17/12/2002 - 21:00

Regulation focus for strata reviews

17/12/2002 - 21:00

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THE absence of regulation in the strata management industry has provoked concern about this $28.5 billion sector of the residential property market. The chairman of a Legislative Assembly inquiry into the strata management industry in WA, Member

Regulation focus for strata reviews

 

THE absence of regulation in the strata management industry has provoked concern about this $28.5 billion sector of the residential property market.

The chairman of a Legislative Assembly inquiry into the strata management industry in WA, Member for Riverton Tony McRae, said that in light of the recent mortgage brokers’ scandal, Consumer and Employment Protection Minister John Kobelke was focused on any area where professional people were managing significant amounts of money.

“There are 40,000 registered strata title plans,” Mr McRae said.

“DOLA, the Department of Consumer Protection and the Strata Title Institute of WA developed a model to understand the monies.

“It has been estimated that there’s about $1,000 per unit held in strata fees.

“So that’s about $36 million in funds managed by about 120 strata managers.

“The sum of those monies also gave rise to some concern.”

This figure is considered to be a conservative estimate, although it also reflects the amount of money that is self-managed.

In WA the register of strata title plans includes two lot plans.

These plans make up 60 per cent of the total number, leaving about 15,000 units in larger schemes.

The State Government has concerns beyond the sheer amount of money that is in the hands of strata managers, however, claiming there are legal issues emerging with regard to building maintenance

“There seems to be a general concern and need for the registration of strata managers in the State,” Mr McRae said.

Currently in WA a unit holder can get orders in relation to how strata properties are managed, but there is no capacity for enforcement.

“In NSW there’s a system and if there is a complaint there is compulsory mediation and arbitration and enforceable orders,” Mr McRae said.

“There are some serious public health and public liability issues where buildings are at risk of serious failure, where there is no capital to do the necessary remedial work.

“There is an interesting chain of litigation emerging.”

In a case in the US, an individual who bought in to a strata property took legal action after it became apparent that the property required structural work.

“They took legal action against all the previous owners for failing to make proper arrangements for the maintenance of the building,” Mr McRae said.

“In NSW there are a couple of cases where this might be an issue.”

However in NSW it’s common for unit holders in strata developments to contribute money to a ‘sinking fund’ to meet the costs of ongoing maintenance.

And the strength of the current market has meant that ongoing maintenance costs are covered by the appreciation of the property.

“You can’t buy in to property and avoid the obligations of long-term maintenance,” Mr McRae said.

Running parallel to the Legislative Assembly inquiry is an internal review by DOLA looking at some aspects of the Strata Title Act.

DOLA will present the review to parliament in September next year.

Consumer and Employment Protection Minister John Kobelke said the current unregulated system posed a potential threat.

“The strata title management system has individuals or companies taking on the managing roles, this sometimes involves substantial amounts of money held in trust,” Mr Kobelke said.

“Problems arise when people who manage these funds are not licensed or regulated. This poses a real threat particularly to senior citizens living in strata title properties.”

Real Estate Institute of WA public affairs director Lino Iacomella said the institute believed that strata management in WA should be licensed.

There is no regulation of strata managers in WA except in the case where registered real estate agents are undertaking the work.

“There are obviously a lot of real estate agents that are strata managers and then they are licensed under the Real Estate Act.” Mr Iacomella told WA Business News.

“There is no licence for strata managers.

Strata Titles Institute of WA president Mark Atkinson said significant reforms of the act were expected following the review being under-taken by DOLA.

“We support some regulation but not anything too heavy handed,” he said. At the moment there are very few controls over the industry.

“We could avoid some risk by having indemnity insurance or fidelity insurance for managers or having a credited strata manager for properties above a certain level.”

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