Commissioner to expose defect-dodging owners


Owners who deliberately hide building defects could be the next targets of Building Commissioner David Chandler, with defective buildings and their owners corporations potentially being named and shamed, just as dodgy developers are currently being exposed.

According to a report in the Sydney Morning Herald, Mr Chandler is appalled by results of a survey into defects conducted by Fair Trading and Strata Community Association (the strata managers’ peak body).

He told the Herald that the “most concerning” finding from the survey was that fewer than a fifth of the buildings with serious defects had been reported.

“What that is telling us is that a large number of body corporates are sitting on known defects and not reporting them,” he said. “We have got a fair degree of under-declaring going on in NSW.”

“My concern is that there are still properties transacting in that building, where there are owners selling and purchasers buying,” he said.

He warned body corporates that they risked defects in their buildings becoming revealed in a “very public way” if they did not report them to Fair Trading and alert potential purchasers.

Apartment block committees in NSW that fail to report defects are treading a very thin line when it comes to strata and consumer law.

The latter requires vendors to declare “material issues” with the properties, and that includes hidden or latent defects.

But what if the strata committee has managed to keep defects hidden from the owners? Simply put, they shouldn’t. Strata law requires owners corporations to maintain and repair common property.  If they are not reporting that, then they are presumably not fixing it.

Secondly, the law requires them to provide an accurate set of minutes of all their committee and general meetings.  But some will skirt that by merely noting that the condition of the building was discussed and deferred.

Section 184 certificates, which in NSW detail for prospective purchasers the state of play  of levies and insurances in strata blocks, are also supposed to reveal future payment plans for financing the 10-year maintenance program for the block.  If that doesn’t include defect rectification, then it’s obviously misleading.

The reasons owners would keep defects hidden are fairly obvious.  If you don’t acknowledge they exist you don’t have to declare them and then you can sell the property at a higher price and let the next sucker carry the can for the eventual repairs.

This commonly occurs in two situations – new flats where the defects are deliberately kept from purchasers so that the developers won’t have to fix them, and older ones where the existing owners want to keep a lid on them, in the hope they can sell before the repair bills start coming in.

But why wouldn’t an owners corp report defects, especially in the first six years of a building when it is still covered by warranties?

For a start, the developer may have loaded the committee with cronies who are there to make sure the owners are kept in the dark about their right and responsibilities for as long as possible.

People who are new to strata will vote for just about anyone who looks vaguely competent and has volunteered to do the heavy lifting on the committee.

Tame strata and building managers – who have a number of contracts with the same developers – may also help this process, especially when a majority of owners are new to strata.

By the time the owners have woken up and got their act together, the window for making claims against the developer may be closing, or have disappeared completely if the developer has already shut up shop and phoenixed into another entity entirely.

In older buildings, it may be that years of neglect by levies-averse owners have seen common property wear out or allowed structural issues to deteriorate to a point where they are harder and more expensive to fix.

Scant information in strata committee minutes are a frequent sign that, rather than there being no problems, the issues that do exist are being covered up.

Forcing strata owners to own up to the defects in their buildings, rather than palming them off to the next purchasers, will be an interesting challenge and could be a game-changer for the existing properties that are unaffected by the Building Commissioner’s current quality control campaign.

How exactly that’s done will be a challenge.  After all, if you are going after people, many of whom have themselves been cheated somewhere along the way, it will feel a lot like victim-blaming.

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