for what they paid for – a building that meets requirements and is built correctly. I have bought new. I thought it would be better than “old”. Less to fix. Less to do. But I was fixing and finding things to fix for the 13 years I lived there.
And here we have a government who believes the answer to our housing crisis is to build, build, build more and more apartments. No thought as to the problems already encountered (which I believe I have read 80% have had faults in the past) No strata owner buying new/off the plan should have to put their hand in their pocket to pay for corrections for a product that should, like your toaster in your kitchen, be covered when things “don’t work”. There seems to be more rules/laws for home appliances than for your actual home! And we should be angry about that!
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