economics and industry standing committeeevidence... · 2020. 8. 26. · economics and industry...

ECONOMICS AND INDUSTRY STANDING COMMITTEE

INQUIRY INTO THE WESTERN AUSTRALIANSTRATA MANAGEMENT INDUSTRY

TRANSCRIPT OF PUBLIC FORUMAT BUSSELTON

ON TUESDAY, 28 JANUARY 2003

Members

Mr A.D. McRae (Chairman)Mr J.H.D Day (Deputy Chairman)

Mr J.J.M. BowlerMr B.K. MastersMr M.P. Murray

Economics and Industry Busselton, Tuesday, 28 January 2003 Page 1

Public Forum began at 9.35 am

O’MALLEY, MR JACK:LOGIUDICE, MS ELEANOR:BROMELL, MR ROSS:BLACK, MR TOM:LUCAS, MR DOUG:CLARK, MR RICHARD:CLARK, MS LOELLEN:

The CHAIRMAN: I will open this hearing of the Legislative Assembly Economics and IndustryStanding Committee by firstly welcoming the local participants in this regional forum. This is aninquiry into the Western Australian strata management industry. Its terms of reference have beenadvertised fairly widely, and I trust you have been able to get a copy of those. I also place onrecord my appreciation to the Shire of Busselton for making available these facilities. It isabsolutely appropriate that the State Government work with local government in conducting theseforums. While this hearing will be conducted in a fairly informal manner, with informal appearance andbehaviours, it is nonetheless a hearing of a committee of Parliament. As such, we are allparticipating in a forum under parliamentary privilege. Not only does that provide a privilege but italso imposes an obligation, so there is a reciprocal responsibility. The point I need to make mostclear to you is that any attempt to mislead this forum can be considered a breach of parliamentarystanding orders, and a contempt of Parliament. Whilst that might sound very serious - and it is animportant obligation on us all - please do not be frightened about expressing an opinion if it isgenuinely felt and is not an attempt to mislead. I am just warning you about any knowing contemptof Parliament. We will not be taking evidence under oath. You will see the microphones aroundus. Parliamentary staff are recording this hearing. The critical thing is that they know us but theydo not know you. When you make a comment, particularly for the first three or four times, giveyour name before you start your comment - we do not need your address, which was part of yourregistration anyway - just so that Hansard is able to identify who is speaking and enter thatappropriately into the transcript. Thank you for that. An introductory Powerpoint presentation was then conducted. The CHAIRMAN: As I indicated, this a reasonably informal process. I propose to go around thetable and hear people’s particular interests, perspectives, questions or submissions. In Kalgoorliewe found that was a useful method of allowing anybody that wanted to make a comment to begin.It also allowed us to hear what the particular regional interests were. The purpose of coming out ofthe city to the mining sector in Kalgoorlie was to see what a regional mining industry-based townlooked like compared with city strata management profiles. Similarly, the reason for coming toBusselton is that we were looking for an economy strongly influence by the tourism industry to seewhat sort of profile of strata management that produced. Do any other committee member wish toadd anything or make any observation? Mr B.K. MASTERS: I will make a comment at the end of the session; I do not want to pre-emptanything that might be said. It is an issue related to a strata title caravan park which may be ofrelevance. The CHAIRMAN: Are there any questions before we begin the process of going round the table?


Mr R. Clark: Are any comments we make actually recorded and posted on the web word for word?

The CHAIRMAN: Every comment that you make will be recorded and we put the full transcripton the web. Mr J.H.D DAY: You will get a chance to correct it. The CHAIRMAN: If you think something has been misheard or the syntax is wrong, you get achance to say “I did not quite put it like that”, and to ensure that it is smooth and precise. Mr Dayhas just reminded me that if any member of the public, or anybody registering as a submissionmaker, believes he or she has evidence that really needs to be taken in camera, they must approachme or any of the staff and I will bring that back to the committee. We will consider it and then giveconsideration to taking that evidence in camera. There is an opportunity to apply for that or put acase for that to be done, if you think that you have something that is private or potentially damagingto yourself or another person. We give that consideration, and if we agree, it would not be postedon the web. Ms Loguidice: I have been present at these hearings before and given my personal opinion. I willjust go through the agenda that was sent out today - first, the personal risk posed to consumers bythe current absence of regulation in the strata management industry. I have given that a lot morethought and I honestly believe that education will resolve any of those potential risks. As I havestated before, I have always believed that any problems have been due to bad management morethan any other thing that happened. By licensing - which means education - we will resolve a lot ofthose issues. At the present time, as you know, strata managers that are not licensed have noeducation to support what they are doing. Some may have but some may not. One of the biggestareas is accounting. Probably 60 to 70 per cent of the job is the accounting ability of the stratamanager to formulate the budgets and finances. The public is asking for more and moreinformation and more breakdowns and more income expenditure reports and balance sheets. So tohave that knowledge, the education will come into that and solve a lot of the problems. Mr J.H.D DAY: Licensing and education are not the same thing though they may well go together.In your view, are both necessary? Ms Loguidice: Absolutely - how can you have a license with education? Mr J.H.D DAY: You can have education with a licensing arrangement.Ms Loguidice: As real estate agents, to have licenses we have to meet certain educational criteria. The CHAIRMAN: I will just pick up on today’s point. In your submission this morning, furtherto the one you made at the previous hearing, you state that there needs to be a registration orregulatory or registration regime, and that registration should only be available once somebody hasundertaken some degree of education and demonstrated a level of competence. I am not trying toput words into your submission, but am I hearing you right? [9.50 am]Ms Loguidice: Absolutely. Similarly, a real estate agent now must have education prior to gettinga licence. A person must have two years work experience in sales. I am not sure what the criteriaare now, but to get my licence, 20 units were required at a recognised real estate course, and thattakes one year full time and two to three years part time. The CHAIRMAN: You said that since your last appearance before the committee you have givenmore thought to it. My memory of that hearing is that you were not absolutely convinced that therewas a high risk to unit holders. You said that there was a level of risk. Ms Loguidice: There is no doubt that there is a risk, because of the bad management of a lot ofpeople who manage strata companies. I come across that every day. However, it is purely nothaving the resources; that is, real estate agents and strata managers working on their own. We pick


up strata companies all the time and mainly because of the bad management of the previous stratamanager. I have never seen signs of any other risk. Bad management can be very detrimental to astrata company. Do you want me to go further? The CHAIRMAN: No, that is fine. Mr O’Malley: My name is Jack O’Malley. I am from Busselton and I operate Busselton StrataManagers. I am also a licensed real estate agent and settlement agent. I will speak from a differentdirection than Ms Logiudice. My strata management business in Busselton deals mainly with smallstrata companies. A lot of elderly ladies are left by themselves and I cater for that market. Thebiggest complex I manage is a 12-unit complex. I do this more as a favour to the elderly peoplewho need help. If I were required to license myself and take out the necessary bits and pieces thatgo with the licence, I would not be able to operate that business; it would not be viable for me. Ican understand perfectly well why some of the bigger strata companies in Perth require some formof licensing and certainly good management, because they deal with a lot more people, a lot moreunits and a bigger finance figure than I do. However, I am a member of the Strata Titles Institute ofWestern Australia. Its educational programs are absolutely terrific. Unfortunately, they are usuallybreakfast or evening sessions, and to attend a session, I must miss a day’s work and stay overnightin Perth, which causes me problems. I honestly think there is a need to look at different types of strata management and not just lump itinto one big heap. Commercial management is one section and people who look after largeresidential units need a certain category. However, the person who deals with the sorts of units Ideal with is in a completely different category. The restrictions on large strata managementcompanies would be a hindrance to people like me, and I do not recommend licensing for that at all.Another comment I will make more as a settlement agent than as a strata manager is about theproblems that still occur with some of the older, smaller two-lot strata companies that have neverformed a strata company and have never kept records, because when it comes to a settlement, thereis a problem. If I could get to the breakfast sessions and training sessions a bit more often, I wouldbe quite happy with the business. Mr J.H.D DAY: You said that the largest complex you manage has 12 units. What would be theaverage or the most common size? Mr O’Malley: Six and eight units would be normal. Mr J.H.D DAY: What about two or three-lot complexes? Mr O’Malley: Two lots. I do not have any three-lot complexes. I think five is the minimum. It ismostly five, six and eight lots. Mr J.H.D DAY: You said that there was a problem with the two-lot complexes. What happens inpractice? Mr O’Malley: I was speaking as a settlement agent. Mr J.H.D DAY: In theory, even two-lot complexes are meant to have a strata managementcompany. Mr O’Malley: Under the Strata Titles Act, the developer is required to form a strata company.Whether the new proprietors are required to operate that company, what they do with it and theiroptions are set out in the Strata Titles Act, but they do not necessarily have to do that. Of course,the biggest problem is insurance. I always recommend that two-lot stratas take out joint stratainsurance at least for the properties. It is a problem if the complex has been there for 15 years, theowners have lived happily next door to each other and then somebody else moves in and there hasnever been a strata company or insurance and the units are individually insured.


The CHAIRMAN: Is there a lack of operational history, too? With your knowledge of this area,have you found that the same problem exists for the three and four-unit complexes and the medium-size complexes? Mr O’Malley: No, I do not find a problem there. The CHAIRMAN: Is it your experience locally that, once there is a critical mass of four or moreunits, there tends to be at least some operation of the strata company? Mr O’Malley: Or at least in the initial records. Mr M.P. MURRAY: How do you find the financing of maintenance in older, smaller buildingsthat do not have a sinking fund? Do you get many complaints when something collapses whichneeds quite a bit of funding and an older person might have moved in only for 12 months? Mr O’Malley: I have found that problem in some strata companies that I have taken on. Forinstance, in a five-unit lot, one unit could be occupied by an elderly couple and the rest occupied bywidows. The gentleman has looked after the strata company and when he dies, the ladies do nothave any idea what to do. They come to me and I take it on for them. Their old records aregenerally okay, because the gentleman has been fairly fastidious, but I have found that theyprobably have not been using the best accounting methods and have not had the best financialarrangement with their banks. I have to change some of those. There is a problem with theinsurance for the smaller companies, particularly the two-lot companies, because there is noinsurance on a common property. That is always a concern, particularly when it comes to thirdparty insurance. Mr B.K. MASTERS: You said that it is difficult for you to travel to Perth for a morning orevening training session with the Strata Title Institute of WA. Are there enough strata titlemanagers in the south west to allow STIWA to hold those sorts of training sessions in the country? Mr O’Malley: No, there is not. As I say, I cater for a small area of the market and that is all I wantto do. My other business is the one that I am involved in. The strata management of the resorts,caravan parks and those sorts of places in this town are all done by people in Perth. Mr B.K. MASTERS: Even in places such as Bunbury you would not see a big enough pool ofstrata company managers to - Mr O’Malley: I am not familiar with the people in Bunbury. I have never met one at a StrataTitles Institute meeting. I do not know who is there. I know there is a Ray White in Bunbury. Thelady who works there comes down and looks after properties here. I do not think there would betoo many others who do it. I think Doug McCutcheon looks after a few - Mr B.K. MASTERS: You mentioned that through your settlement agency you have a lot ofproblems with the two-lot strata companies.Mr O’Malley: They are the older ones. Mr B.K. MASTERS: Yes. One suggestion that has been put to our committee is that maybe weshould seek or recommend government legislation so that there cannot be strata companies forproperties with fewer than three or four units within the property. What would it mean to you andto the people in two-lot strata companies if they were separated and given a green title to each ofthose lots? Would it be a good or bad thing in your view? Mr O’Malley: It would solve a lot of the problems with the proprietors. There would be no needfor any sort of management of course. The only problem I can see is with the older lots, such as avery basic duplex that has the garage in between the units. There is no real dividing wall and thereprobably is a common driveway. There may be a few little hiccups for a while, but it would bemuch better if they had their own title.


The CHAIRMAN: Following on from that question, part of what has drawn our attention to thatissue is that different States deal with duplexes in quite different ways. The historical developmentof those duplexes in Western Australia and probably South Australia are similar. However, in NewSouth Wales and Victoria, and to some extent Queensland, the notion of a duplex as being acommon property title never arose. There were always issues with separate titles and quite differentcommon terms are attached to them. For example, what New South Wales would call a duplex wewould call a semidetached. Although the units might have some common walls and a joint roof,ultimately they have been constructed as individual properties and are semidetached properties. Inother words, they have some common boundaries and property that must be shared, but for allintents and purposes they are quite separate lots. The interesting observation is what is left is aresidual group with a common driveway, a common bit of lawn, a common barbecue or some othercommon property that might be difficult to tease out. Mr O’Malley: The latest style of strata company does not pose that problem, because eachproprietor has an individual lot. The boundaries of the lot have been moved to the exterior wall sothat everybody has his own lot in the strata company. That can cause problems down the track ifsomeone wants to paint his wall green or purple. However, as far as I can see, that new style ofstrata title plan simplifies the problems that we had with the old one. It is fine as long as peopleunderstand that they must have insurance - advisably strata insurance, which it must be for a three-lot unit - that it is their lot and that they must look after it. The common area must have commonarea insurance. Those new strata lots will work much better and the people who live in them willbetter understand what they should and should not do. Mr B.K. MASTERS: On a somewhat separate issue, how many properties do you manage inBusselton? Mr O’Malley: I manage 12 complexes. Mr B.K. MASTERS: Are you the only person who provides that sort of service locally inBusselton? [10.05 am] Mr O’Malley: Under a professional name, yes. The only other person I know of is DougMcCutcheon, but I do not know on what basis he does that. The CHAIRMAN: Okay. Mr O’Malley: Also, Ray White in Bunbury operates - The CHAIRMAN: Does it provide a service for Busselton? Mr O’Malley: Yes. Mr B.K. MASTERS: Busselton is still a small town. What do you see happening when youeventually retire? Those 12 strata companies will need managing. There is no guarantee thatsomeone else will set up - Mr O’Malley: I have seriously considered that. I am finding that I have spread myself a bit thin. Ido not feel that I am servicing the strata companies as well as I would like. There were a fewoccasions recently, particularly over Christmas, when I was absolutely flat strap and did not havethe time. I have thought about it very seriously, and have talked to some of the people in the stratacompanies. They would be most upset if I were to give up my business. Therefore, I have decidedthat the best way I can do it is by reassigning my time. I need better time management, and I willdevote one day a week to strata management so that I can get those things done. Mr B.K. MASTERS: Again, it seems that because Busselton is a smallish town and there is not abig pool of strata companies that need to be managed, it is really hit and miss whether someone willbuy your business and continue when you retire.


Mr O’Malley: I feel that I have got many of these companies to a point at which they couldprobably manage themselves. A number of strata companies around town are self-managed, andthe lady behind me is involved with one of them. I advise them when they have problems and try tohelp them as best I can. That is a goodwill thing. Basically, unless somebody else takes it on, thestrata companies will have to learn to do it themselves. The CHAIRMAN: I return to the issue of training. I want to clarify your opinion of education andregistration as we have heard from Ms Logiudice. First, you said that the STIWA training isadequate for developing the skills necessary to be a strata manager, and - if I heard you correctly - isa sufficient requirement for registration, if that is what was needed. Mr O’Malley: No, I would not say that. I have 22 years experience in the real estate industry. Ibecame a strata manager as a favour, and it has snowballed a little bit. I found that as a real estateagent, I needed to be fed information on changes and that sort of thing, so I joined the Strata TitlesInstitute of Western Australia. At that point, the type of education it offered was suitable andbeneficial for me. The CHAIRMAN: Let me put this back to you. I hear that you are highly experienced in realestate, and through your own practice have become involved in strata management. You do notwant to be required to skill yourself to a level at which you could manage a multistorey buildingwith 60 unit holders and a mix of residential, commercial and retail operations. That is not whatyou are after. In fact, from looking at the profile of the strata management business you gave to us,it seems that you are suggesting that the level of skill requirement you require is available throughSTIWA education, and that you do not require a higher level of registration and associated training.Is that fair enough? Mr O’Malley: That is basically what I am saying. I do not think that I need more education thanwhat I can get from the Strata Titles Institute. I basically pick the eyes out of the courses it offers.It means an overnight stay at a motel. The CHAIRMAN: As part of our inquiry, I am trying to understand the kind of registration thatwe might consider. I am hearing from you - correct me if I am wrong - that there is a need for acertain level of education and that that needs to be quite industry specific so that we can be clearabout the standard of it. Is that correct? Mr O’Malley: Yes. The CHAIRMAN: However, it will not necessarily be the same for each strata manager. Youmight find that people who are managing a property with 10 or fewer unit holders need a particularrange of skills and knowledge to be able to do that adequately. They are not required to take thenext step. From my perspective, if I try to interpret what you are saying, you are in some waysarguing for different grades of - I will not refer to registration for the moment - skill requirementand recognition of strata managers. Mr O’Malley: That is exactly what I am saying. I expect that someone should have a certainamount of experience before he took on a strata management position. He should be a principal ofa firm or something like that. Basically, staff need supervision. After they have worked in theindustry for a certain time, they would have the necessary skills to build on to be a strata manager. The CHAIRMAN: People in rural and regional Western Australia tend to become jacks-of-all-trades. You started as a real estate specialist, did some conveyancing and then, through contact inlocal community, started doing strata management. Mr O’Malley: Yes. The CHAIRMAN: Did it not happen by design? Mr O’Malley: It was not part of the long-term plan. Having said that, quite a few things pushedme in that direction; however, I do not think they are relevant here.


The CHAIRMAN: That is fine. Why would a heavier regime of regulation, even if it were gradedto suit the scene that you have described, make your operation unviable? Mr O’Malley: There is not a lot of money in strata management in Busselton. The clients aremainly widows and elderly people on fixed incomes. If I were to raise the fees to what they shouldbe, they would get upset and have nobody to turn to. The CHAIRMAN: I must put to you that I think you are characterising it in the worst possibleterms. I am trying to explore your ideas. We have heard from a couple of other people that thereneeds to be a number of grades for strata managers. People who manage strata properties withsmaller numbers of units do not need the level of skill or demonstrated competence that might berequired from the manager of a 60-unit property with commercial, residential and retail interests inthe one building. I am not quite sure how you came to the view that any form of registration wouldmake your business unviable. You are thinking of the worst case; that is, if you have to get a fullcertificate from STIWA, you will not be viable. Mr O’Malley: We are talking about registration. Exactly what do we mean by registration? The CHAIRMAN: That is what we are exploring, and why I asked why you think registrationwould make your business unviable. Let us talk about a hypothetical situation for a moment. Thecommittee might come to the view that STIWA or a like organisation delivering a number of unitsof training in particular areas satisfied the requirement of small and medium managers; andrecommend a lower level of skill and registration for managers of smaller units than that requiredfor people managing more complex properties with larger numbers of unit holders. Would you saythat the level of skill, competence and registration required for the small to medium-size strata unitswould make your business unviable? How critical is that? Mr O’Malley: No, I do not think it would. What are you talking about? Are you talking aboutheavy fees? The CHAIRMAN: Compulsory attendance at a training course once every couple of years. Mr O’Malley: No, I do not think that would suit me at all. The CHAIRMAN: Would it not? Mr O’Malley: It would not suit me at all to do mandatory courses. Mr J.H.D DAY: It sounds like you are effectively doing that now by attending some of the coursesoffered by the Strata Titles Institute. Mr O’Malley: That is right. I understand that. That is best for me because I can pick theparticular topics that I think I need to be updated on and attend them. The CHAIRMAN: Hypothetically, if we used you as the benchmark, and said that what Jack isdoing is what is necessary for anybody managing up to 10 or a dozen units, that would not affectyou, as you are already doing that. Mr O’Malley: No. The CHAIRMAN: That is what I am trying to understand. Your concern about the level ofregistration relates to the education, training and participation requirements. Mr B.K. MASTERS: As well as the cost. Mr O’Malley: That is what I am saying. If I were required to meet the same registration standardsas the people who look after the big jobs, it would be beyond me. The CHAIRMAN: People have put to us the proposition that if there were some form ofregistration, we would find that regional delivery of the elementary training would be madeavailable because everybody in the region would need to participate. At the moment, only peoplewho are highly motivated, like you, are participating.


Mr O’Malley: I think you would probably find that many people who manage their owncomplexes would be interested. The CHAIRMAN: Thanks very much, Mr O’Malley. Mr Clark, did you want to say anything?Mr R. Clark: I spoke to Dr Wills late last year and was aware of this inquiry. I intended to put ina written submission but due to a few circumstances - a bit of bad health and luck - I failed to makethe deadline. I am not quite certain how much I can say today. I had the fortune, or misfortune, toinherit a block of land in Dunsborough of about 350 acres. In 1999, we decided to sell it through asurvey strata scheme. At the moment we are in some strife because we are not happy with the waythe land is being sold. We are in legal dispute with a person who is the original developer but at thesame time wears the hat of strata manager for the scheme. I will leave it to others to commentfurther on that. Mr J.H.D DAY: Do you have any general observations about strata management? Mr R. Clark: Basically, because of the trouble we are in, I am just very sorry that I ever heard theword “strata”. I am a simple person. I wish that I had sold the block outright; as someone said tome, “Take your money and run”. The CHAIRMAN: Picking up on Mr Day’s question, do you think that part of the problem arisesbecause of that dual role of real estate agent or property developer and strata manager? Even beforethe ink on the property development contract is dry, you are seeing the person who is promoting,selling and I imagine doing some of the settlement of your property stepping into the role of stratamanager. Is that continuum a problem? [10.20 am] Mr R. Clark: We are now of the view that it would be better for the properties to be managed bysome independent strata manager.Mr B.K. MASTERS: Is there any way that the current unit holders within that strata company canvote out the current manager and bring in a new one? Mr R. Clark: That is possible, but the situation we are in is that the current strata manager seemsto have the sympathy of most of the proprietors. I think if a vote were taken today, they would votehim back in. We are the original owners, and 56 out of the 70 lots are still unsold and sitting withthis real estate and accumulating land tax and whatever. It is a pretty horrible situation to be in. Mr B.K. MASTERS: Mr Clark, your property is a rather unusual structure. Are you aware of anysimilar strata properties in Western Australia, or is this the only one structured in that way? Mr R. Clark: There is one in Ravensthorpe. I cannot remember the name, but they have a website. There is one up in Chidlow that is being formed at the moment. They are well on the way tohaving a very similar scheme to my property. There could well be others. I think there is one inBunbury. I do not know the technical term, but it is to service a really large rural block that hasbeen subdivided within a strata scheme. I do not know how many there are. I think there is alsoone in Toodyay. There are probably up to 10 properties in Western Australia like this. I do notknow. The CHAIRMAN: Are these properties being developed in this way to comply with planningrestrictions? Mr Black: I do not follow, I am sorry. The CHAIRMAN: Would it have been possible to freehold the 70 blocks? Mr R. Clark: It would have been possible, but a decision was made with the developer that wewould do it because at the time we could see certain advantages of going with the then new StrataTitles Act because it had just come off the press.


The CHAIRMAN: In this region is there some motivation, other than sort of maximising return,characterised as it is by tourism and absent landlords and so forth, for doing it in a particular way? Mr R. Clark: A person in New South Wales, Peter Cuming, apparently pioneered this type ofsubdivision. Instead of taking a block of land and dividing it into five or 10 acre lots, the idea wasto try to retain as much of the natural bush as possible, to have a light footprint on the land, andtherefore to put the housing or private lots in in such a way as to retain as much of the naturalamenity as possible, so there is some nice common property for people to enjoy. The CHAIRMAN: Like the waterways? Mr R. Clark: Yes. That was a dream, if you like. Mr B.K. MASTERS: It would not be unfair to describe the property or the concept asincorporating many of the principles of permaculture. Seventy lots together would constitute lessthan 25 per cent of the land, and the rest of the land is, as you say, nature conservation but alsopermaculture-type development of various sorts? Mr R. Clark: There was an idea in the original plan that maybe 60 hectares could be used forsome kind of agricultural pursuit in the future, but because we have had such slow development,people have not come on board to take up these enterprise or activity licences to grow grapes orwhatever. Mr B.K. MASTERS: The financial problems you are facing include paying land tax and increasedshire rates on the 70 lots that have been strata titled, even though 56 are still owned by the parentcompany and have not been sold privately. Is that a reasonable summary of what is happening? Mr R. Clark: I own the unsold lots. They actually have not been created. There is just one titledeed. Mr B.K. MASTERS: But the land tax component has increased significantly for various reasons?Where is the financial bleeding occurring? Mr R. Clark: In actual fact we sought an exemption from the land tax because of the special natureof the subdivision, but the Office of State Revenue was not coming to that party. The CHAIRMAN: They are not nice people. Mr R. Clark: We have an accumulation of several years land tax to pay and at the momentbecause of my financial situation I am just paying $200 a month. I owe them about $50 000 at themoment. That is accumulating every year. We hope for better times and that somehow we can sellsome of this real estate and get out of this problem. Mr J.H.D DAY: What are your observations about strata managers being regulated in some way?Do you think they should be regulated?Mr R. Clark: I certainly do. From our personal experience, I feel the strata manager should not besomebody who is intimately involved with that particular development; it would be better to havesomeone independent. I am sure many people are qualified to do that job. Mr J.H.D DAY: There are problems with conflicts of interest. Mr R. Clark: I think so, yes. My wife is probably more articulate than I. The CHAIRMAN: You are doing very well. Mrs Clark, if you want to add anything at any time,please come forward and we will take you as a joint presentation. Ms L. Clark: I would like to add to that and perhaps describe one of the problems, which is nothaving easy access to some regulatory body. As unqualified individuals, we run into problems allthe time trying to administer the Act, which was seen to be user friendly. When it came out wewere encouraged to believe that this was something that would be user friendly. For instance, some


of the blocks are owned under multiple ownership, which means that there can be four peoplevoting on a show of hands for that one block. Ms Loguidice: It cannot happen. Ms L. Clark: Yes, it can in some situations.Ms Loguidice: No, it cannot. There is only one unit and it is individual.Ms L. Clark: No. When it is a particular sort of vote, it has to be according to the unit. The CHAIRMAN: It really depends -Ms L. Clark: Anyway, this is a perfect example of what I am saying. We only know what we aretold by - The CHAIRMAN: Mrs Clark, you are probably delving into the rules of the operating company.The comments from Mr O’Malley and others are correct; the Act itself does not make provision forthat kind of voting but your strata company arrangements and rules might. Ms L. Clark: Perhaps that is what I am trying to get to. The CHAIRMAN: We are talking about subsidiary rules and company rules. Ms L. Clark: Which is not appropriate perhaps.The CHAIRMAN: I am interested in hearing about that, and I am sure others are as well. Ms L. Clark: Because the strata company can write a collection of by-laws which may adverselyaffect the long-term development of the place and can affect people who come later, without themhaving any say in the matter, and can affect our ability as original owners to control the remainingpart. A few people can have an enormous impact because of the way the voting is structured andone obstructive person can cause enormous harm. Mr B.K. MASTERS: Have you tried to see whether the strata title referee can give you any adviceor direction, or does he have any legal role in trying to resolve these issues? Ms L. Clark: Not at this stage, because of other matters that we are involved in; we really cannotfight on too many fronts at once. Mr J.H.D DAY: Are you getting legal advice? With the scale of your development, you wouldwant good legal advice. Ms L. Clark: Yes, it is all very unpleasant and very sad, because the project itself is lovely. The CHAIRMAN: Born of idealism, by the sound of it. Ms L. Clark: Not really, because we can see that land is disappearing and people finish up livingin suburbia.The CHAIRMAN: I meant that in a complimentary way, Mrs. Clark.Ms L. Clark: Yes, I understand that. People are moving to a rural place and finish up living insuburbia. We are trying to avoid that and maintain the rural feel of the place. Mr J.H.D DAY: Essentially your idea was to try to maintain the environment the way you have. Ms L. Clark: Yes. The CHAIRMAN: Just returning to Mr Day’s question, do you need to pinpoint any experienceyou have had under the Strata Titles Act either about the manager, attempts to get advice or a rulingfrom the referee to resolve any disputes, or your understanding about how the rules of your stratamanagement company were developed? Do we really need to get a focus on any of those things?Ms L. Clark: I think it is really the management aspect that has, interestingly enough, already beenaddressed by professionals. That is something we have not had - a professional strata manager.


The CHAIRMAN: There is a difference between what you may perceive as - you have notactually said it - potentially unethical behaviour, or behaviour that was not consistent with theoriginal idea or intent of the strata manager and property developer, and what the laws of the landmight be. I have to say this to you, and publicly to everyone, that laws cannot make people be niceto each other or, in the end, act ethically. We can set the rules, but ultimately the State must enforcethem, and of themselves they will not make people behave in a particular way. I am interested tohear whether you think some form of education or registration would have made your experiencebetter. [10.35 am]Ms L. Clark: I can only repeat that had we been encouraged to use professionally qualified peoplewhen dealing with the Strata Titles Act, we probably would not have run into some of the problemswe have had. The CHAIRMAN: The fact that you went through a property developer first -Ms L. Clark: Not a property developer. Mr B.K. MASTERS: It was the brainchild of the gentlemen they are talking about to create thisfarm on the basis of 70 units plus a large area of common land for natural conservation andpermaculture; to create a rural village is one way of describing it. Because it was his idea, hebecame the de facto developer. Ms L. Clark: I am not sure it is correct to say it was his idea. We asked him to develop it, and hedeveloped the nitty-gritty of plan. Mr R. Clark: He was under instruction from us, I should say that. Mr J.H.D DAY: Is he based in Busselton? Mr R. Clark: Yes, he lives on the property. Ms L. Clark: We do not wish to imply any wrongdoing on his part. The CHAIRMAN: I understand that. That is why I am trying to understand whether you thinkthat what you envisaged and what you gave as an instruction or agreed as an objective could havebeen realised more effectively if education and registration had been required. I am just trying toget to why you think that. Ms L. Clark: I think that because we did not know what we were doing. We acknowledged thatwe did not know what we were doing and went to a person who said he knew what he was doing. Mr J.H.D DAY: Was that someone who said he had been involved in real estate and sales? Ms L. Clark: No. The CHAIRMAN: What about property management or strata management? Ms L. Clark: He had some management and business qualifications and so on, yes. I feel asthough I am taking up too much time here. The CHAIRMAN: No, we are fine. Mr R. Clark: One of the problems is that at the strata council meetings, a lot of time is taken uparguing about things to do with the strata Act. If there were somebody present who was moreknowledgeable about the strata rules, it would make things far easier. The CHAIRMAN: Are you aware that the Strata Titles Referees does not have the powers ofenforcement? Ms L. Clark: Yes. The CHAIRMAN: How did you come by that knowledge?


Ms L. Clark: I looked up the strata titles documents on the Internet, and read through those tobecome as informed as I could as a layperson. The CHAIRMAN: Given that knowledge and what you are seeking to have done, is it your viewthat enforcement is critical to being able to move from advice and rulings? You would need thatchain of progressive - Ms L. Clark: I think that at some stage somebody has to say that this is right to change and it shallchange. At the moment, we are all just saying that is a good idea or not a good idea and arguingbackwards and forwards. The CHAIRMAN: Why should the State become involved in what is essentially a private propertymatter? Ms L. Clark: As citizens of the State, we have a right to fair treatment. The CHAIRMAN: Yes. I am not a lawyer, but lawyers will also tell you caveat emptor - buyerbeware - and that if you embark on a financial course, it is your business. Ms L. Clark: We have worn as much of it as we can and put up with as much as we can, and it istime to say “no more”. Mr J.H.D DAY: Given your concern about lack of experience in relation to the strata companymanagement - professional expertise, education and training - is there any prospect of engaging astrata company manager who has that sort of background; in other words, changing? Ms L. Clark: We would do that tomorrow if we had the power, but we have no power to doanything. We cannot effect any of the changes that we can see need to be made. Mr J.H.D DAY: What about other lot owners? Ms L. Clark: They do not perceive a need to make any change. Mr J.H.D DAY: It is subject to influence I suppose. Ms L. Clark: I am not going to comment. The CHAIRMAN: We cannot give you advice either. Ms Logiudice, did you want to make acomment about that? Ms Loguidice: Ms Clark, why do you see that you cannot do anything about the strata managerwhen you hold the most votes? Ms L. Clark: That is challenged - Ms Loguidice: It cannot be challenged, unless there is something I am missing here - Ms L. Clark: It is very complex - Ms Loguidice: I can understand that. Unless there is a by-law in place on the strata plan -Mr Black: The issue is that if Richard were to use his super lot vote, he would have to pay unitentitlements on it, and that is in the order of $50 000 a year. That is what I understand the law is. The CHAIRMAN: I am sorry, but we are not going to get into a debate on the particular operationof your strata lot in the middle of this inquiry. I make the observation that I think you are dealingwith the rules of the company rather than the Strata Titles Act itself, and I think that the commentsthat you have made give some lead to what that split is. If you need to go away and examine theroles and powers of the authorities that are outlined in the Act and the obligations and entitlementsunder the rules of your particular company, that is your option. Ms L. Clark: I just say that the ability of the strata company to make by-laws at will is a problem. Mr B.K. MASTERS: You say “at will”, but that still must be subject to unit holders voting.


Ms L. Clark: Yes, but when there are a very small number of unit holders, and those unit holdersact with a cohesive outlook -Mr J.H.D DAY: We are getting into detail that is not really relevant to the overall principles thatare being examined. Perhaps you can discuss the issues later amongst yourselves. The CHAIRMAN: Are there any further observations or questions about that particular matter?We are dealing with the matter of the Strata Titles Referee. Does anybody want to pick that matterup before we have a break?Mr J.H.D DAY: It might be worth making the observation that we have a submission from one ofthe lot owners that essentially says the same sorts of things that you have said about needingprofessional management and that sort of thing.

Proceedings suspended from 10.42 am to 11.00 amThe CHAIRMAN: We will continue with the discussion around the table. Mr Black: I am coming from the position of a proprietor of a strata title development. I have beenchairman of the council for the first three years. For the past year I have been a councillor and I amin favour of a regulatory regime. The sort of regime I have in mind is one that has a bit of teeth. Isaid to John Day that when I set up the IKEA operation in Perth I was a migrant and did not knowall of Australia’s rules and laws. I found the former Ministry of Fair Trading an extremely usefulbody to talk to because I could ring it and get some advice and so too could the customers. Thatsort of regulatory regime would be a good idea. I am concerned about three areas of stratamanagement to which I have referred in my submission. Certainly strata managers of a certain sizeof development must be licensed and they must be trained before they get that licence. I alsobelieve strata managers should not have a financial interest in the properties they manage. I believeit is necessary for the Department of Land Administration to vet management statements - the stratacompany by-laws. The by-laws are registered with DOLA and it would be useful for DOLA tohave a vetting service to ensure that strata managers do not either unnecessarily restrict the personalfreedoms of proprietors or go against the Strata Titles Act itself. That could be done by raising thefees that DOLA charge for registration. At present nobody reads the management statements thatare lodged. Proprietors assume by-laws have power at law because DOLA is a tier of governmentbut, in fact, the by-laws may be contrary to the laws of Australia.The last point essentially is that at a certain size of development, and certainly our size, which is a70-unit development, the accounts should be audited each year before the annual general meetingand proprietors given a copy of those accounts. There is obviously a side issue there in that stratacompanies below a certain size perhaps do not require audited accounts before the meeting, but theywould probably need them every three years or so. However, a biggish development of 25 to 30units should have them. It is a penalty of size that things must be seen to be done properly.My last point is that the DOLA web site has some very good information on running stratacompanies. Perhaps that information could be edited and produced as a small leaflet or booklet sothat when a strata company is registered or a title changes hands, a copy of the booklet could begiven to new proprietors so that they know their rights and responsibilities under the Act and theobligations that a councillor and officer of the company have. It would then be easy for proprietorsto know what they can and cannot do. That is all I have to say. The CHAIRMAN: Thank you very much, Mr Black. I will follow up on a couple of points. Yougave three characteristics for the registration of strata managers, the second being that a managerhave no financial interest in the property being managed and the third being a form of vettingservice for strata property rules.Mr Black: Yes.The CHAIRMAN: What was the first?


Mr Black: That strata managers be licensed so that they have a degree of competence. The CHAIRMAN: Is your critical measure a demonstrated competence? For example, I refer toMr O’Malley’s issue. On the evidence I have before me, Mr O’Malley has probably demonstrated acompetence at the required level for managing particular kinds of properties.Mr Black: You can to a degree rely on the track record of strata managers and on word of mouth.However, there must be a procedure to indicate that strata managers have been educated. Atvirtually every council meeting we have had in the past 18 months we have argued the meaning ofthe Act relating to at least two or three items on the agenda and what we can and cannot do. Thosediscussions have been totally fruitless. To me the Act is not easy to read; it is long and some areasof it seem to contradict others. One really needs to be a lawyer to read it. It is, therefore, difficultfor ordinary lay people, who give their time to sit on councils once or twice a year or once or twicea month, to interpret the Act. It would be useful for a strata manager to have knowledge and betrained in interpreting the Act so that proprietors can ask for advice. They would then know thatthey were getting essentially impartial advice because the strata manager has no financial interest inthe answer. The CHAIRMAN: There are a number of examples of smaller unit arrangements in which unitholders are employed as strata managers and are also employed by the strata company as overallproperty managers or supervisors. How does that line up with your argument about no interest? Mr Black: I would not allow that because it is open to abuse. It is like letting the poacher in withthe chickens. I am not saying it will always happen but the potential exists for it to happen. The CHAIRMAN: What about an employed strata manager who is given residency?Mr Black: I do not have a problem with that if he is paying the rent and it is part of his package. The CHAIRMAN: I refer to the issue of the vetting service. I am sure you know that there is notjust one agency in the State that has sole responsibility for the area that we are talking about. TheDepartment of Employment and Consumer Protection also has a role, as does the Department ofJustice. The Department of Justice houses the Strata Title Referee; the Department of ConsumerEmployment Protection has the responsibility for providing advice on consumer law andentitlement; and, as you said, the Department of Land Administration has responsibility for theregistration and management of land titles. It is already a shared basket of goods. Does yoursubmission imply that that needs to be simplified? I am reading into your comment on DOLA.Mr Black: I mentioned DOLA because that is the one that I know best. It is a matter forgovernment to decide how best to provide those services. However, to allow what is essentially athird or fourth tier of government - The CHAIRMAN: People argue that it is a fourth tier. Mr Black: Okay. It is wrong to allow a fourth tier of government to file rules, without theknowledge of the second tier, and for it to verify that those rules are in accordance with standardpractice, are legal and do not infringe on the rights of the citizens in the scheme. There must be avetting service, perhaps conducted by the Department of Justice. I am not talking about vettingbefore the strata company is set up or as a condition of it, but during the first year it should gothrough a process and if there is something wrong with it, the strata manager should be told that aby-law or whatever needs revision because it infringes the Act. The CHAIRMAN: Have you given any thought to the cut-off that might be applied to that level ofregulation? We have heard today, and in a number of other hearings, that to impose the sort ofregulation that has been suggested to us on large properties with complex unit holdings - youmentioned 70-unit holdings - would be overly onerous for elderly women in a six-unit dwelling.Mr Black: That is true and a cut-off point must be established. The CHAIRMAN: For some sort of hierarchy of regulation?


Mr Black: That may be right. I was involved with about 50 people in the strata title of a terracebuilding in London that had no problems whatsoever. The strata Act there basically ensured thatwe looked after the common property and the facade, which was protected because it had to beprinted every seven years. That was a very simple strata plan; we never had a meeting and we allvoted by post. Certainly in that area the by-laws were very simple. Essentially the conditions ofliving there were that the proprietors would pay when the carpet needed replacing and things likethat. However, in areas where it is more complicated - for example, commercial developments -there must be a higher degree of vetting. I do not know how to do that. You would need to talk tosome lawyers. The CHAIRMAN: We all end up having to talk to lawyers!Mr M.P. MURRAY: This is probably a question for the whole panel and one that the committeehas asked at other sittings. I refer to the issue of a compulsory levy for a sinking fund. You talkedabout elderly people moving into units with no compulsory levy and a major occurrence sendingsome of them to the wall and forcing them out. Do you think that is a good idea, a bad idea or ahard-to-manage idea?[11.15 am]Mr Black: Yes, I think there should be a sinking fund as part of the levy system. Maybe the stratamanager, when it reached a certain point, could cut it off. Mr M.P. MURRAY: Yes, certainly, but at least there should be some funding in the backgroundin case something goes wrong. Mr Black: Yes, because most insurance companies rarely meet the full cost. The CHAIRMAN: However, we are not talking about insurance. The committee has hadsubmissions put to it that there are 30-year-old multistorey buildings in Perth that are ageing andseriously in need of structural maintenance, but no reserve or sinking funds are available, andduring the life of those buildings nobody has contributed as a unit holder. By way of information sothat you can think about this if you want to make a later submission, part of our inquiries includedchecking the progress in some of the other States. In our discussions with people in New SouthWales, it was noted that there is almost a legal umbilical cord between San Francisco in Californiaand Sydney because of the proximity of and the economic and political interaction between thosetwo cities. Interestingly, a flow of legal decisions and guidance coming out of California areoccasionally picked up in Australian jurisdictions, and given that New South Wales is the mostlitigious jurisdiction, it is most likely that that occurs first in New South Wales. They pointed to acourt case in California in which current unit holders had taken a class action against every unitholder in the 30 or 40-year history of the building for failing to contribute to the maintenance of theproperty during its lifetime, and the courts found in favour of the class action. Therefore, there issome legal precedent - not in Australian jurisdictions yet, but it is likely to be picked up, becausemy opinion is that the legal principle is probably right; that is, that people cannot have the fruits of aproperty and not contribute something to the lifetime maintenance of that property. There are dualrights and responsibilities.Mr Black: I agree with that.The CHAIRMAN: My personal view is that that is probably right, and Mr Murray’s question goesto that point; that is, the degree to which the State needs to intervene to ensure that occurs. Mr O’Malley: I will speak on that. My experience has been that here in Busselton most of thesmaller units, particularly the ones that I have been looking after, always make a contributiontowards a common fund.The CHAIRMAN: Not just to an operating fund but to a reserve fund?Mr O’Malley: Yes - call it whatever you like.


The CHAIRMAN: Sinking fund, reserve fund, maintenance fund or whatever.Mr O’Malley: It is a fund, yes. It is a small amount of money - $25 a quarter or $100 a year perunit. That is all very well, but the new strata title amendments show that the lots no longer arecommon property, that all the lots belong to the individuals, and the Strata Titles Act also says thatstrata company funds cannot be used on private property; they can be used only for commonproperty. When the situation is that there are five units and we have been saving up $5 000 and wewant to replace our gutters, we cannot use that money in the reserve fund because the Strata TitlesAct says that we can only use strata company money for the common area. Mr J.H.D DAY: Not even by agreement from all the owners?The CHAIRMAN: If the strata company decides that that is what it wants to do and there isagreement from all unit holders that that is required, Mr Day is asking whether, even with that levelof agreement, it is still not possible. Mr O’Malley: No. The Strata Titles Act definitely says that it must be used only for commonproperty. Mr B.K. MASTERS: Is it not possible, though, for the strata company to decide to give the moneyback to the unit holders and for the unit holders to use that money for painting or other - Mr O’Malley: Not according to the Strata Titles Act, as I understand it. However, there may beone way. I believe that somewhere in section 15 there is a way to deal with it in some manner, but,strictly speaking, strata company money cannot be spent on private property; it must be spent onlyon common property. Mr M.P. MURRAY: We have heard the opposite whereby a manager of a strata block did only theones that he owned up to the other end, and the people down at the other end missed out on theguttering. There have been some other sides to the story.Mr O’Malley: That is a problem that came up in 1976 when they changed the rules of the StrataTitles Act. I do not suppose you can remember the big kafuffle in the papers and all that sort ofthing about people suddenly realising that they did not own what they thought they owned. It waspre-election time and changes were made, and this is one of the by-products of it. The CHAIRMAN: We will have a look at that. Mr Black, was there anything else that youwanted to draw attention to? Mr Black: No. I should say that I think the whole concept of strata title is very good. Certainly arural subdivision subject to strata title does enable things like residual bushland to be left, watercourses to be not interfered with and things like that. Many people who retire down here do justthat. They are retiring, so they are my age or a bit less maybe. If you have two hectares, it is greatfor the first five years. The next five years it becomes not so great, and the last five years it is anabsolute drudge. Strata title gets rid of that, because you just have enough title for your ownvegetable patch, small orchard or whatever, but you do not need to have the huge problems offencing, firebreaks and all the rest of it, which you have with the two-hectare block. Therefore, I dothink that the potential for strata title to improve the retirement environments in areas like this istremendous, if we can just get the thing to work properly.The CHAIRMAN: Okay. I will recap what is needed for the thing to work properly: registrationof managers; barring of financial interest in a property under management; vetting of the companyrules by whatever administrative authority, but at no cost to the State, and you are saying that thatreally needs to be a self-funded exercise; the strata company rules need to specify auditing andaccountability, and maybe there is a hierarchy of obligations in relation to that; and increased needfor public information. In terms of the fees, I sort of saw general agreement from the peopleattending today that enforcement powers needed to be given to the strata titles referee, because it isnot enough to go from information to decision making or recommendation, and then not be able to


do anything about that. People generally - I see it confirmed again - tend to think that if you havethe responsibility for divining the right path, you should also have the authority to ensure that that isin fact followed. Would you concur with that?Mr Black: Yes. The CHAIRMAN: Do you think that that should be a self-funded exercise as well? Mr Black: If possible - if it can be worked out reasonably, yes. The CHAIRMAN: Maybe the property managers might like to comment on this as well. What doyou think of the notion that the State could pay for that by a very small skimming of the interestearned on trust funds held by property managers?Mr Black: I will not comment on that. The CHAIRMAN: Let me use the parallel. Real estate agents, for example, hold moneys in trustin the central trust fund. The State extracts a small percentage of the very large amount of interestearned from those trust funds, and that in fact pays for much of the real estate Act management. MrO’Malley or Mr Logiudice, what you think of that sort of proposition.Ms Loguidice: I do not have a problem with the referee being given more power and being fundedby the interest. My interest goes to the Government now anyway, so I do not see it, nor do mystrata owners. If it is a way of funding that does not cost people money that they are not gettingnow, I do not have a problem with that. the referee does need to have more power, so to speak.The CHAIRMAN: Enforcement provisions?Ms Loguidice: Yes. However, a lot of people are not aware of that, so when he gives an order, 90per cent of the time it works, generally. The CHAIRMAN: It is complied with. Ms Loguidice: Yes. If people do not agree with his order, I have had cases that have gone to theDistrict Court, and the referee’s decision has been overruled in the District Court. The CHAIRMAN: Mr O’Malley?Mr O’Malley: I am just trying to remember what the question was.The CHAIRMAN: There is the enforcement issue and the use of trust fund interest earned as ameans of paying for the enforcement, and maybe even mediation processes. Some of what we haveheard today might have been resolved by a better interventionist mediation process. Mr O’Malley: I would have no problem with that on a large scale. Personally, I could operate mystrata management business through my real estate agency because I am licensed for that, but Iprefer not to for one of the reasons I spoke to you about at half-time. I do not bank any of the stratacompanies’ money into my trust account at all. I bank it directly into their bank account andwithdraw it directly from their bank account, and I account to them for that. I have not had anyproblems at all with it. They are all very happy and they would not have it any other way. Mr Lucas: My name is Doug Lucas. I have really come to learn a bit more about strata titling andthe ramifications of it. I have read the previous reviews that have been on the web, and it seems tome that strata managers need some sort of licensing. They deal with a large amount of money. Mybackground is accounting, so I am aware of money transactions. I really believe that there needs tobe some independence as well. With regard to the referee, I think mediation needs to be placedbefore action, but certainly have him consider the situation, and then have some mediation andaction if there is no resolution. The CHAIRMAN: And payment for that? Mr Lucas: Again, by fee.


The CHAIRMAN: By direct fee? Mr Lucas: If necessary, or skim the interest. It is happening on real estate. It is not a problem, asI see it. People accept that. There seem to be large amounts of money involved in some of thefunds, so the funding of that area should not create a major problem. The CHAIRMAN: My first-pass assessment is that there is probably a sufficient pot of money tonot cause anybody any noticeable disadvantage or loss to self-fund the whole program. Mr Lucas: Yes. The other thing is that audits need to be done. It seems that in some cases peopleare not making their accounts available to their proprietors, which is a bit sad. Having been throughthe regime of tax and so forth, it seems to me quite unreal that they do not do them as a matter ofcourse. The CHAIRMAN: Yes. I indicated in my opening remarks that this level of accountability waspart of the motive for conducting this inquiry. While there was not evidence before or, indeed,there has not been evidence given to us during this inquiry of widespread corruption or misuse, thecommittee’s job is to assess the risk, and a number of submissions have identified the need for verytransparent reporting to ensure that the risk is reduced. Mr Lucas: I would agree with that. The CHAIRMAN: There are a couple of people at the back. Does anybody want to make anyother comments? [11.30 am]Mr Bromell: My name is Ross Bromell and I am representing Adele Farina MLC as her researchofficer. She has a particular interest in strata title as it relates to tourism holdings. However, I havenothing to offer in that regard. I came here as an observer. First, I can offer my experience as aformer property manager in Perth where I managed office buildings in St Georges Terrace, one ofwhich was strata titled, in the late 1980s. Secondly, I have a personal interest in a strata company tothe present day. I do not know whether any of this will be of help to the committee but it providessome background information. Where a strata manager manages a strata company but also a majority of units that make up thatstrata company, there is the potential for a conflict of interest. I know of several instances wherethere has been the perception that the strata company managers have acted in the best interests ofnot the strata company as a whole, but of their client, which is a dangerous thing. Very often anowner will attend a strata company meeting and may be the only person there. The strata companymanager has all the proxies and, even though that owner may have close to 50 per cent of vote andhave a great interest in the property, what he says or wishes to do carries no weight whatsoever. Ido not know how that can be regulated against. The CHAIRMAN: Are you suggesting that democracy might not be the best way of managing aproperty?Mr Bromell: These properties are not residential but commercial-retail properties. The large unitholders wield great power. That is obvious; that is life. Strata company managers/propertymanagers in many instances have an enormous workload. Their employers seem to work on thebasis of turnover rather than allocating sufficient time to that strata company manager to manageeach property effectively. From my experience there seems to be a higher turnover in the staffmanaging these strata companies because they are under enormous pressure and do not have enoughtime to do their job. I am not suggesting that more regulation is the way to alleviate these problems.Perhaps re-regulation is a better option. However, there are certainly problems with the way thesystem now operates in that certain strata company managers act with the consent of, in many cases,absentee unit holders. They can virtually do what they like and even go as far as setting theirannual fee for service each year.


The CHAIRMAN: Those are good observations, thank you.Mr J.H.D DAY: Do you have a proposal for how those issues should be dealt with?Mr Bromell: No. I did not come here thinking that I would say anything. It appears thateverybody here today is saying that more regulation is not necessarily the way to go. Giving thereferee some teeth is a good idea. For example, in the case of a retail development with 40 retailunits, some of the investors in those units - this is not the one that I am involved in - will have noexperience whatsoever of real estate, let alone the Strata Titles Act. The investors are very muchleft in the hands of the strata company manager. If there was to be a referee with teeth, at leastthose uninformed investors would have somebody to go to who could advise what is right andwrong and do something about it. I have friends in a situation at the moment where they haverecognised that something is wrong. The majority of people attending the strata company meetingwished to change strata company management but one large absentee unit holder had given proxiesto the strata company manager and nothing happened. Therefore, giving teeth to the umpire is agood idea. The CHAIRMAN: I was attracted to the conceptual framework that New South Wales is puttingin place where you cannot get to the arbitration stage with a referee until you have been through amediation process. Therefore, it is compulsory mediation. Mr Bromell: That is a good idea because that eliminates the vindictive -The CHAIRMAN: The vexatious and the vindictive behaviour, yes. Mediation by its nature is alower cost option than going into full hearing submissions. Whether that involves work or not, bythe time the process reaches arbitration, it is a serious and formal process - Mr Bromell: And it may be that the problem only arose because of a lack of communication or forwant of knowledge rather than a deliberate action. The CHAIRMAN: We can be optimists and hope that the majority of people still operate withgoodwill. Mr B.K. MASTERS: You said that mediation would eliminate the vexatious. I am not surewhether that is exactly what you meant. Mediation will potentially overcome confusion or a lack ofunderstanding when the two parties have not sat down and talked about the issue. However, withvexatious problems, you may need to rely on the powers given to the referee. If someonedeliberately intends to cause a problem for the strata company manager or a particular unit holder,then mediation without teeth will not have an impact. Is that how you see it, Mr Bromell? Mr Bromell: Yes, the vexatious strata company manager or unit holder will continue no matterwhat. However, the process will weed out any of those people before it gets to the level of thereferee. Mr B.K. MASTERS: It will certainly discourage them. Mr Bromell: Yes. The CHAIRMAN: I was just talking to Dr Ray Wills, the senior research officer of the committee,about getting a better understanding of the sort of ratio of management to unit holders. The rule ofthumb for the two sole operators here today is that Ms Logiudice services about 60 units - Ms Loguidice: No, 80 high-rise and resorts. The CHAIRMAN: You do that on a full-time basis and Jack manages 12 low-rise units on a part-time basis. He says that he could manage it with one day a week of work -Mr O’Malley: Once it is all under control. The CHAIRMAN: There seems to be an approximate ratio for the two situations that have beenpresented today. I was asking Mr O’Malley earlier about the level of hierarchy of registration. Is


there a critical mass or a cut-off point in the number of units managed? For instance, under thatfigure it might be easy to manage the units in the way Mr O’Malley has been and when there aremore units that the degree of complexity and the onus on the manager changes significantly?Mr O’Malley: It needs to be categorised rather than having a cut-off level. To a certain extent, acategory is needed to cover people who are qualified to manage single-storey units. We then needto consider who manages a development, such as the Clark’s, which is obviously in a specialistfield. High-rise apartments, resorts and the like should be in a completely different category again. The CHAIRMAN: The diversity of unit holders creates another level of complexity. Mr O’Malley: Commercial properties are in another field. They could be mixed with high-riseapartments as they would have the same level of management difficulty. However, only two orthree categories are needed with a couple of specialists. With a development such as the Clark’s, adifferent type of specialist manager is required. However, there is not much call for that in WesternAustralia. There should be some form of qualification and some sort of registration so ownersknow exactly who they have working for them. At registration time their qualifications need to bechecked to sort out under which category they can be registered.The CHAIRMAN: Ms Logiudice, do you think it is a combination of size and category? Ms Loguidice: Both. Managing a complex with 50 ground-floor villas would be no different torunning one with 12 villas, other than involving multiple owners. There is very little by way ofcommon area. The owners own their own lots, they have their front and backyards and they have acommon driveway. Some complexes in Perth have up to 100 units now. They would be the easiertypes to manage. Some sort of scale would have to be worked out when creating the categories. Acut-off number of units on a lot would not be enough.Mr B.K. MASTERS: It looks like the Chairman is going to thank you all for coming along.However, I have one last comment for the record. I must advise you that when the Busselton-Margaret Times publicised this forum it ran an article entitled “Concerns of Owners Prompt StrataForum”. Next to the article was a photograph of the Geographe Bay Holiday Park, which is a stratatitle holiday park. The manager of that park thought that the article referred to her business and shecalled me to express a number of concerns. During my six years as a member of Parliament for thisarea, I have only had one concern from a full-time resident of that holiday park. It was a fairlyminor problem that was resolved legally and the Geographe Bay Holiday Park has run effectivelytrouble-free for the six years that I have been the MP for this area. I wanted to correct any -The CHAIRMAN: For the record, there is no association between the photograph of the holidaypark and the concerns about strata management. Thank you all very much for your contribution. As with our Kalgoorlie forum, it has been valuableto the committee to come here and consider a different set of profiles, interests and experiences. Ithas been useful in helping us to understand how to devise an appropriate recommendation for someform of registration - if that is where we finish up - and to deal with some of the other complexmanagement issues related to reserve funds and how they are paid, mediation versus arbitration andthen enforcement. From our discussions you can already see that the issues are becoming clearer tothe committee and it is now a matter of internal debate as to how far we will go in ourrecommendation to Parliament. It is then a matter for government as to how the matter is pickedup. Thank you very for your efforts this morning.

Committee adjourned at 11.43 am

economics and industry standing committeeevidence... · 2020. 8. 26. · economics and industry...

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