HomeBusinessShane bought a $300k apartment. Then he was told the building needed...

Shane bought a $300k apartment. Then he was told the building needed $750k worth of repairs

Major reform is needed to South Australia’s strata regulations to ensure buildings are well maintained, saving owners from taking massive loans for repairs and prospective buyers from purchasing derelict apartments, amid a spike in strata disputes.

Stakeholders in the housing industry said improvements were urgently needed as high-rise apartment blocks spring up across Adelaide in response to housing shortages.

Lawyers are reporting an increase in the number of people requiring legal support because of strata-related concerns.

They are appealing to the SA government to establish a dispute resolution process or specialist tribunal to handle strata disputes, saving homeowners thousands of dollars in legal and court fees.

The need for such reforms was flagged with the previous state Liberal government through a 2018 parliamentary inquiry and the current Labor government says its bill drafted in 2022 is still under review.

Homeowners to pay $750,000 loan

Shane Hryhorec and his neighbours are among those owners involved in a dispute.

He bought an apartment for more than $300,000 in Adelaide’s northwest in 2023, without being told the extent of maintenance work required for the building and is now calling on the state government to make it compulsory for strata corporations to have long-term maintenance plans for buildings and collect sufficient levees to carry out the works.

Some of his building’s 44 occupants told 7NEWS.com.au there was damage to their interior and exterior ceilings, walls, and floors because of water leaking into their homes from apartments on the level above them.

Hryhorec and other apartment owners were recently informed they need to collectively take out a $750,000 loan to have waterproofing of 10 apartments repaired.

Once those were fixed, the body corporation will likely have to take out another loan to fix further damaged apartments.

“I renovated my unit to make it lovely, my apartment is really nice, but the rest of the building is not well maintained, and it feels depressing,” Hryhorec said.

Camera IconDamaged to one apartment identified in 2021. Credit: Supplied

Remediation required was flagged with the building’s strata management, Whittles, as far back as 2012, when one homeowner reported issues with their home and an engineering report was completed.

It wasn’t until 2018 the homeowners found a copy of the engineering report via an internal portal of Whittles that stated work to further apartments was required.

“I was completely shocked that I was being asked to fix problems from almost 15 years ago,” Hryhorec said.

The owners are now questioning why repairs were delayed for years, leaving some unable to claim the costs through builder’s warranty insurance.

In 2021, one homeowner told the strata company they had lost about $8000 in rent because of water damage that made the apartment unlivable for their tenant and there were delays getting the repairs completed.

Eventually, that owner’s repairs were for paid using the building’s contents insurance, but now other homeowners are being told insurance won’t pay for the costs because they’ve found it is a pre-existing issue with the building.

Hryhorec said his building had been managed “extremely poorly” over the years, and he was told he’d have to pay out of his own pocket to have hallway lights replaced and his level painted.

“The fact there’s no money in the bank to be able to fix things and repairs things is a great show of where it’s at,” he said.

Another issue the apartment owners are facing is a lack of record keeping relating to the decisions made for their building.

They have been told that under state law it was not compulsory for the building’s committee of homeowners to meet, and Hryhorec said he could not find records to explain why some repair work was carried out on the building, and major issues were unresolved.

“We thought there was a due process happening,” another apartment owner told 7NEWS.com.au.

Whittles would not comment on the specifics of the building because of client privacy, but said it maintained a “positive relationship” with the building’s committee and “acted in their best interests”.

“If any concerns are raised, we work closely with the owners’ corporation/committee to ensure they are resolved as quickly as possible,” a spokesperson said.

‘Need a better system’

Lawyers with a collective experience of three decades working in strata disputes told 7NEWS.com.au there were increasing numbers of homeowners needing legal support recently, but the state’s laws were not serving the needs of South Australians.

Lynch and Meyer partner Alice Carter has represented body corporate managers and homeowners the past 12 years.

Carter said she was aware of other homeowners, such as Hryhorec, who were struggling to pay hundreds of thousands of dollars for repairs to their building.

Part of the problem is, strata corporations are not required to create maintenance plans for their buildings and maintain an adequate account known as a “sinking fund” to pay for these repairs.

Hryhorec called on the SA government to reform strata laws since it plans to increase apartments in Adelaide.
Camera IconHryhorec called on the SA government to reform strata laws since it plans to increase apartments in Adelaide. Credit: 7NEWS

“Across all building, even the bigger (and) modern ones, they have significant maintenance with swimming pools, lifts and all these extra things that they offer, they need to be able to maintain those expenses,” Carter said.

Cowell and Clarke director Symoane Mercurio said most strata disputes she had been involved with in the past 19 years related to building maintenance.

“The problem can be that managers don’t know the problems of properties until they arise because no one’s given any thought to the long-term matters.

“If a maintenance plan was mandatory, it requires someone to think through the needs of the property and the timing and costing of those works,” Mercurio said.

Mercurio said laws about record keeping should also be strengthened to prevent situations like Hryhorec’s who is struggling to find a paper trail of decisions made for his building.

Currently, the law allows for building committees to “regulate meetings and proceedings as it thinks fit.”

“(This) is why we’re probably seeing this very informal approach by committees because they do that little bit of discretion on how they approach those,” Mercurio said.

She suggested the law be changed to either lessen the discretion or set minimum requirements for committee meetings and record-taking.

Both lawyers agreed the current system, where homeowners are sometimes paying thousands of dollars to resolve strata issues in the magistrates court, is not suitable.

“These types of matters have varying levels of complexity and some of them are not addressing any type of legal issues, it’s more so how people perceive behaviours,” Carter said.

“The magistrates’ court just isn’t resourced enough to deal with these people issues … we need a better system.”

Cowell and Clarke director Symoane Mercurio.
Camera IconCowell and Clarke director Symoane Mercurio. Credit: Supplied

Mercurio said the law should require people to go through dispute resolution or mediation before they can proceed to court, similar to the system in place in Victoria

“This is a similar approach to how residential tenancy disputes are handled in the South Australia’s Civil and Administrative Tribunal.”

“I’ve actually seen great success as a lawyer and also a mediator for the Small Business Commissioner in these initial conferences in preventing matters going to court.”

Carter recommended a specialised tribunal be established within South Australia’s Civil and Administrative Tribunal to deal with strata disputes.

The suggestion was also made in the 2018 parliamentary inquiry report into strata that the former Liberal government accepted.

In 2023, the current Labor government released its recommended changes to strata laws, but the bill is yet to be introduced into parliament

Minister Andrea Michael said: “These are complex areas for reform and the government is currently considering feedback”.

“The draft bill was written by the previous government and when we came to office, we wanted to undertake our own stakeholder and community consultation on it and potentially amend it.”

She highlighted the government was looking to make mandatory sinking funds and annual general meetings to consider financial plans for maintenance over 10 years.

The government announced a 30-year strategy to boost Adelaide’s population to 2.2 million and construct more than 300,000 homes as part of the Greater Adelaide Regional Plan.

High density housing, including more apartment buildings, is one of the proposals on the table.

Hryhorec said the minister needed to update strata laws urgently to save others from experiencing a similar nightmare to his.

“The only way we’re going to fix the house crisis is with apartment buildings, but if this is how they’re run, who will want to partake?”

Content Source: www.perthnow.com.au

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