The news that the NSW government is offering an open-ended, low-interest loan to the Mascot Towers owners corporation (body corporate), to allow them to pay for evacuated residents’ emergency accommodation, is much more of a game changer than the casual observer might think.
Forget the rights and wrongs of the situation, the precedent that it threatens to set for governments all over Australia is significant.
In most jurisdictions, when the warranty period on a unit block has run out or the developer has shut up shop, or both, it is the apartment owners who legally must carry the can for repairs and maintenance of major defects.
So the owners corp in Sydney’s Mascot Towers were facing serious financial strife last week when the 10-storey block was evacuated due to cracking support beams.
Not only were they the only body with the ultimate legal obligation to maintain and repair – and that’s a bill that could ultimately run to millions of dollars – they were also obliged to pay for alternative accommodation for residents while the block was made safe.
But then brand new NSW Minister of Better Regulation Kevin Anderson stepped in with a cunning plan.
The state government is giving the owners corp an interest-free loan for accommodation, to be paid back when they work out who’s responsible and then get them to make amends.
So we asked the department this week, if this wasn’t just a smokescreen? Isn’t this just a fake loan? The block is several years out of warranty, the developer is no longer trading and the builder has no duty of care.
What happens when they run out of options and the owners corp is the only body left standing legally obliged to fix the defects?
“The thing is,’ a spokesman told us, ‘there is a very good chance that this has nothing to do with building defects. A lot of people are going to be very surprised.’
What!?! Then …who?
He was tight-lipped but, from all accounts, experts are looking at other nearby developments that may individually or collectively have contributed to undermining what was may have otherwise been a reasonably well-constructed apartment block.
Getting back to this interest-free loan, this is the first time we can recall a disaster in an apartment block being treated with the same urgency as, say, a bushfire or flood.
The finances for the “loan” – which our contact admitted might never be repaid, regardless of who is ultimately found to be responsible – will come from the interest accrued from rental bonds, so it will barely register on the state budget radar.
OK, pats on the back all round, but what about that other glaring and potentially much more dangerous example of the failure of governments across to protect consumers – flammable cladding.
This material, installed by builders and developers even after it was known to be dangerous, is an imminent threat to life and limb, according to our state governments, although you don’t hear so much about it since buildings started falling down.
Do owners faced with bills of up to a quarter of the value of their properties get an open-ended interest free loan that they probably won’t have to pay back? How about a fighting fund and some serious legal assistance with potential class actions?
The NSW government is saying the Mascot Tower loan is a one-off. But it shouldn’t be. Victoria has instigated a low-cost loan scheme through local councils that no one seems to want.
And at the end of the day, for the buildings that are out of warranty and where developers have been meekly allowed to shut up shop in name only, and continue trading without any responsibility for their previous misdeeds, there is no one left with a duty of care for apartment owners.
In moves (or lack thereof) that smack of punishing the victim, our state governments are compelling apartment owners to pay to replace dangerous materials that would either not be there, or would be fixed by the firms who installed it, if we had decent consumer protections around apartment blocks.
Flammable cladding represents a failure of regulations and, therefore, ultimately a failure of government. Governments take our stamp duty quickly enough, and use it to build the roads and rail networks and sports stadiums to get themselves re-elected.
Maybe you should pay some of it back when it’s clear that the government has failed the consumer so spectaculalrly.
A version of this column first appeared in the Australian Financial Review.