Another gaping hole in strata law has been brought to my attention this week – and it shows how the right to make decisions about your own home can be ripped away from you by a statistical blip.
Under current law, the developers of a new strata scheme have their voting power on the Owners Corporation reduced to one-third of its actual strength until they have sold more than 50 percent of the units. But as soon as they have sold more than half the units, their voting power rockets back to full strength.
This rule was designed specifically to prevent unscrupulous developers controlling new buildings against the best interests of unit owners. What’s the problem? It doesn’t work.
Experience tells us that at a new development’s first Annual General Meeting, a naive, trusting and probably bewildered group of new owners will often approve even the dodgiest deals presented by the developers, while meekly electing their cronies and stooges to the executive committee.
Eventually savvy owners move in and start looking at decisions made (and not made), who’s on the executive committee and all the lucrative and lengthy contracts the developers may have awarded to their subsidiaries and mates.
If this coincides with the developers selling more than half the apartments, they will have a fight on their hands. As soon as their holding goes below 50 percent, the developers’ voting power almost trebles to just a couple of votes off a majority.
Throw in a few easy-to-get proxy votes and the owners lose any real power over the running of their own homes for a couple of years until balance is restored. By the time they’ve got it back it could have cost a fortune in inflated levies, legal costs, missed opportunities, crippling cast-iron contracts and unattended defects.
This isn’t some crazy conspiracy theory – it’s happening right now in some of our biggest and best known developments. It’s perfectly legal and utterly reprehensible.
The simple answer is to amend the law so that it does what it was intended to do. Stagger the limit on developer votes: one third up to 50 percent of holdings, then reduce them by half till they hit 25 percent. Sorted.