Industry Issues

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

Focus Issues

Extreme weather events

In recent months, we have seen the trajectory of extreme weather events that began with the Northern Rivers floods in July of 2022 and both Australia and New Zealand are dealing with an abundance of new climate related challenges.

Late last year in South Australia, the River Murray flooded causing upwards of $200m worth of recovery costs. In January, a record flood hit the Kimberly region of Western Australia, as Tropical Cyclone Ellie forced the WA Government to initiate a state of emergency. In February, New Zealand was impacted as Auckland experienced a highly dangerous and hugely impactful set of climate conditions.

Not only do extreme weather events cause a substantial amount of undue harm and risks to safety, they also have a significant impact on the affordability and availability of strata insurance. For example, we know that homeowners in Northern Australia have experienced increases in insurance premiums of up to 178% (compared to 52% elsewhere), arising from vulnerability to extreme weather events since 2011. With the compulsory nature of strata insurance, strata premiums have become unaffordable and are putting enormous financial pressure on owners.

The Federal Government initiated its $10 billion reinsurance pool for flood and cyclone-prone regions of Northern Australia late last year, and SCA continues to work to make sure the scheme is implemented as effectively as possible for strata residents.

Management rights

The topic of management rights in strata is a polarising and divisive one, that continues to raise concerns around consumer rights and protections in Australia’s growing strata environment.

Currently, in Queensland, strata residents in new (and existing) developments are exposed to being locked into up to 25-year contracts for site management services, often pre-sold by developers before the handing over of the body corporate to owners. This leaves owners with

a lack of choice or self-autonomy over who provides site management services, and little wriggle room of what has the potential to be excessive wages.

The issue is now largely unique to Queensland. NSW has previously engaged in reforms to prevent this issue from occurring, via forcing the expiration of management agreements made by developers at the first AGM, and limiting all future contracts to a 10-year maximum. Similarly, in Victoria, legislation was recently brought in that prevents developers from introducing management contracts to owners of more than three years. We know that of the 250,000 lots under Management Rights across Australia, approximately 225,000 of them are in Queensland.

SCA (Qld) has therefore called for management contracts to be capped at 10-years, and for original owners to not be permitted to enter into contracts of more than three years, in line with the successful reforms in NSW and Victoria.

The Queensland Government is currently investigating the issue, and consulting with industry to consider reforms that would result in increased consumer protection and positive outcomes for strata owners.

Smoking in strata

A recent decision by the New South Wales (NSW) Civil and Administrative Tribunal (NCAT) saw a couple in Northern NSW successfully sue their neighbours on the issue of smoke drift, resulting in the party in question being banned from smoking tobacco on their unit’s balcony.

The issue of smoke drift in strata is becoming more and more pertinent, likely due to overall changes in attitudes towards smoking (and the availability of nicotine alternatives), that is in turn contributing to the decline in social acceptance of cigarettes.

In Queensland last year, a resident of a Surfers Paradise apartment was banned from smoking on her balcony, as the smoke drift was considered by an adjudicator as a ‘hazard’, as opposed to a ‘nuisance’, which it had been typically considered in the past. This meant that it was therefore in breach of both the body corporate’s bylaws, and Queensland’s state body corporate laws.

There are concerns that tribunal decisions of this variety may set a precedent moving forward and allow for strata communities to ban smoking completely, which ignites the discussion surrounding the rights and autonomy of people living in strata communities as opposed to standalone homes.

The issue is not straightforward and has many facets, for example, could stricter by-laws now expand the definition of ‘smoke drift’ to include barbecues, cooking smells and all other drifts, or affect the potential for property prices, or could their perception to be influenced by strict or more relaxed rules in this regard.

Issues in Brief

Half of all unit blocks have serious issues, research reveals – Herald Sun

New research has shown evidence that reinforces the known prevalence of building defects in strata, finding that as many as one in five high rise apartments in NSW may be at risk due to flammable cladding or other problems. It was also found that 76 per cent of occupants in buildings higher than 4 stories had complained of water penetration or structural issues within their complex.

Airbnb in residential buildings: Time for a change? – Accom News

Challenges continue to be caused by the preponderance of short-stay accommodation options in residential buildings and strata communities, due to the widespread prevalence of apps like Airbnb and Stays. Not only do short-stay accommodations impact the availability of long-term rental options, they also impact strata communities due to noise, poorly behaved tenants, vandalism etc. The conversation now surrounds the capability of bodies corporate to dictate their own by-laws that permit or prevent short stay accommodation lots within strata complexes.

Major win for Couran Cove Island Resort residents without power, water – Herald Sun

The recent passage of the Building Units and Group Titles and Other Legislation Amendment Bill 2022 has resulted in landmark changes to the Building Units and Group Titles Act 1980 (BUGT Act). One such group that was pleased with the passing of the reforms was the residents of Couran Cove, who have long been caught in a complicated legal battle over allegations of unpaid levies. The reforms surrounded new committee eligibility requirements, increased transparency in body corporate decision making, improved financial management and overall contributed to increased consumer protection for strata residents in Queensland.

Trowbridge second phase of strata reforms ‘premature’ – Insurance News

Following the release of John Trowbridge’s Independent Review of Strata Insurance Practices: Phase 2 Report on Remuneration, the National Insurance Brokers Association (NIBA) have suggested that the strata industry focus on improving disclosure and self-regulatory reforms, prior to committing to the further strata sector remuneration changes that were proposed by Trowbridge.

SCA has committed to further improving transparency and disclosure practices, to ensure consumers are educated and understand the strata insurance products they are taking out, and each party’s role in the strata insurance supply chain. SCA will review the impact of these changes in 2024.