How a bit of 19th Century nonsense is ruining our dinner.
"..cigarette smoke might only be a 'nuisance' to a person of elegant or dainty modes and habits of living.."
Charles Dickens was walking the streets of London and at the time writing
"Little Dorrit".
It was the middle of the 19th century - cholera
was rampant, and raw sewage poured freely into the Thames.
It got so bad
that Parliament itself took recess when the stench from the river made it
impossible to conduct business - that event was referred to later as "The
Great Stink".
On March 24th 1851 on a cold and wet morning in nearby Surrey, there was,
along with the cold and the mist, some smoke about, and it was because of this
smoke that land owner William Walter entered court to plead his case and
seek an injunction against his neighbour John Selfe.
It seems that Mr. Selfe
had taken to a new business of digging up the clay on his land and firing
bricks, and the considerable smoke generated by the new enterprise was causing
much distress to plaintiff Walter.
160 years later, sitting on your apartment balcony, perhaps sipping a chilled
riesling with dinner, you might wonder what all these 19th century events
have to do with you.
You'll likely have come from a workplace that's been mandated smoke-free
for nearly two decades, walked through a smoke-free city mall, traveled
home in a smoke-free train that you boarded in a smoke-free railway station.
Unfortunately, as you now sit down to dinner on your balcony
you are assailed by the noxious, awful stench of the cigarette smoke from
a couple of the residents on their balcony barely ten feet below.
Now living in a modern fairly dense strata title community, governed under
the most advanced Strata Title legislation of the 21st century, as Queensland's
is, you'd think that it would be easy to get relief from this very stressful
'smoke-at-home' situation.
After all, one of the fundamental tenents of modern Strata Title law is
that each Community is able to make rules for the common good of the residents
- they are able, to a significant extent, democratically govern themselves.
So it should be a simple matter of the Body Corporate just resolving to
approve a new By-Law prohibiting smoking on balconies and Common Property,
or perhaps anywhere in the complex. But you'd be wrong, you've just come
slap up against 19th Century's "dainty person" Common Law definition
of 'Nuisance'.
Our current predicament with anti-smoking By-Laws in Queensland dates back
to that courtroom in Surrey in 1851, where the judge in summing up felt
he had to come to grips with a definition of 'nuisance and inconvenience',
and in part said:
"And both on principle and authority the important point next for decision may properly, I conceive, be thus put : ought this inconvenience to be considered in fact as more than fanciful, more than one of mere delicacy or fastidiousness, as an inconvenience materially interfering with the ordinary comfort physically of human existence, not merely according to elegant or dainty modes and habits of living, but according to plain and sober and simple notions among the English people ."
And so these now immortal words, "elegant or dainty modes and habits of living" - in other words, something like cigarette smoke might only be a 'nuisance' to a person of elegant or dainty modes and habits of living, has been seized on by our Commissioner's Office Adjudicators and Tribunal 'beaks' as the only relevant bit of Common Law to define such 'nuisance' - we wonder just how hard they tried, and how much they realise just what a joke all this is. And we wonder also how hard they are agitating for some new statute law that would override this bit of quaint Dickensian nonsense now that we live in an era of smoke-free workplaces and environs and can detect a single noxious cigarette smoke particle at 200 yards.
And the amusing thing about all this is, back in the Surrey courthouse,
in 1851, Mr Walter got his injunction - he was even successful on appeal!
But it's the legacy of the judge's summing up musings that have been referenced
time and again in our Adjudicator and Tribunal Orders.
They seem to be having more luck in NSW with preventing smoking in Strata
Title communities - we're just wondering how much longer before sanity on
this issue comes to Queensland, and a bit more modern law that takes into
account the shift in sensitivity with cigarette smoke, relegates the 'dainty'
man to history.
Walter v Selfe - the original 19th Century case
download here
And now see how this nonsense plays out today and is blocking attempts to restrict the annoyance of cigarette smoke in our Strata Communities:
Adjudicator's Decision Norbury vs Hogan
download here
QCAT Norbury Vs Hogan on appeal (failed) download
here
Michael Kleinschmidt of MacGillivrays Solicitors comments on the Norbury case download
here
Admiralty Towers failed smoke ban
download here
Sydney Morning Herald Strata Commentator Jimmy Thomson's article on one latest NSW initiative download
here
Work, Health and Safety - a new nightmare for Strata Communities
Our view is that we cannot conceive how a Body Corporate could manage compliance with this new legislation without outside assistance.
Another time, another place, we might have the much needed debate about
'nanny state' and chronic over-regulation - for now just let's try and come
to grips with this new bit of nightmare legislation that's been dumped in
our laps.
On January 1st. the new 'federally-harmonised' Work, Health and Safety legislation
came into force in Qld, NSW, ACT - other States likely to follow soon.
It is the opinion of specialist strata lawyers - Andrew Suttie of Nicholsons
Lawyers and Michael Teys of Teys Lawyers - that it will apply to most Strata
Title Schemes.
Read Andrew Suttie's commentary (14 pages)
Michael Teys has produced an excellent overview video about it all:
link to the video
Work, Health and Safety Act 2011
you can wade through the 351 pages of the legislation here:
download here
Michael Teys gives a good, and frightening, summary of what Bodies Corporate and their Committees have got to worry about - and it's a lot!
Our view is that we cannot conceive how a Body Corporate
could manage compliance with this new legislation without outside assistance
- a Committee might have good intentions, but we just don't believe they
will manage compliance on their own.
This goes way beyond just ensuring you have a safety audit done.
No doubt many Strata Schemes, out of ignorance or by conscience decision, will opt to do nothing concerning attempts to ensure compliance - for those that do decide to 'bite the bullet' it will likely mean another expense, but should there be a serious accident on the property, those Committees that have sought to manage compliance to some extent will likely be hugely relieved.
Assistance to manage compliance and risk will, we suspect, become a significant business for consultants - in SE Queensland, one company that is able to assist now is Diverse FMX facility managers and safety advisors.
And finally, if you need any more convincing, here's the Sydney Morning Herald strata living commentator Jimmy Thomson's take on it all: link to the SMH article
To contact Nicholsons for advice, go here: e-mail Andrew Suttie
To contact Teys Lawyers for advice, go here: e-mail Michael Teys
To contact Diverse FMX for advice, go here: e-mail Lynda Kypriadakis
It's Time to Cut Electricity & Gas Costs - Part 2
This is the second in a series of articles presented by Andrew McNair from Energy Options Australia on energy related topics for Strata Communities. Energy Options has been providing energy related services to Bodies Corporate for nearly 10 years and provides a wealth of experience in this area with over 30 years in the electricity industry.
This is the second article is a series to assist Bodies Corporate in reducing
their electricity costs. In the first article we concentrated on encouraging
Bodies Corporate to carry out a review of their electricity supply arrangements
and some minor details on what can be achieved. This article provides more
in depth detail on the opportunities and the actions required to take advantage
of any savings where applicable.
The first point for any Body Corporate is to understand if they are currently on a regulated tariff arrangement with their retailer (typically Origin, AGL or Ergon if outside South East Queensland) or on a market contract. These are two very different types of arrangements so it is important to understand the differences. If you are not sure - seek assistance.
This article will concentrate on regulated tariff arrangements.
A regulated tariff arrangement is a carryover of the arrangements prior to deregulation. The Queensland Government provided all electricity customers with a choice to remain on a tariff if they chose not to enter into a contract arrangement. Regulated tariffs are based on a set of charges and structure to suit different customer types, usage pattern and annual consumption.
The charges for regulated tariffs are reviewed on 1st July each year and subject to increases only after approval by the regulating authority, in the past the Queensland Competition Authority and now the Australia Energy Regulator. The tariffs are applicable to all customers in Queensland. Similar structures exist in other states but not to the same extent of choice.
Any customer currently on a regulated tariff has the choice to remain on this tariff and or seek to enter into a market contract. Entering into a contract should only be on the basis of savings over the current tariff. It is therefore extremely important that all bodies corporate on a regulated tariff ensure they are on the appropriate tariff before making any decision.
The typical tariffs applicable to all Bodies Corporate are as follows -
Domestic Tariff 11 - This is the standard tariff for all residential bodies corporate. Often we find many residential bodies corporate on Tariff 20 particular for more recent developments in the last 4 or 5 years. In terms of suitability this tariff normally suits smaller bodies corporate up to around 30,000 kWh consumption per annum or $6,000 + GST.
General Supply Tariff 20 - This is the standard tariff for all commercial, retail or industrial bodies corporate. Depending on the type of development and annual consumption other tariffs may be suitable.
General Supply Time of Use Tariff 22 - This is a time of use tariff with low off peak rates and is suitable for the medium sized body corporate typically with more than 30,000 kWh per annum or spend of more than $6,000 + GST per annum. Commercial, retail and industrial bodies corporate with off peak usage (like security lighting) may be suitable on this tariff.
Low Voltage Demand Tariff 41 - This is a more complex tariff and suitable for larger bodies corporate using around 300,000 kWh per annum or a spend of over $50,000 + GST per annum.
Time of Use Demand tariff 43 - This tariff is suitable only for the larger bodies corporate typically spending over $250,000 + GST per annum with a consumption of close to 2,000,000 kWh.
Some bodies corporate will also have other tariffs such as Night Rate Tariff 31, Controlled Supply Tariff 33 and Non-Domestic Heating Tariff 37, all of which can be used for water heating or pool and spa heating.
You may need to seek advice on which tariff is suitable and the choice of tariff can also be dependent on the type of metering for the property.
Changing Tariff - If a more suitable tariff has been identified then changing tariff may require the meter on the property to be changed. If this is the case an electrician usually needs to be engaged to confirm the switchboard is suitable for the meters to be changed. With some recent changes in the Energex and Ergon's Queensland Electricity Connection and Metering Manual requires installation on meter isolation (if not already installed) prior to any tariff change.
For some older properties this could result in electrical costs of $300 to $600 + GST. Confirmation is required though in case there is other associated work required. For changes from Tariff 20 to Tariff 11 generally there is no work required and your retailer can manage this process. Alternatively contact your Body Corporate Manager to advise you on consultants who may be able to assist you in this process.
Whats Next?
Once you have confirmed you are on the best tariff there are further arrangements that can be sought to provide further savings. The choice is generally either a negotiated discount arrangement (a percentage off the base tariff charges) or the negotiation of a market contract.
Negotiated discounts are available of customers classified as "Small Market" which is defined as consumption of less than 100,000 kWh per annum. This would be equivalent to an annual spend of approximately $18,000 to $23,000 + GST, however the criteria is consumption based.
Customers with consumption of 100,000 kWh and above are classified as "Large Market" customers and the only option for further savings beyond the current tariff is to enter into a market contract. More details will be provided in the next article.
Negotiated discounts
For "Small Market" customers, you can enter into a negotiated discount arrangement with your current retailer or another retailer of choice at any time. The discounts offered will depend on the current tariff for the main supply, any other tariffs on the same account (such as Tariff 31, 33 or 37) and of course the annual consumption.
The highest discounts (up to 20%) offered are generally for bodies corporate with larger consumption in this market category (i.e. 50,000 to 100,000 kWh per annum) and on either Tariff 20 or Tariff 22. Residential bodies corporate on Tariff 11 will generally receive discounts up to 10% to 14% maximum. This is why it is important to ensure the best tariff before negotiating the discount offer.
An example of savings achieved for a body corporate using 80,000 kWh per annum ($16,600 + GST) currently on Tariff 11. Their first step was to arrange for a tariff change to Tariff 22 with initial savings of $1,800 + GST (nearly 11%). Once the tariff change was complete a discount arrangement of 18% was negotiated with further savings of $2,600 + GST. Total savings - $4,400 + GST (27%). This compares to the initial offer from their retailer of only 10% off the original Tariff 11. Costs to achieve the savings were around $1,000 and recovered in less than 3 months.
To enter into a discount arrangement the body corporate will need to enter into a contract or agreement for terms of 12 to 36 months. The discount will apply off the regulated charges for the current tariff for the term of the agreement. Please be aware though that on 1 July the regulated charges will increase and the discount will then apply off these new rates.
Agreements of this type are relatively risk free as the body corporate has the right to terminate the agreement at any time, generally after payment of a termination fee between $50 to $150 + GST.
The key point is to do some homework, and get good advice, to make sure your body Corporate is getting the best arrangement possible and as always if in doubt seek help from your Body Corporate Manager in the first instance.
Next article will explore opportunities for "Large Market" customers
by entering into market contracts.
You can contact Energy Options Australia
for a free independent assessment.
Phone / Fax: 07 3278 8611
Mobile: 0414 370 993
E-mail: Energy Options Australia
Web: www.energyoptionsaustralia.com.au
Caretaking & Management Rights - Discussion Paper released
"discussion paper seeks submissions about the current state of management rights in Queensland"
‘Management rights’ are arrangements where a business holds contracts with the body corporate of a community titles scheme to provide a combination of caretaking and letting agent services, with the ‘resident manager’ or employee licensed to act as a resident letting agent living onsite.
Management rights businesses provide critical services to both the residential and tourist accommodation sectors. It is a significant business sector in Queensland and is expected to grow in future years as development, housing and accommodation needs increase. As such, it is vital that the legislation governing these schemes remains relevant and appropriate.
Since the commencement of the Body Corporate and Community Management Act 1997 (BCCM Act), management rights arrangements have been a source of significant discussion amongst community titles sector stakeholders and the subject of several amendments to the Act.
This discussion paper seeks submissions about the current state of management rights in Queensland. The defining characteristics of the management rights business model and market are discussed, alongside concerns about the impacts of rising costs on lot owners and the relative lack of competition in the provision of management rights services.
Feedback is also sought on the effectiveness of legislative obligations on developers as original scheme owners when establishing management rights. The paper also discusses legislative protections, powers and remedies provided to bodies corporate and their lot owners.
Management Rights Discussion Paper
download here
The Government invites submissions:
By Email:
managementrightsreview@justice.qld.gov.au
By Post:
Management Rights Review
Office of Regulatory Policy
Department of Justice and Attorney-General
Locked Bag 180
City East, QLD, 4002
PLEASE NOTE: Submissions will be made publically available on the Department of Justice and Attorney-General website unless marked ‘IN CONFIDENCE’
Caretaking & Management Rights - a House of Cards?
"It's a rotten system - it didn't get rotten, it's been rotten from the outset."
The winds of change are picking up - the zephyr is becoming a breeze.
The bad joke perpetrated on Queensland apartment Owners for more than two
decades has gone on far too long, and the 'little people' are massing at
the city gates. Even those 'in the game' - the more sensible of them - know
that something's got to give and would welcome a change.
The evil that is Management Rights in Qld, together
with the associated legislation, are an anachronism in our modern society
- where developers are able to 'stitch up' apartment Owners by installing
a Caretaker on a 25 year contract and the Owners have no say whatsoever
in that process, and then the legislation makes it so difficult to get an
under-performing Caretaker ejected - that nonsense has got to come to an
end. Whether the warrior who leads the charge is another Peter Lawlor (the
Lot Entitlement soldier), or some other politician, maybe one who gets 'bitten'
personally at his Noosa holiday apartment, whether he's 'pumped up' himself
or pumped up by others - doesn't matter - the job just needs to get done,
the legislators need to pick up their quills and start drafting the changes
- but be warned politicians and legislators, the 'little people' won't be
pacified with just a 'pat on the head' - substantive changes that will dry
out the rot and stop the stench are needed. The stench originated in George
Street, and it's there it needs to be stopped.
To these calls, the age-old response from those in the industry has often
been the old homily: "..well, one bad apple..." - unfortunately it's not
just one bad apple - it seems as if half the barrel's "gone off". The amount
of disputation, hardship, Committee work, tribunal sessions, litigation,
legal fees, caused by under-performing and badly behaving Caretakers has
been monumental. But it was always going to be that way wasn't it - when
you have someone entrenched in a 'job', a 25 year contract that's difficult
to break, a guaranteed salary - gosh!, who would have thought that might
lead to laziness, arrogance, and complacency.
The current Caretaking & Letting Agreements in
place can't be 'unwound', but the holders of those Agreements will not be
spared - the current 'move on' provisions in the legislation are just too
cumbersome and difficult to implement and need to be significantly reworked.
There is the problem of absentee Owners generally not really knowing what
is going on at the Scheme - if their monthly rental cheque arrives that
is the primary concern, and Committee Minutes, if they read them, rarely
are able to give a vivid picture of the hardship the Committee is having
on the ground. And when a General Meeting resolution does reach these Owners,
they are invariably reluctant to be joining a group that is taking action
against the man who writes them their monthly rental cheque - fear over
losing rentals is justified too - victimisation definitely does take place!
Be under no illusion, the engines that drive this circus roundabout are
Greed, Self-interest, and People Behaving Badly.
There are lots of options for legislative reform to fix this mess - not
allowing developers to enter into the long agreements in the first instance,
but rather giving that right to the Owners - not allowing very long Agreement
terms no matter who selects the Management Entity - making the 'move on'
provisions far easier to implement and execute. But it's a rotten system
- it didn't get rotten, it's been rotten from the outset - and the fact
that there are indeed some good Resident Caretakers doing a good job, doesn't
make the system itself less rotten or less in need of urgent overhaul, and
drastic and fundamental change - and if those changes don't work, then abolishment.
If you have a tale of woe to tell us about on-site Caretaking problems, contact us and share the pain.
Lop that palm? - here's the plan
There are three types of people in the world - tree lovers, tree haters - and those that tolerate a few; and generally all three types will be found in your community.
One of the most disruptive and divisive activities in a Strata community is the lopping or removal of trees or palms.
Heaven forbid that it is an 'unauthorised' lop or removal - although they do occur too - but even the fully authorised events invariably cause 'gnashing of teeth'.
There are three types of people in the world - tree lovers, tree haters
- and those that tolerate a few; and generally all three types will be found
in your community.
The issue often arises where the original landscaping is now maturing and
those palms and trees, some perhaps not planted so wisely, are starting
to block views and inhibit sunlight - apartments that were once 'light-filled'
are now a bit dark dingy. And so the Committee gets the requests coming
in demanding palms and trees be lopped and removed.
For many Committees this is, or can become, a significant problem to handle well. What is one person's nuisance is another's joy and amenity, and then of course there is the very important matter of setting precedents - "...you approved that palm coming down, and now I want the one blocking my view removed too".
For some Committees, the problem has become so difficult and divisive, that they have simply decided not to make any such 'tree resolutions' at Committee level, but rather to insist that any Owner that wants a palm or tree lopped or removed, to submit the relevant Motion to a General Meeting of the Body Corporate - and thereby let all Owners have a chance to have their say. So, problem solved? Well, probably not - we think there is a better way.
Shoving the matter to a General Meeting - the next AGM or EGM - certainly takes the 'heat' off the Committee, and certainly allows the broader ownership to have a say - more democracy should be better - but the result, either way it goes, is still going to leave some unsatisfied, and even angry residents.
We believe that the ideal solution for this situation,
for all communities with significant landscaping, is to engage a landscaping
consultant, arborist, or the like, to compile a five-year plan for landscaping
management i.e. what trees/palms need to come out, be lopped, or maybe relocated
now, what ones in a couple of years time need to be focussed on and so forth.
Sometimes, even the original landscape architect or consultant is available
to prepare this plan - but if not, then there is no shortage of such consultants
available. The beauty of this strategy is that when the final plan is arrived
at it can be voted on and adopted at a General Meeting and everyone is then
aware of the 'vision' going forward - and it's been drawn up by 'sympathetic'
and qualified consultant, and hopefully with input from interested Owners,
and so is hard to resist and argue with. The other benefit is that if local
Council permission is needed for these tree/palm removals or lops, then
presenting them with your specialist consultant's advice should make official
sanction that bit easier.
Developing strata property in Queensland
- with God, and a good lawyer at your side
Both are recommended risk-avoidance partners, but this article will hopefully convince you about one half of the equation.
It was early October 2009 at an afternoon session of the Supreme Court of
Queensland, the Honourable Justice Debra A Mullins was presiding and about
to decide on the status of thirteen Contracts For Sale - for floors of the
new 24 storey Matisse Tower commercial building in the Brisbane CBD.
Across town, the building contractor FKP was putting the finishing touches on the building and for the
off-the-plan purchasers it would soon be time for them to gird their loins and
get ready to 'pony up' the settlement funds.
But these purchasers, like the rest of us, were already sliding over the
precipice of the catastrophic GFC and their purchases weren't looking all
that rosy now.
So as is happening in a repeat performance now, and especially on the Gold Coast, one of them went looking for a lawyer - a smart lawyer - who might be able to find a way to get them out of the Contract. They found the lawyer, and the way out.
Beneath the tons of concrete of the Matisse Tower building
structure there was, allegedly, some amount of contaminated soil - the land
had been listed on the EPA contamination register. Of course, under the
sarcophagus of thousands of tons of reinforced concrete, this would never
of been any import to the owners or occupants - but there was a requirement
for it to be noted in the Contract documentation material, and it wasn't.
The EPA legislative issue, whilst being the substantive matter that this
case turned on, wasn't the only irregularity. In Queensland, consumer protection
elements are increasingly featuring prominently in legislation, and adding
complexity to dealing with that legislation. In this case, as well as the
Environmental Protection Act, other legislation cited included: The Integrated
Planning Act, Property Law Act, Property Agents and Motor Dealers Act, and
the Body Corporate and Community Management Act. In her findings, Justice
Mullins found that as well as the EPA breach, there had been a breach of
a consumer protection clause of the BCCMA.
With the developers one moment looking at $41million in potential sales, it was now about to spiral rapidly downwards.
When Justice Mullins brought down her gavel that afternoon, all contracts
were annulled, and soon after, the St George bank moved to protect their
investment, and the development entity was put into receivership - 'all
over red rover'.
The litigation over the contract documentation omission
and errors was soon to begin - and it is still running today.
If cases like this don't convince developers about
the importance of seeking out the best property lawyers to set up their
projects, then we could tell you more, but the real problem often is that
a developer doesn't really know how good his lawyer and advisors are.
When he takes that phone call, or receives that e-mail: "We seem to have a bit of a hitch with the contracts - we're looking into it now and will get back to you later today." - it's probably too late.
And it's not only just related to the contract documentation preparation, it's everything that has gone on to get to that point - how the titling structure is determined and established is critical, and can be complex.
The best property lawyers for these tasks need an intimate knowledge of
all the related land titling, property law and contract legislation as well as the strata
legislation, but most of all perhaps is that they need a lot of experience
- and lawyers with all those attributes are 'hens teeth'.
And finally, a word about Professional Indemnity (PI) insurances. In the case above, the developer's lawyer wasn't holding PI insurance cover at a level sufficient for the developer's losses, and so the point needs to be made, that whereas it has become quite common practice to request details of a contractor's PI cover, that isn't yet common to do when dealing with your lawyer! But for developers, and others, handling projects with significant risk, maybe that should change.
If you are a developer and would like a few recommendations for 'hens teeth' property lawyers, contact us for details.
National Strata laws? - not in our lifetime.
Fresh from the Griffith University Strata & Community Title Conference held on the Gold Coast, and no doubt still overwhelmed and dazed by Queenslander's generosity and hospitality, Sydney Morning Herald strata and community living columnist, Jimmy(FlatChat)Thomson wrote a somewhat 'breathy' piece on the theme of Strata laws going National - well before anyone gets too excited let's get serious.
One only needs to study the form material and forums of the Griffith conference to see just how disparate the Strata legislation across Australia is - that's if you didn't already have a good idea. And more worrying and indicative perhaps is the trend for legislators to seemingly not be strongly influenced by finely honed legislation that has been working pretty well for a decade in some States e.g. Queensland!
So not only is there currently no apparent desire from the legislators, but there is also no compelling justification. Sure, it might have some advantages, but it's not like national road laws is it. Who would it benefit? And at what cost to get there? All States would have to agree to significant compromises and changes to their individual beloved legislation, and in some cases the particular requirements that some have, make it hard to see how any unified laws could be brought in. For example, Dr Gary Bugden (the 'Godfather' of Australian strata law) recently observed, in commenting on the burgeoning Queensland strata law (now more than 1,800 pages) just how much of it was necessary because of that State's unique Caretaking & Management Rights industry.
No, sorry Jim Jim, it ain't going to happen in your lifetime, or ours.
Strata loans - they're back!
Well, they never really disappeared,
Lannock specialise in strata finance and appear to be still going strong,
but it is Macquarie Bank(MBL) that have reintroduced their Strata loan product.
MBL used to offer the product to Bodies Corporate but took it off the shelf
more than five years ago - probably because it was more work than profit.
That's the trouble with Macquarie, whilst they preach that they're the market
leaders in strata banking, and have been with, and for, the strata industry
since they got their banking licence - blah, blah, - they'll pull a product
like this just because it isn't making bags of money for them. Very much
like another frustration with Macquarie - the fact that Strata Owners can't
set up bank initiated direct debit facility for their strata Levies via
MBL's DEFT payment system - others can do it of course, and it's a facility
that many Owners would like, but some long-standing stubbornness at MBL
headquarters ( i.e. it'll be more work than profit) means that the useful
feature still remains out of consumer's reach.
Anyways, back to the Strata loans. The product seems pretty much, or exactly the same, as it used to be. The good thing about MBL is that they do know the Strata business, and so applying for one of these loans and managing it through its life is an easy process for a Body Corporate and the Strata manager.
The MBL product in a nutshell:
- $1,000 establishment fee (regardless of loan size)
- loan amount from $50,000 min to $2.5million max (but if you're big and want more, they'll listen)
- Term 5 years max, and no early payout penalty
- no ongoing monthly management fees
- interest rates are competitive
- security required: none (but they have a good look over the financials,
and don't want to see too many, or too much, Owner's Levy account arrears)
You can read more about MBL's Strata loan product
here
Strata loans can be an excellent way for a Body Corporate to get out of a 'pinch' - it might be, for example, some 'out of the blue' unplanned for situation like a serious building defect that has cropped up or has gotten to the 'can't-be-ignored' stage.
New legislation can also cause some 'discomfort' - we know of one Strata
Scheme that is faced with $30,000 pool fence replacement costs in order
to comply with the new pool safety laws in Queensland. And of course there has been the flood damage for many buildings, and the costs for some have been huge.
Other situations can result just because the Sinking Fund has been mismanaged
and real budget requirements suppressed by Committees over the years - always
a bad (and illegal) practice because these things never go away, and the
day of reckoning is painful.
In all of these situations, if the cash reserves are insufficient there are really only a few options for a Body Corporate to fulfill its obligations - big hikes in Sinking Fund Levies, a significant Special Levy, or taking out a loan. And often times, the Strata loan can be a very good option - easily managed, not too expensive, and it 'spreads the pain' over a few years.
There is one silly idiosyncrasy in the Qld Strata Legislation
that requires the loan funds be deposited into the Administrative Fund,
even though the works it is to be expended on will be capital in nature
and would normally be Sinking Fund expenditure!
We suspect that knowingly or unknowingly most Strata Managers will overlook
that little requirement and deposit the monies in the Sinking Fund just
so it doesn't 'stuff up' the financials - and who could blame them (note
to the legislators: fix that bit of nonsense next time you're having a fiddle
with legislation).
Queensland Floods - Mirvac's 'Tennyson Reach' Development
The heart-rending stories that have emerged from the January floods have shocked Queenslanders and others around Australia as we learnt of the enormous loss and damage and what supreme efforts were required in property restoration.
We hope to bring you more of these stories, and if you can make a contribution, please contact us.
Here's one Owner's story about his complex - the luxury Tennyson Reach development by Mirvac.
The Tennyson Residential Development precinct is 12 hectares of idyllic
riverside land and incorporates the Queensland Tennis Centre. Originally
5 hectares was set aside for the proposed 6 tower residential development
and 1.87 hectares of parkland - as you can read in Graham Upton's account
below, that has changed post-floods.
The January floods in Southeast Queensland created havoc and widespread
damage to people and property located in low lying areas which border
the Brisbane River and the estuaries feeding it.
Many properties were badly affected and for those which did not get swept away, there has been a clean and repair or replace requirement.
One site which was front page in the Courier Mail was the Tennyson Reach complex which sits on the land which previously accommodated the Tennyson Power Station.
The complex of 3 towers sits adjacent to the new Queensland Tennis Centre(also built by Mirvac) and, as was the case in 1974, the water rose to a height which breached the building envelopes.
The complex was designed to BCC requirements which related to 1974 flood levels, however, the sudden intensity of water let out of the Wivenhoe Dam saw the level at Tennyson reach an abnormal height of 9.05m (650mm above required design immunity level).
The water rose so quickly that three vehicles were lost in the basement and all services were affected, including the lifts, fire pumps and fire electrics, electrical supply, communications, security systems and gas hot water.
Many owners also lost the contents of the storage bays which are typically attached to each title.
The developer of the complex, Mirvac, was quick to respond to the total inundation of the 2 basements and partial damage to 9 of the ground floor apartments.
The Owners and Committee have been involved in assessing and approving the subsequent expenditure, and special Levies have been staged over a period of nearly 4mths to help fund the $3,000,000 expended so far. This was required because there were not enough accumulated funds in the Administration or Sinking Funds as Stage 1 only opened in May 2009 and Stage 2 in April 2010.
The refurbishment is now going through its last phase and should be completed by December to bring the complex back to the original high standard set by the developer.
The complex is surrounded by lands and bikeways which are the responsibility of BCC. Most of those areas have been reinstated by the developer, but the adjacent mangroves are showing signs of stress and will need a period of time to regenerate.
In response to this recent flooding, the developer offered to sell the land which was set aside for a further 3 towers, to the Brisbane City Council for circa $12,000,000 (less than 30% of book value). As part of this agreement, the developer will turn this land into a district "all-access" park to complement the Queensland Tennis Centre precinct.
The sequence of events which lead to the floods will likely never be repeated, but that does not say properties will never be flooded again. Next time, it will most probably be a different sequence of events.
The lessons to be learned from this flood include;
* establish a plan to raise or seal as many services as possible out of
harms way e.g.. park lifts on higher floors
* establish an evacuation process and make sure individuals know it by
communicating that process very regularly
* make sure contact details for owners and tenants are up-to-date
* ensure proper authorities are in place for alternative persons to
remove/save items of value (where occupants are away)
* understand the future building risks and nominate an agreed chain of
command in readiness for an event
* document what work was required this time and review how it might have
been completed more effectively next time
* establish a set of reference documents which identify all the
essential services and store them in an easily accessed space out of
harms way.
Graham Upton - Director, PEP Consulting (and Owner & Committee Member 'Tennyson Reach')
New unified peak body gets down to work
The Strata Community Australia organisation was formally the National Community Titles Institute (NCTI) and is the Australian national representative professional association for home owners, community associations, body corporate management practitioners, solicitors, tradespeople, insurers, bankers and other parties involved in the professional, full-time administration of community and strata schemes.
It currently has more than 1500 members through its State affiliate members - the Community Titles Institute Queensland (CTIQ), Institute of Strata Title Management NSW (ISTM), Owners Corporations Victoria (OCV), Community Titles Institute South Australia (CTISA), Strata Titles Institute of Western Australia (STIWA) and the Strata Managers Institute of the ACT (SMI ACT). Crockers Strata Management from Auckland, NZ, has been accepted as an extraordinary member.
The loooong wait is over - Updated Layman's Guide is finally here!
Author Garry Maynard has just announced the long awaited update of his 'Layperson's
Guide to Body Corporate Laws in Qld.' - now with a perfectly 'PC' title!
This is a highly recommended guide to the legislation that governs Strata Living in Queensland and is now fully up-to-date with the added benefit that it references both the Standard and Accommodation Modules (the previous version referenced only the Standard Module, and that led to a bit of searching to find the equivalent reference in the other Regulation Module).
Whilst it is an excellent reference for Committee members and those starting out in the industry, it is also a very useful tool for seasoned practioners to help locate that elusive reference in the legislation.
More information, and ordering details here
And to heap praise on the author, go here: e-mail Garry Maynard
Help for stressed Sinking Funds
Most strata buildings will have times of unexpected costs that can put stress on Sinking/Capital funds, but that doesn't have to mean that major jobs like painting need be deferred.
Repayment plans for building painting have been becoming increasingly popular over recent years and can facilitate getting that job done rather than postponing it for a number of years.
Whilst these arrangements are offered by a number of painting contractors, Rochele Painting have made it a significant feature and option for their Body Corporate clients.
If the decision is made to take up a repayment plan like those offered, it means the Body Corporate can 're-jig' their Sinking Fund Analysis report to reflect the reduced lump sums that will be called on for these major jobs.
Typical for these plans are arrangements whereby the entire building is repainted the first year, and then repayments are spread over a 5 year maintenance plan - you can see more details here
Web: Rochele Painting
Bank term rates easing
We're seeing Term deposit rates easing - this table is from Macquarie on 4th Sept 2011. But Bodies Corporate should always contact the financial institutions to check on the very latest rates that are applicable.
Ease of establishment
Whilst rates do vary between the institutions, so too does the ease in setting up Term Deposit accounts for Bodies Corporate - for some banks (like Macquarie) it is a common and easy procedure, but with others it certainly isn't and this can cause a lot of inconvenience in getting the required documentation and authorisations in place.
It's Time to Cut Electricity & Gas Costs - Part 1
This will be the first in a series of articles presented by Andrew McNair from Energy Options Australia on energy related topics for strata communities. Energy Options has been providing energy related services to Bodies Corporate for nearly 10 years and provides a wealth of experience in this area with over 30 years in the electricity industry.
Electricity Account Review
For many Bodies Corporate electricity is one of the largest expenses for their budget and yet little attention is paid to whether the most appropriate arrangement is in place. Bodies Corporate need to take the time to understand the options available to them for their electricity supply. Currently all customers in Queensland have the opportunity to seek alternative suppliers however a review of the current arrangements should always be undertaken first.
What is involved in the review of your electricity supply arrangements?
A review will evaluate the Body Corporate's current electricity supply arrangement (whether tariff or contract) including the annual consumption, peak and off peak usage, demand and other factors to determine the most suitable arrangements for the Body Corporate. The review will identify savings as a result of these changes or simply confirm that the Body Corporate is indeed on the best possible arrangement.
Why should your Body Corporate get a tariff review?
From 1st July 2007 full contestability came into being for all Queensland customers. In particular customers in the Energex distribution area (South East Queensland) were provided with the option of choosing their retailer of choice. Customers in the Ergon area, while still deregulated, did not have the same choice with retailers not offering the same level of discounts.
Smaller Bodies Corporate with consumption less than 100,000 kWh (about $20,000) per annum have the choice of remaining on regulated tariffs and seeking discount supply offers of up to 10% from many retailers (SE QLD only). Importantly however, often greater savings are realised by changing to a more appropriate tariff before seeking any discount arrangement. There are costs associated with the tariff change but in some instance small Bodies Corporate have realised up to 30% savings with less than six months payback on any expenses.
Larger Bodies Corporate with consumption greater than 100,000 kWh (about $20,000) per annum also have the choice of remaining on regulated tariffs but are also able to enter into a negotiated electricity supply contract with a number of retailers. It is important to note that once you enter an arrangement of this type you cannot return to a regulated tariff arrangement. Often greater savings are realised by changing to a more appropriate tariff before seeking any discount arrangement, however recently some Bodies Corporate have achieved up to 45% savings on their common area electricity accounts.
Advantages of Having a Review for Your Body Corporate
1. Keep Your Current Energy Retailer Honest!
How do you know that your current tariff is right for you? The Review will look at your Body Corporate energy usage based on billing from your energy provider. You will be advised if your current tariff and or electricity provider is delivering you with the lowest possible costs and if there are any other options that provide clear and defined savings. This will provide your committee with clear guidance on what steps can be taken to reduce your energy costs.
2. Reduce Your Body Corporate Levies
By having a review carried out, any savings realised will have a positive impact on the Body Corporate budget and reduce the levies for each owner.
3. Be Proactive
By having the review your Body Corporate shows that it is being proactive with the energy needs for your community and conscious of the growing cost of energy by looking at ways to reduce these costs.
Please contact your Body Corporate Manager to engage the services
of a reputable consultant to carry out a review of the electricity arrangement
for the Body Corporate.
Alternatively you can contact Energy Options Australia
for a free independent assessment.
Phone / Fax: 07 3278 8611
Mobile: 0414 370 993
E-mail: Energy Options Australia
Web: www.energyoptionsaustralia.com.au
The Unit Owners Association of Qld zeros in on Management Rights
The latest edition of the association's newsletter leaves no doubt about the number one priority on the association's agenda!
This article is one of several in this edition alone.
A New Era - Owners Taking Control
Many owners and we at the UOAQ believe that these “rights” contracts should be for no more than three years On the 14th of March, 2011 at the “Carmel By The Sea” AGM another significant step forward in the quest for true owner control of strata title buildings in Queensland was achieved according to the body corporate committee chairman. Broadbeach apartment building ‘Carmel by the Sea’ owners again voted against an extension of the current Caretaking and Letting Agreements - the committee of ‘Carmel by the Sea’ has been working towards the day when the current agreements expire.
At their previous March Annual General Meeting, the owners authorised the Carmel committee to prepare for this new era by engaging advisers to prepare new agreements for the appointment of caretaker and letting contractors after expiry of their current agreements in 2012. The owners have made it clear they want this to be accomplished through a tender process and that they want “owner friendly” agreements.
True owner control of all aspects of ‘Carmel by the Sea’ has not existed since the building was constructed about 15 years ago. At the time of construction, the management rights for ‘Carmel by the Sea’ (like most other strata title building on the Coast) were sold by the developer of the building. These “Management Rights” (MR) contracts commit the Lot owners to use the one contractor (the contractor that paid the developer for the “rights”) for both caretaker and “in house” letting agent services with built in cost escalation clauses. The owners had no say as to the terms of these long term agreements, yet they are committed to honour them for many years (up to 25 years in some cases).
READ MORE HERE
MacGillivrays Boosts their Strata Team - again
MacGillivrays are pleased to announce the appointment of Allan McKenzie
as Special Counsel in our Property and Strata Services division.
Allan comes to MacGillivrays with over 25 years of post admission experience
specialising in the areas of commercial, corporate, body corporate and all
aspects of property law.
Allan’s depth of knowledge will enhance the services we provide and help meet the strong demand in this area of our practice. Allan has worked extensively in body corporate law, management rights, leasing, property development, commercial agreements, company law and estate planning.
The Property and Strata Services division is headed up by Partner, Michael Kleinschmidt.
Developing Serviced Apartments - What are the Banks Missing!!
This is probably one for the bankers and financiers out there in property
land - and we would be keen to get your feedback as there appears to be some serious
contradiction in the rules relating to the funding of apartments.
What is so scary about the words "SERVICED APARTMENTS"?
There I said it and I didn't die. The world didn't end.
Here is our dilemma.
Australia's 3rd biggest industry is tourism.
In Queensland it is probably number two.
In order to grow tourism in this country we need to be able to accommodate,
tourists.
Simple really.
Nobody can afford to build a 4 or 5 star trophy hotel or resort and hold
it in one line as an investment. That would take $100 million plus for 200
rooms or more.
The only effective way to build a new hotel is to strata title the property and sell it down to individual investors.
Now I need to say up front that we are not talking about 30 sq mtr studio
hotel rooms here.
We are talking about 1 and 2 bedroom holiday apartments (that are sold every
day on the Gold Coast) and perhaps dual keyed apartments.
Now here is the contradiction.
If I build an apartment building of 1 and 2 bedroom units on the Gold or
Sunshine Coast and furnish the apartments for holiday letting, the banks
will fund 90% of the purchase price for investors.
Now pick up that building and move it to Queen Street Brisbane (call it
serviced apartments) with the 2nd highest occupancy and tariffs in the country
and the banks will only lend 60% to investors on those units.
Brisbane serviced apartments have the highest investor income returns in the entire country.
What am I missing here?
Bankers have told us outright that they only lend 50% to 60% on serviced
apartments because they look at the fall back rental position IF tourism
takes a dive.
They need to be able to rent them permanently.
What about the Gold Coast??
You can still rent a Brisbane 1 or 2 bedroom unit on a permanent basis just
as easily as on the Gold or Sunshine Coast. Probably more easily in Brisbane
and at higher rentals.
We have numerous developers wanting to build serviced apartments in capital
cities and they are told every time by unit marketers and banks that they
shouldn't because the banks won't fund them.
We have huge demand from operators for those buildings and they are forced
to retro fit residential buildings (flirting with council regulations) because
there is no purpose built holiday / serviced unit buildings.
It's not that councils won't approve a serviced apartment building, it's
just that developers don't apply for that specific use because of the banks
attitude.
WHY NOT? Can anyone explain because it sure doesn't make sense to us?
Bankers where are you?
Regards
Rod
Rod Askew - Director - RnR Strata Sales
PHONE 07 3369 7200 MOBILE 0411 758 236
FAX 07 3369 7211
E-MAIL: Rod at RnR Strata
WEBSITE: www.rnrstrata.com.au
