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NSW should help Mascot owners … and why it won’t

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It’s been almost two years since the residents of Mascot Towers were told their building was to dangerous to live in.

Just last week they were advised to sell the block to a developer to demolish and rebuild, but if they do so, they will lose up to 80 per cent of their value. 

Predictably and quite reasonably, there have been renewed calls for the state government to bail them out. It can’t and won’t, but let’s look at reasons why it should. 

Whatever the reason for the Mascot Towers collapse – bad construction in the first place or the result of construction on a site next door (as the Mascot Towers owners are alleging in a court action) or maybe a combination of the two, Mascot Towers has become the poster child for all that ails apartment building in NSW and Australia as a whole.

It has been a nightmare for the owners and is also one of the myriad reasons your apartment value may have stagnated while house prices are soaring. 

Mascot Towers, plus the Opal building cracking that preceded it by a few months, plus the flammable cladding crisis, plus a steady stream of stories about defective apartment blocks, plus the fact that NSW has had to employ someone to threaten builders and developers that they’ll be put out of business if they don’t do the right thing, are all liable to plant seeds of doubt in prospective purchasers’ minds.

But it’s not a new thing. It is the distillation of decades of bad policy by Labour and Coalition governments alike, who couldn’t believe their luck when they discovered that there were developers in our cities who were not only happy to house our rapidly growing urban populations, but would pump money into party coffers for the privilege of doing so.

That’s why in the 1980s and 90s a succession of governments handed consumer rights to property developers.  They were allowed to hire their own certifiers and then, when insurers refused to provide cover for apartment block construction – because they were pretty sure they would be crap – the government removed the need to insure blocks higher than three storeys.

Owners were told they could sue the developers for defect rectification … if they could raise the money to go against their highly paid attack-dog lawyers and, even then, if developers hadn’t gone into receivership at the first whiff of a defects claim.

This has been going on for decades. An investigation by the Sydney Morning Herald in 2002 revealed multi-storey unit blocks without proper fire safeguards; new buildings certified despite multiple defects; people allowed to move into buildings that didn’t have occupation certificates; and developers using their votes on owners’ corporations to block legal action.

A subsequent parliamentary inquiry made bipartisan recommendations, including the establishment of a new body to take over from Fair Trading in dealing with building complaints.

That was never going to fly – the department of broken toys and dodgy mechanics wasn’t likely to easily give up any territory, which meant plans for a dynamic and aggressive investigations unit within that proposed body were kicked to the kerb too.

According to this 2012 story in the SMH, the report also recommended beefed-up powers for councils and the NSW Fire Brigades in ensuring compliance with the building codes and a new body to help consumers fight shonky builders.

Again, Fair Trading’s Mandarins flexed their considerable muscle behind the scenes and virtually none of that was implemented. However, a demand for more meaningful penalties for certifiers led to the Building Professionals Board being set up to license and monitor certifiers.

This board was scrapped last year, under a revamp of the whole certification system, with its powers transferred to NSW Fair Trading. The immediate result, according to this story, was that fines were reduced by 90 percent on an average of the previous three comparable periods.

A NSW Fair Trading spokeswoman told Herald reporters that the department’s focus since the transfer of the powers was on “promoting compliance through education”. That represents a sea change in attitudes to certifiers, the results of which we won’t see for years, maybe decades.

Now, it could be that the threat of a visit from new Building Commissioner David Chandler has pulled everyone into line. It would be nice to think so.

But looking back, it’s been a long and sad saga of corruption, incompetence and negligence. And every time things went wrong, it was the suckers who’d bought the apartments who had to pay.

Why? Because under NSW strata law, the single entity ultimately and inescapably liable for the repair and maintenance of apartment blocks is the owners corporation, aka, the unit owners.  Everyone else can just walk away.

The new strata laws introduced in 2016 tidied up some of the shortcomings but fixed nothing major. The defects bond is just added to the sale price of units so there’s no incentive for developers to raise their satndards.

In fact, if the developers are lucky enough, the owners won’t even realise they can claim for defects so they’ll get the money back.

And there there is still no law that says that if a developer or builder gets a financial gain by deliberately cutting corners, concealing information or even forging documents, that’s a fraud and they should be prosecuted under criminal law.

So, to summarise, a succession of State governments has created a profoundly corruptible system and built on it, rather than sweeping it away and introducing proper consumer protections. 

They created a culture of corruption and incompetence, side-stepped an opportunity to fix it, and made apartment owners pay for it.

That’s why the state government should step in and help the owners of Mascot Towers, taking responsibility at last for their predecessor’s misdeeds and their own failure to remedy them. 

And here’s why they can’t.

Let’s assume that David Chandler is going to work his magic and most future apartment blocks will be mostly OK.  That’s great.

But the problems in apartments built in the past are so widespread and endemic that we and the government don’t know when the next disaster is going to appear.

Helping the Mascot Tower owners would set a very dangerous precedent for all the other schemes where purchasers have been ripped off.  Those problems are many and great.

There are a lot of defective buildings that we know about and, we can assume, others where owners have kept quiet in the hope of protecting their property prices or where the problems haven’t emerged yet.

But there is one thing the government could do: give the Mascot Owners a loan to cover all their legal expenses.  Pay for the expert reports and combative lawyers they need to even the odds in whatever battle they have to fight to get justice, but only ask for the money back if they win.

And they could extend that to any other block that has a viable legal case against developers or builders.

That would be fair and reasonable.  Politicians caused this problem and they have ducked almost every opportunity to fix it. 

And we, the prospective buyers of existing properties, need to know that someone has our back when problems caused by previous policies lead to us potentially losing our homes.

It’s time to make amends and make the people who cause the problems pay for them.

2 Replies to “NSW should help Mascot owners … and why it won’t”

  1. TonyC says:

    Great analysis. There’s many issues, so I will confine myself to two.
    1) Under the Australian Consumer Law, the ACCC is able to obtain compensation orders for consumers and fine company directors personally if they are ‘knowingly concerned’ in breaches of the consumer law. A good recent example is the car rental company, Australian 4WD – this is the ACCC Media Release https://www.accc.gov.au/media-release/penalties-of-1223m-against-australian-4wd-hire-and-ex-directors-vitali-roesch-and-maryna-kosukhina
    Why isn’t this made to apply to consumers who purchase apartments under state Fair Trading Laws?
    2) The NSW Government should definitely be providing financial assistance to the OC of Mascot Towers to pursue the owner and developer of the adjoining property through the Courts. It should be a no strings attached undertaking to contribute towards the legal fees, not a loan.

  2. Jimmy-T says:

    If you want to start a discussion or ask a question about this, log into the Flat Chat Forum (using the Forum link on the menu at the very top of your screen). More people will read it there and you can more easily keep track of responses.

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