Maria thought her townhouse was ‘perfect’. Then her bedroom ceiling began to drip
Defects are being kept out of strata reports and the building commission is removing defects notices from public view – which creates a trap for prospective buyers.
Maria and John Tsolakis bought their dream townhouse in 2021 and have had nothing but problems since – none of which were apparent prior to purchase. Credit: Nick Moir
Maria Tsolakis and her husband, John, bought the “perfect” townhouse at Ettalong Beach in 2021. The listing promised a “low-maintenance” home that fused “impeccable quality with exquisite modern design”. “The first summer was almost magical,” she said.
But then came the drips: in the bedroom, in the living room and in the garage.
It uncovered a waterproofing problem that would lead to mouldy stairs, moist wooden beams, and a balcony railing secured by two screws through a concrete sheet.
Not that the Tsolakises could have expected this. The strata report, which they purchased and had a lawyer read before agreeing to buy the home, included a copy of the owners corporation’s minutes that reported a water issue that a builder had agreed to fix.
“It’s all good,” Tsolakis remembers her real estate agent promising at the time. “All new buildings have little water leaks.”
A building report commissioned for the couple revealed the balcony railing was connected to concrete via two screws.
But Tsolakis later found out there had been a building work rectification order made for the site, and that other members of the owners corporation were aware of the saga – but didn’t detail it in meeting minutes, leaving the couple another victim of Sydney’s $700 million buildings defects crisis exposed in the Herald’s Shoddy Sydney series.
The series has heaped pressure on the Minns government to bring further reform to the sector, with opposition building spokesman Tim James calling Tuesday’s revelations about dodgy training certifications “shocking revelations that undermine confidence in our construction industry”.
Premier Chris Minns defended the status quo, pointing to the record of the Building Commission under its former boss, David Chandler. There are inevitably going to be “bad operators in the system”, he said, but the commission’s focus on prosecution would clean up rogue actors.
But unit owners who discover defects in their new homes are still battling secretive owners corporations, obfuscating strata management companies, the Building Commission removing some orders before works are completed, and outdated legislation that is costing them millions in legal fees and years of stress.
‘This model is going to implode’
Strata experts are warning Australia’s 60-year-old strata system is at risk of buckling under the pressure of the defects crisis, which is causing a “lawyer’s breakfast” as unit owners are forced to spend tens or hundreds of thousands of dollars fighting developers and builders in the court system.
At least 4.2 million Australians live in buildings managed by owners corporations or strata: a group of owners who join together to take on the legal and financial responsibilities for upkeep of buildings. But the complex system by which owners enact those responsibilities, first legislated in NSW in 1961, is making repairing problematic or worn-down buildings increasingly difficult.
“Ten years ago, I thought ‘the government has to intervene, this model is going to implode on itself’,” said Penny Vandenhurk, a Sydney-based property lawyer turned buyer’s agent who regularly deals with strata issues in new purchases. “But that hasn’t happened. But it’s not far-fetched to say it will implode soon.”
Vandenhurk said she had multiple clients who had done due diligence on a property before purchasing, only to find an array of defects had already been discussed among members of the owners corporation outside of meetings.
“There should be at least five years of AGM minutes so that you can see what was voted on and decided,” she said. “There should be information about the building, the strata insurance, there should be information about the fire safety, any medium to major works that have happened in the last five years,” she said.
But some strata companies allow inspectors – whose job it is to pull together information for a strata report – only one hour to access all files.
“They don’t have an infinite amount of time to pull this information together, and so they’re going on the information the strata manager has given them, and then they basically try and find this information to put it together in a document,” she said.
Anoulack Chanthivong, the NSW minister responsible for strata, said legislation required all records to be available for inspection, and that the maximum penalty for failing to produce them was $550.
“This is why transparency and full information is so important,” he said. “When the information comes to hand [about defects], you should obviously go through the right channels.”
Strata management under the spotlight
But difficulties in managing defects in strata buildings are compounded when management companies, contracted by owners corporations to manage issues around building maintenance, do not perform as they should.
Among the worst examples was the case of PSMG Strata, which faced numerous NCAT orders but is still allowed to operate after multiple appeals.
In Macquarie Park in Sydney’s north, Building Commission NSW issued developer Greenland Australia with a work rectification order, demanding it urgently repair a concrete slab in its basement that, if not fixed, could eventually cause the massive apartment block’s collapse.
But the strata management firm associated with the company contacted residents with instructions to avoid talking about the situation and the Building Commission removed the notice from its website.
“Please do not contact the lawyers, the Strata Manager or this office as we do not have anymore more [sic] information,” the email said. “Please do not make any comment to the media, this will only harm the reputation of the building and your asset.”
Similar arguments to keep knowledge of defects out of the public eye have been made by developers eager to keep Building Commission NSW’s rectification orders off the internet.
In a LinkedIn post last month, Assistant Building Commissioner Matt Press said legislation allowed the commission to “consider the public interest at the core of our decisions”.
“While, of course, we do (and should) consider potential impacts on the licence holder and their customers when taking action, [a recent legal decision] highlighted that the overall purpose of the Home Builders Act is to ‘protect consumers in the contracting for and the construction of residential buildings’,” he wrote.
Legal obligations
Cathy Sherry, a Macquarie University Law School professor specialising in land law for high-density developments, said owners corporations had a legal requirement to maintain common areas.
“You can let your house collapse but you can’t let a strata collapse. If there is disrepair, all of the owners have an obligation to fix it,” she said.
“Owners are just blindsided by this, and then they have to collectively work out what to do. They’re meant to fix it, but very often that means raising special levies. If you can’t afford to pay a levy, you’ll be bankrupted because you can’t pay your strata. You can have your home taken away from you.”
Despite being brought together through strata, unit owners are often worn down and divided when coming up against developers, resulting in a “divide and conquer” approach from developers, Sherry said.
Amanda Farmer, a leading strata lawyer who runs a business supporting strata members across the country, said NSW’s strata legislation “can’t keep up”.
“We cannot write and make laws fast enough to deal with the challenges we are facing in strata,” she said. “Our law is very reactive, and this space is moving too fast.”
Tsolakis and her husband are living in Sydney and paying two mortgages while they take the developer to NCAT over the fixes, and what began as a retirement adventure has turned into a legal fight with no end in sight.
“The system is not working and all I see around me is apartments going up, strata,” she said. “But I can’t understand if you don’t fix the laws as they stand now, how can you keep building and expect things to improve?”
Tomorrow: The solutions to Sydney’s defects crisis
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