FAR TOO MANY KEY POINTS to summarise here!
Leaking buildings, mould and court battles: The dark side of the apartment boom – Experts fear a coming glut of problem buildings that cannot keep the rain out will trap many buyers in legal limbo.
NOR is this confined to apartments … but townhomes et al!
The talk from the developer Lobby, Urban Taskforce over the past couple of years has been that half of Sydney’s homes will be apartments within a generation …
HOWEVER with the Opal Tower Disaster following years of defective builds documented …
PERHAPS now the Community will not be buying any more “deve-loper speak”?
IN JANUARY 2018 it was revealed that research by McCrindle for the Urban Taskforce predicted that half of Sydney’s homes will be apartments within a generation.
WHO in their right mind will be buying any more of this Spin? Or these developments?
Photo: Black mould problem raises concerns about leaky buildings
Buying a new apartment?
Defects are driving many owners to court to get their leaks and defects fixed after they discover changes to insurance law means they are no longer covered.
It’s you versus the builder, so bring your lawyer.
Tim Roxburgh investigates.
Tim Roxburgh: People who buy a new apartment expect it to last a lifetime, but whether it’s six months or six years after they move into their new home, many are getting a nasty surprise.
John bought a new apartment in a luxury block 16 kms from the Sydney CBD. But now in his living room he’s got what they call in the trade a water ingress issue.
How much water were you pumping out during these rain events?
John: I think on one occasion it would have been over 120 litres or more.
Tim Roxburgh: 120…you pumped 120 litres of water out of…?
John: Well, I vacuumed 120 litres out, yes.
Tim Roxburgh: In the next suburb, in a newly completed gated community, Kitty has much the same problem.
Kitty: The water come from the corner.
Tim Roxburgh: Oh so the carpet is all soaked?
Resident: Yes, when you put your feet on it, it’s sopping wet.
Tim Roxburgh: Oh, it comes up around my feet. Oh, wow. How long has this been happening?
Resident: A week, since it started to rain.
Tim Roxburgh: No one knows exactly how many new apartments leak, but the anecdotal evidence is alarming.
In your experience, how many new buildings leak?
Suzi Broome: Probably 70% of them. And that’s really basically a straw poll, it may be even higher. Sadly I don’t think it would be lower.
Tim Roxburgh: The cost of rectifying leaks can be enormous. And some owners are finding out they’ve got little chance of getting developers or builders to pay for the repairs.
David Carney: Buckley’s. I don’t think there’ll be any money left. And the owners here will be left high and dry.
Tim Roxburgh: Since the turn of the century, changes to insurance, building certification and warranties have wound back the rights of apartment buyers in many states. Now governments are realising they may have a problem on their hands, and in NSW at least, they’re starting to make changes. The question is, will they go far enough?
On Background Briefing, the bad buildings springing up in our cities, and the system that allows money to be made from development, while owners get left with repair bills.
On the edge of Sydney Harbour, next to Olympic Park, is the new waterfront suburb of Wentworth Point. It’s like a finger of land that juts out into the harbour. This suburb was only named 8 years ago, as scores of new apartment buildings shot up.
David Carney: We had the RiverCat down the bottom so it was easy to get to town and it was quite close to where…about 20 mins from where I work in Parramatta.
Tim Roxburgh: David bought a unit on the second floor of a Mediterranean themed complex called Palermo which has 245 apartments. It was finished in August 2007. It’s a residential complex of four buildings joined by a tropical themed garden on level 2, with a gym and a pool.
David had a career in property management, so he knew what he was looking for.
David Carney: Basically when I go into a unit I look at the condition of the fittings, paintwork, joints, plumbing and see how that’s all in place, door locks, things like that.
Tim Roxburgh: For the most part, he liked what he saw, but in 2008, after he moved in, he noticed something that bothered him.
David Carney: Well, in my apartment it was obvious there was no inspection holes there. It’s normally about a 300 by 300 millimetre hatch in the ceiling. And there was none there.
Tim Roxburgh: Most people wouldn’t even notice this little hatch. It allows inspectors to check out the fire safety equipment in the roof, equipment that stops fire spreading from one unit to the next.
David Carney: They’re supposed to then put their head up in the ceiling put their torch in there and have a look at how the fire damper is situated.
Tim Roxburgh: So in your apartment there was no hole to look at the fire damper. How would someone inspect the fire damper?
David Carney: Well, you tell me, then we’ll all know! There’s no way you can inspect it. Physically you’ve got to cut a hole in the ceiling to get your head up there.
Tim Roxburgh: And that’s exactly what the owners ended up doing. They got a contractor in to cut holes in the ceilings that didn’t have inspection hatches. The inspector stuck his head inside, and in many cases, they found the fire dampers weren’t correctly installed.
David Carney: If the dampers aren’t fitted property to close off when the fire starts, then the smoke or the fire cinders will go up those exhaust areas and will go to other units. So that’s a major thing.
Tim Roxburgh: Here’s the thing about owning a new apartment. When something goes wrong, you can’t just call the insurance company anymore.
In the early 2000s after the collapse of insurance giant HIH, NSW and Victoria abolished some classes of builders’ warranty insurance. The governments said it was to try and stabilise the industry and ensure its viability.
So if you’re in a new apartment building of more than three storeys, instead of making a claim with an insurer, it’s now you versus the builder. You’ve still got a warranty, but you may need a lawyer.
David Andrews: My name is David Andrews, I’m a partner at Makinson D’Apice Lawyers based in Sydney.
Tim Roxburgh: The owners at Palermo brought David Andrews and his team on board to help them out. David Andrews says this process of getting problems fixed isn’t quick, easy or cheap.
David Andrews: The owners’ corporation have the onus of proof, they’ve got to prove that there’s a defect, they’ve got to prove that it was the builder and developer’s responsibility. They’ve got to prove what’s required to fix it. And they’ve got to prove how much it will cost to fix.
Tim Roxburgh: So the owners got to work. They started to gather the evidence. And they started to talk to the builder. Then in 2012, they got a nasty surprise.
Newsreader: Another NSW building company is in financial trouble, this time Southern Cross Constructions has slipped into insolvency administration. 600 creditors are owed around $17 million.
Tim Roxburgh: The collapse of Southern Cross constructions was a blow, but the owners had another legal option. They decided to pursue the developer, Payce Properties.
Female voice: Payce, transforming places since 1978.
Tim Roxburgh: In 2014 the owners in Palermo began legal action over the alleged defects and fire safety issues. Meanwhile they were trying to come to an out-of-court settlement with Payce Properties. Initially there were some productive discussions. Then, early in 2015, nature intervened.
Newsreader: Cyclonic winds and rain have been battering the coast from the Hunter to the Illawarra including Sydney for more than 36 hours.
Tim Roxburgh: The wild weather dumped over 230mm of rain in two days.
At home in their second floor apartment at Palermo was a couple in their late 70s, John and Shirley. They’d moved in back in 2009, but six years later, as the rain pelted down outside, they realised something had gone terribly wrong in their living room.
Shirley: I just remember the carpet all being soaked. And I just called to John, ‘I think we have a problem.’
John: Oh well, it was a disaster, and we had to take action. The whole carpet was wet through to about here.
Tim Roxburgh: Middle of the room.
John: Yeah, middle of the room. I had to take unilateral action to get someone in to help.
Tim Roxburgh: John got on the phone to a contractor that specialises in these kind of watery emergencies.
John: And we had them four hours later. So we had the air dryers going and a dehumidifier working and that went on for a couple of days until everything was finally dried.
Tim Roxburgh: The storm also caused problems in other apartments at Palermo. The lawyer David Andrews:
David Andrews: We had almost waterfalls entering into apartments. There was water ingressing down a number of floors. I think one of the units suffered a…part of the roof collapsed. Water coming through the light fittings. So there was quite a large amount of water coming through.
Tim Roxburgh: This storm damage made it clear that the building’s issues went way beyond fire safety. Now the owners had to work out how the water had got in, and it turns out that’s not an easy task.
David Andrews: The rooftop is covered in pebbles. So to actually expose the membrane we had to remove the pebbles and we had to flood-test parts of the waterproofing membrane to work out where the water was coming from or whether that was actually the cause of the water ingress.
Tim Roxburgh: While all this complicated testing and report writing was going on, John and Shirley were living with a leak. Whenever it rained heavily, water just gushed into their living room. And we’re not talking about a drip here, we’re talking about a stream.
How many litres in an hour were you pumping out of your living room?
John: Let’s say 40, 50 litres when there was heavy rain.
Tim Roxburgh: 40 or 50 litres an hour?
John: Yep. That’s two 20-litre…of that wet vacuum cleaner. I’d stop it, unplug it, take it out and drain it and bring it back and start again to fill it up.
Tim Roxburgh: But what happens if it rains heavily and you’re not here?
John: Well, that was overcome by being here most of the time!
Tim Roxburgh: John and Shirley couldn’t go travelling. They were even cautious about leaving the house.
John: No, no we wouldn’t go away overnight. And I kept a narrow…a thorough watch on the weather bureau, and I would sort of see the weather forecast to see how much rain was predicted, and I’d know when there was a potential to flood.
Tim Roxburgh: You’re holding what looks like a big book full of weather observations.
John: Yes, so I use the weather forecast and the Bureau of Meteorology radar forecasting to know when I’d be likely to have a problem and then we wouldn’t go out.
Tim Roxburgh: Instead they’d stay at home and wait for the rivers of water.
Shirley: Sort of crawling around the floor and trying to mop things up, and it’s just not good enough. I don’t feel it’s the right place for us at this age. Maybe young people might be able to cope with this. It is very difficult.
Tim Roxburgh: A year after the big storm, the legal wrangling with the developer was still going on, and John and Shirley still had a water problem. Then John had an idea.
Shirley: This guy came here one day and John said to him: what about putting a dam in here? And he said: that’s a good idea, I’ll get that done for you straight away. And he did.
Tim Roxburgh: I have to say when I saw this dam, that was when I really realised just how bad this leak was. The dam is a 5cm high barrier that runs along the full length of their large living room wall.
John: From a design point of view, we probably needed to make the dam higher, the wall height. But that’s in hindsight.
Tim Roxburgh: So when it rains…for the last two years, when it rains heavily you’ve built a dam in your living room and you have to pump out the dam.
John: In a sense, yes.
Tim Roxburgh: How much water would you pump out of this dam?
John: That dam, there’s about 100 litres would be contained in that. I calculated that.
Tim Roxburgh: Then they made another improvement to this strange setup. They had a drain drilled through the cement slab in their living room, down to the gym showers on the floor below.
John: This is the ladies. Hello?
Tim Roxburgh: Oh, this is where it comes down?
John: Yeah and there’s a funnel underneath this slab which collects any water that goes through the hole and then that’s run down the plastic line into the drain here.
Tim Roxburgh: The funny thing is, this dam in their living room, it’s changed their lives.
Shirley: We haven’t had the water running all over the floor, it just runs down a little tube downstairs into a toilet downstairs. That’s amazing isn’t it?
Tim Roxburgh: That’s remarkable that having the dam installed was a big improvement.
Shirley: Yeah! In your lounge-room, yeah. So no, you can’t have visitors when you’ve got water flowing like a river.
Tim Roxburgh: For two years John and Shirley lived with this while the developer and the owners’ corporation tried to reach agreement on A) the problem and B) who should pay. All of this was getting to John and Shirley.
Shirley: John and I fight over it. I was saying let’s go, let’s go, and he’s saying you can’t, you can’t. So we’re still here.
Tim Roxburgh: You wanted to leave?
Shirley: I want to go. You can’t live like this, you can’t sell it like this. And we need to go soon, and get out of here, yeah.
Tim Roxburgh: Later in 2015, the year of that big storm, the developer made some changes. David Andrews:
David Andrews: In December 2015 the developer in this case changed its name from Payce Properties, to Palermo 9 Hill Road Pty Ltd. So they actually took out reference to Payce.
Tim Roxburgh: Here’s one thing you need to know about the developer, it’s a subsidiary of a larger company, Payce Consolidated. Payce Consolidated is the holding company. It’s not uncommon for developers to create a subsidiary for the purposes of carrying out just a few or even a single development.
At the same time as the subsidiary was renamed, the two directors of that company resigned. These two men provided a link back to the highest level of Payce Consolidated.
One was the managing director, and the other was its general manager. In their place, a single director and secretary was appointed. Payce says this employee was appointed because he had primary carriage of managing the ongoing dispute. And they said the company was renamed to reflect its core activities, because now the Palermo matter was the only activity of the company.
At the time, David Andrews wasn’t overly concerned.
David Andrews: We had a party who was actively defending the matter. They had solicitors engaged acting on their behalf, so as far as we were concerned we were taking the ordinary steps in litigation to prosecute the case and then they would take the ordinary steps in preparing their evidence and responding to the claim.
Tim Roxburgh: The following year, the owners of Palermo filed the evidence in support of their $10 million claim to the Supreme Court. Expert reports, damage reports, it was volumes of evidence. The developer asked for 5 months to review all these documents and prepare their evidence.
David Andrews: So they were given a substantial amount of time do that because it is such a large scheme and has such a large claim.
Tim Roxburgh: Finally the five months was up. The owners at Palermo would see how the developer intended to defend against their claim.
David Andrews: And they were supposed to put on their evidence by the 17th of February this year, that didn’t happen. We inquired as to when we would receive their evidence.
Tim Roxburgh: Then, a bombshell.
David Andrews: And then we were informed on the 22nd of February that the developer had been placed into administration.
Tim Roxburgh: The reason for the company being put into administration was simple. The Payce group said it was no longer willing to fund the company.
David Andrews: I was disappointed and concerned as well, concerned by the fact that the developer had taken a year in which to…and left it to the last minute in which to do this. They may have their reasons. I have my suspicions. But it meant that the owners’ corporation waited for them to put on their evidence when really they may very well have had no intention to do that at all and may very well have always intended to go into administration. I don’t know that for a fact, that’s my suspicion. But obviously I think it’s a reasonable inference which can be drawn from the circumstances.
Tim Roxburgh: David Andrews wasn’t too optimistic about what this meant for the owners at Palermo.
David Andrews: It’s very early days but speaking from experience it’s unlikely that the owners corporation will be able to recover much if anything out of the administration of the company.
Tim Roxburgh: The residents at Palermo are a little more blunt. David doesn’t like their chances.
David Carney: Buckley’s. I don’t think there’ll be any money left. And the owners here will be left high and dry.
Tim Roxburgh: All of this emerged not long before I popped in to visit John and Shirley at Palermo. I asked Shirley what she thought about the news.
You’ve had some bad news, haven’t you, from the developer, in a way.
Shirley: [to John] You didn’t tell me it’s like that.
Tim Roxburgh: It turns out I’d put my foot in it. John hadn’t told Shirley the news. He’s worried about the impact all this is having on her.
Shirley: Yeah, no, I don’t get told any more than I have to be told.
Tim Roxburgh: I wanted to interview the managing director of Payce Consolidated, but he declined. Instead he emailed a statement.
Reading: After a year of extensive consultation with the Palermo Owners’ Corporation and despite a written offer by PAYCE to rectify issues identified (May 2015), the Palermo Owners’ Corporation elected to pursue a course of litigation rather than resolution.
Tim Roxburgh: No agreement could be reached on that offer in May 2015. The owners say the offer didn’t include repairs for many of the waterproofing issues, because it came a month before the big storm hit in 2015.
Payce Consolidated says their subsidiary was placed into administration because it had not traded in seven years and had no assets.
Reading: PAYCE was no longer prepared to waste time in litigation and spend money on lawyers that should instead be spent on building defect rectification. PAYCE believe that in the hands of an independent administrator, a solution to the issues will be achieved. As has been the case since it was first advised of defect issues, PAYCE remains willing and able to address defects.
*Tim Roxburgh: Payce also says that the testing the owners commissioned on the roof membrane exacerbated the leaks.
Reading: Whatever the roof defects that previously existed, there is now no doubt that the removal of the roof covering by the Owners’ Corporation has made the problem considerably worse.
Tim Roxburgh: Payce Consolidated is a developer with big ambitions. It plans to build more than 7,000 apartments across Sydney within the next five years, and last year the company was valued at around a quarter of a billion dollars.
The chairman and managing director of Payce Consolidated is also the company’s majority shareholder. His name is Brian Boyd.
Brian Boyd would be familiar with John and Shirley’s building, Palermo, as he was a director of the company that developed it.
Brian Boyd is a man who keeps a low profile. Ben Wilmot would know.
Ben Wilmot: I’m the commercial property editor at the Australian newspaper and I’ve reported on the area for about 15 years.
Tim Roxburgh: If anyone had tracked down Brian Boyd, i thought it would be him.
Ben Wilmot: No I’ve never seen him. I’ve tried to interview him a number of times, but without success.
Tim Roxburgh: For the scale of its operations, Ben Wilmot says that the company keeps a low profile too.
Ben Wilmot: It’s one of Sydney’s most successful property development companies. It’s been one of the leaders in the apartment boom. I sometimes thought of it as the most successful developer that no one had ever heard of. It made quite strong profits each year, it generated strong sales, but had a very, very low public profile for what it was.
Tim Roxburgh: One of the few people who has written about Brian Boyd’s past is Fairfax investigative journalist Kate McClymont.
Kate McClymont: Brian Boyd and his brother Garry have run a series of construction and then property development companies. They’ve got Payce, they’ve got Telmet Ventures, they’ve got Paynter Dixon. And I can remember journalists…this is back around 2003, 2004, journalists trying to get to the bottom of why a $2 company run on trust for somebody else was giving hundreds of thousands of dollars to the Labor Party.
Tim Roxburgh: These companies were linked by a single director, property lawyer, Mark Morgan. And in 2004, Mark Morgan was appointed company secretary at Payce.
In the late 2000s, the Payce group of companies was donating directly to Labor. The donations coincided with a period when the company was seeking more planning approvals from the state government at Wentworth Point. Payce wanted to build hundreds more apartments down the road from Palermo.
Stateline excerpt: It’s a massive commercial and residential development being marketed as an idyllic Mediterranean lifestyle near Sydney Harbour.
Tim Roxburgh: In 2009, political donations by developers started to attract media attention. The ABC’s Stateline program investigated the history of donations by Payce to the Labor Party as it was seeking approval for its Mediterranean themed developments at Wentworth Point.
Stateline excerpt: In March, 2007, just before the state election, it donated a total of $90,000 to the ALP. Labor won the election.
Payce’s DA proceeded through the concept plan stage, and in June 2007 another $15,000 was donated to Labor. Final approval: January 2008. Total donations: $105,000. Again, this is perfectly legal under current law.
Stateline sought interviews with Payce chairman David Macintosh or managing director Brian Boyd to canvass the company’s donations to Labor and its dealings with the Department of Planning. We emailed a list of questions. A company representative said our request for an interview was respectfully declined.
Tim Roxburgh: Fast forward to today, and Wentworth Point is full of residential buildings with alluring names; Palermo, Napoli, Sorrento, Corfu.
Palermo isn’t the only one of those buildings that’s had problems with water. Another building, Corfu, did too, and the owners had to stump up around $100,000 for repairs to the roof after the warranty period had expired.
Payce Consolidated sent us a statement saying that all issues raised during Corfu’s seven-year statutory defect period were successfully addressed by the builder, and ongoing maintenance issues are the responsibility of the owners’ corporation.
I didn’t have to travel far from Wentworth Point to find more buildings that leak. I soon heard about another big development just over the other side of Olympic Park. It’s a six-hectare site being developed in stages, and when it’s finished it’ll hold over well over 1,000 apartments.
Telmet Ventures, another company half-owned by Brian Boyd, owns the land here. But other companies are responsible for developing and building the apartments.
On a rainy Saturday afternoon, some residents offer to show me around this place, which is called Centenary Park.
Resident: I’ve got a few more people now. All right, so should we go to building A? We’ll run out of time.
Tim Roxburgh: Before long I’ve got 7 or 8 residents walking around with me, as I get shown into apartment after apartment, all of them with building problems.
I’ll take my shoes off here.
Stacey: Thank you.
Tim Roxburgh: One of them is Stacey. Not long after she moved in to her townhouse, water started coming into her kitchen.
Stacey: Every single time it rains, all the water comes into my house.
Tim Roxburgh: Oh it ran all the way through the house?
Stacey: Yeah, so that’s why my whole dining room is all wet.
Tim Roxburgh: So it ran from this corner of the house all the way to that corner of the house?
Stacey: Yeah, because of too much water.
Tim Roxburgh: When you were at home would you just mop it up?
Tim Roxburgh: And if you weren’t at home?
Stacey: I can’t imagine that! That’s why I have to be home, otherwise, they all go to the stair.
Tim Roxburgh: So you have to be at home every time it rains?
Tim Roxburgh: And how old is your apartment now?
Stacey: Two years, two years.
Tim Roxburgh: Here at Centenary Park, the builders are still on site, building more apartments over the road from Stacey’s townhouse. She says they came back to fix the leak.
Stacey: They fixed up twice already. The first time just two months after I move in.
Tim Roxburgh: So it was brand new, the apartment?
Stacey: Brand new one.
Tim Roxburgh: And then it leaked again?
Tim Roxburgh: Again the builders patched up a gap in the wall of her dining room.
Stacey: They just fill some gel or I don’t know what material they filled it with.
Resident: Yeah, it leaked when it rained because it wasn’t properly sealed.
Tim Roxburgh: Stacey’s not entirely happy with this fix. But at least there’s no longer water coming into her kitchen. Now though, she’s worried about her basement.
Now we’re in your basement and…
Stacey: Yes, in my storage room.
Tim Roxburgh: And it looks like there are drips coming down from one corner. Oh thanks, I’ll have a look, climb up the ladder. Oh yeah, I can see that. And have they fixed that one?
Stacey: No. Before they told me they would fix up, but after that, they didn’t do any for me.
Tim Roxburgh: The leaks are just the beginning of the problems here. Walking around this development, it’s a bit of a mess. An area marked on the plans as a sculpture park now contains nothing more than rubbish bins and a transmission tower for high voltage power lines.
Countless cracks and chips are already visible in the render and the tiles. When I stop to take a photo of yet another cracked and chipped set of stairs, the residents start joking that the tour is going to take all night, and my camera will run out of space.
Resident: You should get a bigger memory card!
Tim Roxburgh: After being encouraged to focus on the bigger problems, I’m shown into another apartment, and guided up a staircase.
Resident: The water come from the corner.
Tim Roxburgh: So the carpet is all soaked.
Resident: Yes, when you put your feet on it, it’s sopping wet.
Tim Roxburgh: Oh, it comes up around my feet. Oh, wow. Is it your baby that lives in this room?
Resident: Yes, the baby lives in this room.
*Tim Roxburgh: When problems are found in an apartment building, a group of owners known as the strata committee usually decides what to do next. But at Centenary Park, the developer’s own lawyer has a prominent role on the strata committee, and he’s been there for years.
He told me that his voting power comes from all the apartments that are still owned by the developer. A lot of those apartments aren’t even built yet.
I asked Rod Stowe, the Fair Trading Commissioner, whether in general this was legal.
Rod Stowe: You can’t control votes for buildings that aren’t complete, it doesn’t work that way. You don’t have a controlling interest because you’re building something that’s not complete and you don’t have an occupation certificate for, that’s just wrong.
Tim Roxburgh: That appears to be what’s happening in this case.
Rod Stowe: Well, I’m talking generally and that’s the case. You can’t say that you’ve got a vote for a unit that doesn’t exist, that’s not complete. It’s not possible under the strata legislation.
Tim Roxburgh: Okay, that’s interesting.
Rod Stowe: That’s the fact. You can’t, you can’t say we’ve got all these buildings we’re building and as a consequence we have a whole lot of strata entitlement, it just doesn’t work that way. Strata entitlements relate to physically completed units. Not something that’s on the plan, not something that’s half built.
Tim Roxburgh: But it turns out the developer can do this at Centenary Park. The unusual way this strata plan was lodged with Land and Property Information, as a big, single master plan, allows the developer to use voting rights attached to apartments that aren’t yet built. That’s allowed the developer to exert a strong influence over the strata committee.
Residents like Kevin and Kitty end up just bypassing the strata committee and going straight to the developer. When they complained about the water coming into their bedroom, the developer’s lawyer replied:
Reading: Unlikely to be a builder’s warranty problem. More likely the result of the heavy rain last week. If it is failure to clean the guttering and downpipes, it is not a strata issue either, but purely an owner maintenance issue.
Tim Roxburgh: What are you going to do if they don’t fix it in the next week or two?
Kitty: Maybe we have to move to another room to live.
Kevin: What else can we do? We just try to keep sending them emails.
Tim Roxburgh: Eventually, weeks after I visited, and after the leak had happened yet again in heavy rain, the builder did come back and fix the leak.
However, in an email to Background Briefing the developer’s lawyer said they were maintenance issues. Nevertheless, the developer had the builder:
Reading: Replace the pipework to the balcony when the record rainfall during March permitted.
Tim Roxburgh: Last year, in desperation, some of the residents at Centenary Park decided to appeal to the local member in state parliament, Labor’s Jodi McKay.
Jodi McKay: Well, I had a call from residents here who were concerned about a development that Strathfield Council was looking at. So I got in my car and came over, and I came around the corner here through this big entry arch and around the corner and I was so shocked by what I saw. It’s my electorate and I had no idea it was here and its enormous density.
There are a lot of defects in the building and the residents have spent so much time trying to report these and getting them fixed. There are many here, and they’ve been left for a very long time and not addressed.
Tim Roxburgh: Jodi McKay says it’s troubling that the developer still has an influence over the strata committee, even though the residents have been living here for years.
Jodi McKay: When you’ve got a development of this size, so you’ve got more than a thousand people living here on one strata title as such, there is the ability to take control. You’ve got people living here, well over a thousand people living here, 800 units or so, you still have a developer that has a say in what happens, so the owners aren’t controlling their own destiny. And I really believe there has to be a clear line between a developer and development versus the owners controlling their own destiny, and that isn’t happening here.
Tim Roxburgh: I wanted to interview the developer’s lawyer to get his side of the story, but he declined my request. Instead, in an email he wrote:
Reading: The only issue I vote on at each AGM is my re-election to the strata committee. On all other issues I abstain from voting to allow the owners to control their own destiny.
Tim Roxburgh: Fair Trading says it’s assessing claims about defective building work at the site.
At both Centenary Park and Palermo, residents trying to get someone to fix their problems have experienced extreme frustration.
*But the Fair Trading Commissioner, Rod Stowe, told me that the level of consumer protection is about right.
Are you saying that you think the laws that we have on the books are sufficient or not to protect buyers of new apartments?
Rod Stowe: Yeah look, I think they are.
Tim Roxburgh: From the middle of this year, builders in NSW will have to put down a bond that can be used to pay for repairs, even if the builder and the developer have disappeared.
Rod Stowe: From the 1st of July a developer or builder will have to put aside 2% of the construction cost of that project into a retention bond which can be accessed by residents should they find later on there are, as a consequence of an independent inspection, defects in the building which aren’t repaired by the builder or developer or the builder doesn’t happen to be there, they’ll be able to access that money.
Tim Roxburgh: But the bond is only held for two years, and many serious problems only become apparent further down the track. Like the leaks at John and Shirley’s building, Palermo,
And even if those problems did become apparent right away, 2% would be nowhere near enough to fix their leaks. David Andrews:
David Andrews: We’re talking the water leaks themselves, we’re looking at contracts now in excess of $2.1 million dollars to rectify the water ingress issue. 2% would’ve gone nowhere near that.
Tim Roxburgh: Other lawyers working in this space agree that the 2% bond won’t stretch far.
Suzi Broome: There are some checks and balances in there that weren’t there before, so let’s be grateful for small mercies, but really, 2%, it’s diddly squat.
Tim Roxburgh: Suzi Broome is a solicitor and consultant with Sachs Gerace Broome. She’s practiced in the area of strata law since 1997.
Suzi Broome: So unfortunately it’s punishment by massage with a feather, rather than anything else. It’s sort of insulting when you compare how much money those innocent homeowners have to pay out, even the reports alone, to get a really solid litigation report in litigation format by an expert, it cost thousands and thousands of dollars, and exponentially the bigger the building the more the defects and the greater the cost. Okay, there’s more owners to share the cost but it’s a big impost.
*Tim Roxburgh: She says the system was tilted in favour of developers way back in the early 2000s.
*Suzi Broome: I think the whole insurance regime, which altered fundamentally for buildings over three storeys in December 2003, was a huge, huge disaster for homeowners.
Tim Roxburgh: That was when NSW and Victoria made a call: if your building is three storeys and under, your builder needs insurance. Four storeys and over, no insurance required.
Suzi Broome: The argument was that larger buildings were more like commercial structures, and of course since it was like a commercial structure it was going to be subject to the checks and balances of commercial buildings and we wouldn’t find that number of defects in the building, and basically it was nonsense.
So then you’ve got the situation that the bigger the building the more the defects and there is no insurance, so that was a game changer, a game changer.
Tim Roxburgh: The lawyer for the Palermo residents, David Andrews, agrees:
David Andrews: It’s a substantial flaw in the system. There’s an assumption that anything over three storeys is constructed by a larger developer or a larger builder who’ll have assets or will be able to attend to rectification of defects and pay compensation, and that’s just not a safe assumption to make. There are lots of buildings over three storeys who are being left in circumstances like Palermo where there’s just no one to recover compensation from.
Tim Roxburgh: With the hope of getting that compensation fading, the owners at Palermo have collected the money among themselves to go ahead and fix John and Shirley’s leaks.
In the past few months they’ve had building technicians taking away bricks from walls and laying in new waterproofing materials. Just this little patch of waterproofing will cost around $70,000 to repair.
John: We had to get the remedial building services in to do a very thorough job. The flashings has been done. And when they’ve done the extra waterproofing, they’ve done two coats, so it is a thorough job. Since that’s been done in the last week or so, we haven’t had any water in.
Tim Roxburgh: But John and Shirley aren’t removing the dam they’ve had installed inside their house, not yet. Not until they’re sure that the rivers of water streaming into their living room are gone forever.
It rained like mad overnight, any water in your apartment?
Tim Roxburgh: Background Briefing‘s co-ordinating producer is Linda McGinness, series producer is Vivien Altman, sound engineer this week is Judy Rapley, our executive producer is Wendy Carlisle, and I’m Tim Roxburgh
- Tim Roxburgh
- Supervising Producer
- Linda McGinness
- Sound Engineer
- Executive Producer
- Wendy Carlisle
Palermo, Wentworth Point