Industry Issues

Industry Issues pulls together some of the most interesting and important themes in the strata industry over the past few months.

Light Electric Vehicles

Light electric vehicles (LEVs) are battery powered vehicles that differ from traditional electric vehicles (EVs), in that they are designed to travel relatively short distances. LEVs such as e-bikes and e-scooters can offer an eco-friendly, convenient, and low-cost option for transportation, due to their portability, weight, energy density and longevity.

However, the benefits associated with LEVs are counterbalanced by their associated risks, most notably their vulnerability to fire related incidents. In fact, LEVs are considered by fire safety experts to pose a higher risk to emergency responders than passenger EVs.

The low barriers to ownership, ease of battery abuse (including everything from direct physical damage, overcharging, sun exposure) and portability to harder to access areas lend to higher chances for battery fire incidents, especially when compared to incidents strictly involving electric vehicles.

This has led to e-scooters being banned globally from such places as the London transport network, and a significant number of buildings in New York City.

In a strata community, where people live close to one another, it is of no surprise that the consequences of a battery fire can be devastating. A growing number of recent incidents in strata have led both residents and governments to examine the impact of LEVs, and consider both additional safety measures and outright bans for apartment buildings.

Through its specially formed Electric Vehicles taskforce, SCA is exploring this issue in depth with a view to provide guidance to members, government, owners and the general public on the topic.

Valuations

Valuations are an important process that is often overlooked in the world of strata. Valuations are imperative to ensuring that strata properties are appropriately insured, compliant with jurisdictional legislation, and can have a significant impact on sales, financing, and strata land taxes.

Strata managers are an integral part of the valuation process, and act as a facilitator for schemes to ensure that they are correctly valued, and that their risk is minimised. Worryingly however, low-quality strata valuations have recently emerged as a concerning issue for industry, with more and more insurers becoming concerned with the lack of detailed valuations being prepared in the market.

The potential implications of inaccurate valuations (of both overvaluations or undervaluations) can be significant, and have the potential to cause a cascade of severe outcomes for strata residents and owners.

If a strata property is overvalued, this may result in a property owner being subject to higher than necessary costs, including higher insurance premiums (to ensure adequate replacement value coverage) and increased land taxes.

If a strata property is undervalued, strata owners will likely not have adequate insurance coverage for the replacement value of the property, and in the event of a significant incident, strata owners could be left underinsured and hung out to dry.

Stakeholders including regulators, industry associations, and professional valuers must consider how the valuation process can be improved, to ensure the accuracy and reliability of strata valuations moving forward.