We’re looking at some big news this week on the podcast and wondering what it all means.
NSW Fair Trading has announced that they will be appointing a properties commissioner – like building commissioner David Chandler, only maybe without the fear factor – to help regulate all the professions involved in looking after buying, selling, renting and managing properties.
What might those professions be? The inaugural appointees of Fair Trading’s Property Services Expert Panel provides a clue.
The invitees included strata managers, real estate agents, building facilities managers, real estate trainers and employers, livestock and property agents, business brokers, short-term rental managers, someone from the Wool And Pastoral Agency and a representative of private landlords.
Everybody and his or her brother or sister – except apartment owners and tenants. But hey, what would we know about buying and selling, let alone letting and renting property?
You can see the full list, with the lucky participants named, if not shamed, here. By the way, a couple of times in the podcast we refer to the strata managers’ organisation SCA as Strata Community Australia. That’s their old name. The A now stands for Association, and has ever since they pulled New Zealand into their orbit.
Anyway, the big questions are, what is this new Property Commissioner going to do and how are they going to do it? Will they be kicking butt and taking names, a la David Chandler? Or will they follow the established Fair Trading protocol of a light tap on the wrist and a quiet word with miscreants?
Will they be looking at under-quoting, misrepresentation of properties, excessively long contracts, systematically waived cooling-off periods, gazumping, embedded networks, endemic dishonesty and general incompetence?
Having kicked those topics around, we turn to security in strata buildings and a free webinar scheduled for June 30 (not this week, as I briefly thought).
There’s a lot in this week’s podcast so it runs a little longer. Enjoy.
TRANSCRIPT IN FULL
So, you’re back from Arnhem Land?
I am. It was so nice and warm up there. It’s freezing down here again.
Yeah, we had a really cold day during the week. We’ve got a lot to talk about, because last week, there were a couple of big announcements from Fair Trading New South Wales and, the property market seems to have gone completely nuts.
Oh, it really is mad. I mean, it may not be hot weather, but it’s certainly a hot market.
I’m Jimmy Thomson. I write the Flat Chat column for the Australian Financial Review.
And I’m Sue Williams. I write about property for Domain.
And this is the Flat Chat Wrap.
So, for the past year, we’ve been talking about the Building Commissioner, David Chandler, and the difference he seems to be making in apartment buildings; getting them built. But, last week, the Fair Trading minister (or whatever they call themselves now; the Better Regulation and Shorter Titles. I think that’s what the ministry is called). They announced there’s going to be a properties commissioner.
This is something that the Real Estate Institute was really pushing for, wasn’t it?
Well, they were. I wonder if that’s one of these ‘be careful what you wish for’ things, because if this guy turns out to be anything like David Chandler… I’m saying it’s a guy; it could very easily be a woman. I wonder if they’re going to shake things up more than the real estate industry suspects. I mean, why would they be keen to have a commissioner?
Well, I think in the same way that SCA, the Strata Community Australia, are really keen to have tighter regulations for strata managers. They want to clean up their industry. To make sure it’s really respected and operates well and it has no charlatans in there.
This kind of goes back about a month or two, to the creation of the property panel. That’s where everybody in the property industry and their brother and their sister, got a seat on this property panel. Apart from (I was going to say the victims), apart from the consumers. There’s no place there for the Owners Corporation Network (who represent apartment owners) and no place there for the Tenant’s Union, who represent tenants.
I wonder why?
I don’t know. I mean, it’s a big committee. There’s strata managers, there’s building managers, there’s real estate agents. There are people who do short-term letting.
Property managers, probably.
Property managers and it’s quite possible that even if they had had representatives of consumer organizations, they would have been drowned out by all the professionals anyway.
Yeah, but at least they would have had a bit of a voice, and at least that new committee would have been seen to be including them. When you’ve got like, 20 people or whatever, on a committee, another couple really aren’t going to break the bank, are they?
No. I did speak to people, both from the Owners Corporation Network and from Tenants Union and they both said the same thing. They didn’t need to be on any more committees in their lives, but, they should have been on this one.
Did you talk to anybody on the committee’s to ask why they had been excluded?
Well, I think it was an invitation from the minister, and I spoke to somebody at the ministry who just said “look, it’s for professionals.” Yeah, all right. Why? Well, you know, that’s a decision that had been made. They were going to bring all the professionals together. It kind of felt like, the unsaid thing was ‘we’re bringing all the professionals together so they can make decisions about your lives, that you won’t have any say in.’ I’m sure that’s not what they meant. The other big announcement last week was that Fair Trading is already cracking down on real estate agents. Well, they say they’re cracking down. They sort of throw out these figures, like $150-odd-thousand in fines have been issued.
That sounds quite substantial.
It does and there’s a $20,000 maximum fine for misbehaving real estate agents. But, then you divide $150,000 by 137 (which is the number of cases they said), and it comes out to almost exactly $1100.
That’s what the fines are?
That’s what the fines really are. They’re not $20,000 fines. It’s $1,000, plus GST.
Wow! So they’re all getting the same fine, more or less, and the minimum one.
Sounds like it and some of them… There were about two or three times as many, who didn’t get fined at all; they just had a quiet word, because that’s what Fair Trading does, those champions of the consumer. If you’re getting ripped off, they will have a quiet word with the person who is doing it. “could you please stop doing that?”
Really, just over $1,000 is not much of a disincentive for misbehavior, is it really?
I mean, we’re looking at a story this week, about a house that was listed; the price was supposed to be about $5 million, and it went for $6.1 million. Now, that’s 20% higher, and the limit for under-quoting is supposed to be 10%.
But the trouble with under-quoting in a hot market is it’s really, really difficult. I do feel a little bit for real estate agents about this, because if you’ve got even two really determined bidders, how on earth are you going to be able to predict where they’re going to end up? It’s all very well to say, “this property is probably worth about $5 million,” and they are looking to maximize returns for their vendors, so they’re looking around at similar sales. They’re looking around at the area and what’s happening there. So it’s fair enough for them to think “well, this is going to be this is going to go for $5 million.” I think at that auction that you’re talking about; the house was in Annandale and there were over 70 bidders that turned up. 70 interested parties. So, when you’ve got that volume of people, it does tend to get out of hand. I think the bidding was just really quick and really fast and people were really, really determined.
That’s all it takes, is two determined bidders.
Yeah. It is very hard, in this kind of market, under-quoting. You can just look at a property and think ‘well, that’s worth that much,’ but then in this market, the next week, it could be worth more than that. When you start a campaign at the beginning of the four weeks, it might be worth something, but by the end of the four weeks… We know now that real estate agents have been revising their price guides upwards over the weeks of a campaign, because they just can’t keep track of the speed by which prices are going up. When you look at Annandale, I mean that’s gone up 9.4%; houses in that suburb, over the year. That’s pretty sizable, too.
Right. Well, when we come back, we’re going to look at some areas that the Property Commissioner could look at, apart from under-quoting (which seems to be problematic, in the extreme). That’s after this.
And, we’re back. So Sue, apart from under-quoting (which I think is probably still an issue in some areas, and certainly will be when the market starts to cool a little bit), what other areas can you think of that the new Properties Commissioner might get his or her teeth into?
Well, I guess in the past, illegal actions by real estate agents and that means siphoning money from people’s Trust Funds and things. But that’s kind of illegal, so they won’t be looking into that. That’s a question to take into the law.
That’s a criminal offense.
I guess there’s lots of areas which there are some dubious practices. I got an email the other day from somebody who’d put a deposit down on a home. He’d had made an offer and had been accepted and he put the deposit down, then two days later, he received a call from the agent saying “I’m sorry. We’ve had a much better offer now, so I’m sending you your check back, unless you’re going to increase it.” And this guy said “but he accepted my offer and he accepted my check!” You kind of think ‘that’s a bit of a dangerous practice. It seems to be a very grey area.’ I’ve also had a lot of correspondence and I’ve done a story about another practice, where two people were in almost identical situations. They both were going for auctions for houses; one was in Sydney, one was on the south coast of New South Wales. They tried to make an early offer before the auction and the real estate agent said “no, I’m sorry, the vendor is determined to go to auction,” so wouldn’t take their offer. Two days later, he phoned the buyers. So, this is two different houses; two different real estate agents and different potential buyers. They said, exactly the same way “we’ve had a fantastic offer from somebody and unless you can beat that offer, we’re going to sell it to the person who’s made that offer.” In both cases, the buyer said “well, what is the offer, because we might be able to top that offer?” The real estate agent said “no, I’m sorry. I’m not going to tell you. You just have to make your best and final offer and if it’s higher than the offer I’ve received, then you might get the property. If it’s lower then you won’t get the property.” I thought that sounds really weird; not telling people what the offer is. Somebody suggested that it might be illegal to tell them the offer, because it’s breaking the confidentiality of the first person who made the offer. I called up Fair Trading and there actually is no regulation around that kind of thing. There’s no legislation on the advising of offers, so it’s not illegal to tell people how much the first offer is. Nor is it illegal to not tell them at all, but it just seems like a really non-transparent way of selling a home and it really takes advantage, I think, of this FOMO that’s going around now. People’s real determination and desperation to buy. I talked to a few people about it and the Real Estate Buyers Association of Australia, President Cate Bakos’ office was saying it’s happening more and more. It’s been happening a lot in Melbourne, during the lockdown, as well. It’s happening more and more in Sydney, because prices are going up so fast. People are really keen to get into the market as soon as possible. She said it’s like throwing a dart at a dartboard. You have no idea what the other offer is and it would be much fairer if it actually went to auction and you could see people at the auction, bidding. You knew exactly what the bids were; you knew who were making the bids and that’s a much fairer way of doing it. But, she said this is happening more and more now and that always happens in a rising market. You know, you couldn’t do it in a in a dead market, really.
So you mentioned FOMO there, which for non-regular listeners, means ‘fear of missing out,’ and that does drive a lot of people, doesn’t it?
It sure does at the moment, because prices are going up so quickly. They’re desperate to get into the market, because they can see the market drifting away from them all the time. They’re just really worried and anxious and kind of thinking “well, if I don’t buy this week or next week, I’m not going to be able to afford to buy in a couple of months, with prices rising so quickly. We had a look at some data from an SEO and content marketing company, called Semrush and that also seemed to back up this idea that this was happening much more, because they’d had a huge 136% increase year-on-year of Australians searching for unconditional offers. There was a number of searches on ‘can real estate agents lie about offers?’
That had increased by 350%. It just seems there was not very much trust for real estate agents, really, if there were that many people thinking “well, can real estate agents lie?” You have no idea; a real estate agent will say to you “I’ve had a fabulous offer on something; you’ve got to give me more.” You don’t know whether that’s the truth or whatever.
Even if it is true, you don’t know that they’re not going to go back to the original person and say “your offer is now being topped; give us your best offer.”
Yep, that’s absolutely right. I talked to the Real Estate Institute of New South Wales; their CEO, Tim McGibbon. I talked to him about the process and he was kind of saying “oh, yes, it’s not uncommon today.” He was saying “well, you know, agents are acting for the vendors and they’re obliged to get the best price possible for the vendor.” So, he didn’t really see any issue with it at all, saying, if people want to make an offer, then they’re just going to make their best offer and see how it goes.
I tell you something I’d like the Properties Commissioner to get into, is the cooling-off period. Now, that’s the thing where; it doesn’t apply to options, but if you make an offer for a private exchange, there is a mandatory cooling-off period of 14 days, I think, unless you agree to waive that. The thing is, you go and make your offer and the vendor, or their agent, will say “this is conditional on you waiving the cooling-off period.” So, how can it possibly be mandatory, if they can say “just sign away your rights?”
And I think they should just say you’re not allowed to do it. If you’re doing a private treaty, the cooling off period… Okay, they are worried that people will be making offers, but you could be sitting trying to sell your house and somebody comes along and says “I’m going to make you an offer of a ridiculous amount of money” and you go “terrific!” Then, a week later, they go “nah, changed my mind” and then you’re back to square one. But, in things like off-the-plan apartments sales…
Is it happening there as well?
Oh, very much so. It’s not like you’ve got one vendor selling one house and theey’re really hanging out for that offer, that they want to be locked down as quickly as possible. As somebody selling 50 apartments, they don’t want people to go away and think about it.
Yeah. I guess the person who’s buying an off-the-plan apartment; if the developer is saying to them “well, you can’t go off and aave a two week cooling-off period…” The developer might say to them “we’ve got lots of demand for this and we have lots of potential buyers out there, so you’ve got to buy now, otherwise, we’re going to sell. Sorry, we won’t accept your offer, and we’re going to possibly sell to someone else.” So then you feel really obliged,
You know, that two weeks is the time for the purchaser to go and do their due diligence and find out well, who is this developer? What kind of things have they done in the past? Are there any plans for buildings to go up in front of this building?
Yeah. Or, if it’s an established apartment or house, it’s the time for a building inspection or a pest inspection. For an apartment, it’s a strata inspection as well.
Yeah, you would do them before you put an offer in.
But, it becomes really expensive, if you’re going to lots of auctions. On auction, you don’t have a cooling-off period. If you’re going to look at lots of properties and suddenly, you’re making offers, but the other offers are really high and you don’t get them time-after-time, then it can be really expensive, getting so many inspections done.
But, isn’t there an agency now that does shared inspections?
There is, but it depends on how many other people are asking for the same building report. You know, if there’s maybe 10 people, then the cost can (by some companies), be shared between 10 people, but, if maybe two people have applied for the building report and maybe another person is a builder themselves, so they do their own report… Or, other people may not even do a report.
Yeah, it’s hard. Maybe, they should have a conditional waiver. Okay, we’ll waiver cooling -off period, but that doesn’t count, if in the time allocated, you discover that the building’s falling down.
Well, they do have that in some contracts, but somebody I know, recently bought a place and tried to put in that clause and said “I haven’t had time for all the inspections, because that particular market on the Central Coast was incredibly hot.” The agent said him “unless you put in an offer today, I’m afraid we’re gonna give it to somebody else, because we’ve had so many offers.” So, that person put in an offer and said “can I make this conditional, on a good building report?” And the agent said, “no.” He said “go away.”
That’s the kind of thing that the Property Commissioner should be looking at.
Yeah, absolutely. So it’s interesting, because we’ve got a Building Commissioner now, who’s looking at the building and the integrity and the structure of things. These people are looking at the sales and the rentals and the occupation; everything to do with the occupation of buildings. That’s kind of like a good, complimentary service, isn’t it really?
Tim McKibben, of the REI, says the real estate agent is acting on behalf of the vendor, but there’s obviously an advantage to them to get as high a price as possible, because that’s where they make their money. So it’s not like they’re saintly people, just trying to do the best for their customers, they can (and some do), pressure the buyers into paying more than they really need to, just to get a few extra bucks coming in.
Yeah and in a hot market, there’s so much scope for doing things like that. In a market which is really slow and which is maybe falling, they have to really work hard to get their commission, but, in this kind of market, I’m sure there are some people who really cut corners.
Or use pressure techniques. It’s pressure selling. When you consider the amounts of money there at stake, that’s when you really want somebody there to ease the pressure a bit. One of the things I would like the Property Commissioner to look into is, strata managers and building managers. As I often say, there’s never been a case in New South Wales (and possibly anywhere else in Australia), of a strata manager losing their license for being really bad at their jobs.
Are you sure about that?
Absolutely. Some of them have lost a license, because they were also real estate agents and they were stealing money from the trust funds, but there’s never been a case where somebody like Fair Trading or Consumer Affairs in Victoria has come along and said “you went to a meeting; you gave us advice that was wrong. You cost the Owners Corporation money, because your advice was wrong. We’re canceling or suspending your license, until you go and get properly trained.” It never happened. Now, we do know that Strata Community Australia (the strata managers body; they’re moving into professional accreditation. I don’t know what difference that makes really, because they’ve always claimed to be professional and authoritative, and all the rest of it. But, I think it may have a lot to do with licensing and their ability to say “if you don’t have a license, you shouldn’t be; if you don’t have an accredited license…”
Because I think at the moment, before this new system comes into effect, you can become a strata manager with maybe only a really short period of training.
You can get a three day course. Now, there’s a difference between being a strata managing agent and having a strata managing license, because, you get a company like Flat Chat strata management …
Oh, god forbid!
Whoever owns that company, can get their license, but as long as everybody who works for them is certified and has done the four or five day training course, that’s okay, because the license is held by the company. That kind of means that you could have a licensee who is totally over all the things they need to know and then a bunch of people who are just bumbling around, looking up things on the internet and giving bad advice. Like the person we know who ran an AGM on the 1996 laws, in 2020 and when somebody said to them “shouldn’t you be using the new laws?” They said “what new laws?” They said the laws changed in 2016 and they said “well, nobody told me.”
We’ve had a strata manager before; a long time ago and we questioned why we didn’t have very much money in our administration account. It turned out that we were paying another building’s bills, because the strata management company were in such an absolute mess with their accounts.
Yeah, they literally had receipts in shoe boxes.
That’s right, because we went to their offices. Hopefully, that doesn’t happen so much anymore, because the whole industry is becoming a lot more professional.
SCA are about to launch their professinal accreditation in the next week or so.
Which is a good thing.
But, building managers can still have contracts that go for 10 years, plus 10, plus 10. That’s just wrong; that should be cleaned out, the same way they did with strata managers. They said “you can have a contract for the first year of a building and then after that, it’s three years at a time, maximum.” That’s perfect. There’s nothing wrong with that system. The first year, the strata manager and the strata owners can establish a way of working and they get to know what they’re dealing with. After that, yeah, you can’t lock people into a 10 year contract. Nobody in business has a 10 year employment contract, apart from building managers.
Or, in the sale of building management rights, which you can’t do now. But, there are still building managers around in New South Wales, who were the recipients of the money for the building management rights. They’re now on maybe their 15th year. I spoke to somebody the other day, who was on his 20th year of being the building management company for a particular building and he said to me “well, you know, we sold building management rights, so we really have to give them a good service and prove that we’re giving them a good service. ” Whereas I would have thought, the developer can’t sell building management rights in the first place.
Well, they can and they’re doing it again, apparently, up in northern New South Wales. It’s commonplace in Queensland, as we know, but apparently, one of the better known developers is now going to people (especially up in the Northern Rivers area, where just across the border, the presale of contracts is commonplace). All they’re doing is saying to the caretaker manager “if you pay us the money to buy the management contract, we will tell the owners of the new apartments that this is standard practice, and all they have to do is approve it.” Of course, that means the levees have gone up, so that they can put more money in the developers pockets. That’s something else that the Property Commissioner might look at.
I think you should send them an email and maybe they won’t even apply for the job.
I’ll just send them a link to this podcast. Embedded networks is another thing. You know, where people say “we’ll put the lifts in your building for free, if you lock your owners into a 20 year or a 50 year maintenance contract.” In big buildings, where a lot of owners have never lived in strata before, it just takes a man in a nice suit to say “this is standard practice” and everybody signs up for it, because they’ve got no way of arguing against it.
Especially when so many baby boomers are downsizing into apartments for the first time and they have no idea. I think maybe we have a lot of trust in people behaving well.
Integrity. I remember when we started off in apartments. A lot of the time, we assumed that certain things could not be happening, because they were so obviously immoral and illegal, that the government would never allow them. Boy, were we wrong about that! Okay, talking about illegal; New South Wales Police apparently, are telling strata residents they need to have a close look at their security.
Why is that? What started that?
We’ll have a chat about that after this.
What prompted that; the New South Wales Police to come in on strata buildings?
The Owners Corporation Network are running a webinar (free) and it’s prompted by police and security professionals, who are saying “look, everybody’s getting a bit lacks. People are not focusing on the security of their building.” The thing is, that if a dishonest person, if a thief or whatever, gets into a building, they can cause absolute havoc once they’re in, because of this concentration of homes. One of the classic things is, they go through letterboxes and collect credit cards and things like that and use them for as long as it takes the person who owns a credit card to find out that there’s all these weird charges going through. I know somebody who basically began his criminal career many, many years ago, by having kids going around letterboxes, taking out any letters that look like they came from a bank, to get the credit card.
Who was that, Jimmy?
I’m not telling you.
It sounds like a modern day Fagan.
Well, yeah, he was in that respect. You’ve got the post office who says “we don’t want to have to unlock doors to deliver mail.” You’ve got a building that doesn’t have a concierge or a front desk manager, so the post office insists on putting the letterboxes outside. For a start, people can see when a letterbox is stuffed full and the mail hasn’t been picked up for a while. These people have gone away on holiday, so they know exactly what apartments to target. Then there’s the fact that these letter boxes are so easy to open.
They can be forced open quiet easily.
They can be forced open, or a hair grip kind of thing, will open some of them. I mean, that’s your first line of security. I’ve got to be honest, at the same time, we’re talking about people who will go on Facebook and say “hey, everybody! I’m leaving tomorrow for a 12-day-trip around the outback. I’ll send you some pictures.” “Oh really! Great!” We know where that person is for the next 12 days. Then there’s things in buildings like security cameras; people install them, but who checks them? How often do they get checked? How often do professionals come along and say “you know that these cameras; these two cameras aren’t working?” Where does the recording go to; who has access to it? Should they have access to it? Things like that. Garage gates are a favorite. Do you have protocols in your building for what happens if somebody; if a stranger follows you into the garage? That could certainly gives them access to a lot of cars.Could be you’ve got storage boxes there and it could be that that also gives them access to the whole building.
Yeah, sure. In our building, it’s hard to get into the lift to get to certain levels. You need a security key for different levels, but other buildings don’t have that. You can get into a lobby of a building and lift landing
The apartment that that we used to live in, the apartment block… It didn’t have security. It didn’t have a secure lift and somebody got in; got onto the roof, used the fire hose on the roof to slide down to a balcony, got into the apartment, stuffed his pockets full of anything valuable, and then realized that the door was deadlocked. So, he’s in the apartment. He wasn’t game enough to climb back up to firehose to get out quite (wisely). Then, somebody saw the fire hose, dangling down and called the police and the police came to the door and knocked on the door. “Police. can we talk to you?” “No!” “Can you come out please?” ” No!” “Can you open the door?” “I could, but I don’t want to.” Eventually, the owner came and they took the person away. That was one instance of somebody getting into the building and not being able to get out. There’s plenty of cases of people who are a bit smarter, who would have found the spare keys and unlocked the door.
When you see someone carrying a wad of goods and a television set down in the lift, you don’t think to question them, do you? You just think it’s somebody moving out.
The favorite thing is for people to take backpacks, you know, like rucksacks. They get to wherever they’re going to rob and fill up their rucksacks. Nobody ever says “oi!” People don’t these days; they just don’t engage. If you see somebody that you think is a criminal, most people will go “I’m just gonna make a mental note, but I’m not going to engage. I don’t want to be bailing up criminals, because they could be dangerous.”
What they should be doing is saying “hello. Can I have a selfie with you; is that alright?”
When this building first opened, before anybody moved in, a guy turned up with an empty rucksack and he was caught coming in the back gate. The security guy who was in charge said “what are you doing?” He said “oh, I’m looking for somewhere to stay. I’m looking for a hotel.” The security guard said “oh, just come with me” and then said “oh, look up there!” The guy looked up and he was looking straight at a camera. The security guy said “now,on your way. We know exactly what you look like.”
That’s clever. So, when is the webinar?
There is information about the webinar on the website.
Oh, okay, on flat-chat.com.au
I think it might be this week at lunchtime. It could be this Wednesday, which if you’re listening to this on Wednesday, would be today. Have a look on the website. It’s there. All right. Thank you, Sue.
And thank you all for listening. Bye. Bye.
Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website, flat-chat.com.au And if you haven’t already done so, you can subscribe to this podcast completely free on Apple podcasts, Google podcasts, Spotify, Stitcher, or your favorite pod catcher. Just search for Flat Chat Wrap with a W, click on subscribe, and you’ll get this podcast every week without even trying. Thanks again. Talk to you again next week.