Why strata needs to get out of Fair Trading NOW!

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The highly publicised problems at the Opal Tower in Sydney have brought some much-needed attention to the issue of new apartment blocks with serious defects.

They have also generated a predictable amount of finger-pointing, married to a considerable lack of self-reflection.  A long hard look at themselves is not a default activity for many politicians.

But the problems with strata are systemic and endemic, and they start at the very top in a culture that has traditionally seen apartment living as aberrant behaviour.  Wanting to live in a unit is unAustralian, mate.

As a consequence, apartment owners are usually the last to be considered when plans are made and, indeed, when things go wrong.

For instance, NSW’s defects bond – the two per cent of the building cost the developer must set aside in case of defects – has to be seen as a token gesture.

Expert estimates floating around at the moment place the likely cost of your average defect remediation at between 20 and 30 per cent of the cost of construction.

However, to get anything close to that, apartment owners often have to fight the developers in court. With the stakes sometimes running to millions of dollars, the odds – and highly paid lawyers –  are stacked against them.

By the way, in Victoria, a 75 percent vote by owners is required before that tortuous and treacherous process can even begin.

A sense of institutional neglect has led to growing calls in NSW demanding that strata be taken out of Fair Trading and given its own ministry, or at least a prominent part in a more relevant one.

To have a minister solely focussed on the state’s fastest-growing housing sector makes perfect sense. However, in NSW strata comes under Fair Trading which in turn is part of Innovation and Better Regulation, a Babushka doll of a department.

Earlier this year, the Real Estate Institute of NSW withdrew from government consultative committees, with their CEO Ian McKibbin saying: “Fair Trading do not have the knowledge, skills and experience to support the industry, and therefore put consumers at risk.”

He has a point. Apartment owners who go to Fair Trading looking for help on specific issues are offered simplistic advice and zero advocacy.

The obligatory mediation process is geared more to compromise than achieving a fair solution and if a case is elevated to the Civil Administrative Tribunal, a whole other set of rules, complexities and, occasionally, personal as well as legal opinions comes into play.

Meanwhile, Matt Kean, NSW’s Minister for Innovation and Better Regulation, has too many distractions. Two weeks before the Opal cracks appeared, he was taking a road roller to dangerous toys.

The next week, he was issuing warnings about unsafe barbecues (although with no mention of barbies on strata balconies). On the day of the great Opal exodus, he was busy warning people not to get locked into unfair gym contracts.

As for strata, in the past year he came close to opening every apartment block in the state to unlimited short-term holiday letting, as they did in Victoria, until a backbench revolt was threatened.  He also dealt with the flammable cladding crisis, after a fashion.

So where should strata live? It’s worth noting that the lead on the Opal issue was taken by Planning and Housing Minister Anthony Roberts.  Mr Roberts, coincidentally, was the architect of the radical strata law reforms that came into force in 2016.

You don’t have to join too many dots to see how strata could fit neatly into Planning and Housing.

But, in an election year, and with Minister Kean and Premier Berejiklian’s political careers closely intertwined, that would never be allowed.

A version of this column first appeared in the Australian Financial Review.

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