The Joy of Christmas in Australia

Amongst all the doom and gloom, Christmas brings to all of us a little bit of something nice!

Whilst sitting in the car the other day I heard an email from a community title complex in Western Sydney read out on the radio. The email came from a Christian who enjoys the celebration of Christmas. They had even written in their correspondence that Jews, Muslims, Hindus, and Atheists all reside in their community title complex. Although not sharing the same beliefs, all of the groups came together for Christmas to celebrate this wonderful time of the year. Essentially the non-Christians enjoyed sharing the celebration of Christmas with all of the Christians. This email went on to say that their community also enjoyed the various religious celebrations of all the other groups.

We live in a multicultural society. Many whinge about it and indicate that it ain’t what it use to be! Thank God for that!

The other day I had a wonderful Australian experience. I was picked up by my Persian taxi driver and driven to meet my Italian Catholic and my South African Jewish clients. Later on that evening I had dinner with a Greek Orthodox person, a Roman Catholic Italian, the same South African Jew and an Islamic Lebanese person. What do we toast: Christmas! What did they say to me when we parted: “Merry Christmas”.

The Politicians may not have grasped it and the Public Servants definitely have not; however the people of Australia have. With multiculturalism comes difference, and with that comes an exploration of humanity that is sometimes daunting but always enjoyable.

I once lived on the other side of Australia, which is not as cosmopolitan as Sydney. I am an Australian who can be traced back on one side of my family to the convicts, and that is being an extremely proud Australian. I have been lucky enough to represent my country in many different sports and, as you can see, the name of our company is uniquely Australian.

The return to Sydney provided me with such joy and such a journey. The journey of different cultures; its foods and its beliefs provides an excitement to me which I always remember. Yes, Christmas is my time of the year because it fits my belief. I am so lucky to enjoy it with those of other beliefs and other nationalities. What a joy Christmas is in Australia.

From all the team at Leverage Australia and the Australian College of Professionals we thank everyone for reading these weekly newsletters. We pray that you have a Merry Christmas and an extremely prosperous New Year and that 2012 and brings you all the things that you dream of.

Unit Entitlements

Registered with every strata scheme is a set of unit entitlements. These unit entitlements will define the proportion of levies paid by each lot owner and will determine the their voting powers at General Meetings. It is one of the many systems in the world where a person pays for power. What is ironic however is that power is not always important in an owners corporation, it is the amount that a person pays in relation to levies.

There is no definition under the Act how unit entitlements are allocated when first registered. There are 2 primary mechanisms for determining unit entitlement:

•   Value; or
•   Floor space.

It is our experience that developers and builders rarely have any scientific approach to the allocation of unit entitlements at registration. Hence, this leaves many strata organisations in a position of disputation.

Section 183 of the Strata Schemes Management Act 1996 (SSMA) permits any lot owner to seek action to have unit entitlements reallocated. The simple test under Section 183 is that the allocation of the unit entitlements were “unreasonable”.

Although Section 183 of the SSMA does not provide an absolute means of determining unit entitlements, it does require that a valuation be provided to the Consumer Traders & Tenancy Tribunal (CTTT). Based on Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305, the valuation must be vigorous and pass certain tests. The reasonability or lack of reasonability will be determined based on the valuation.

There are usually 3 parties to a unit entitlement dispute:

•   The lot owners;
•   The owners corporation; and
•   The developer.

If it has been found that a lot owner has paid an unreasonable amount of levies, the developer will be responsible for refunding all of those fees. This is why developers should pay greater attention to the distribution of unit entitlements when first registering the strata scheme.

If unit entitlement is disputed, it now appears that the matter can only be heard and ruled upon once. There was consideration for many years that, owners corporations could return to the CTTT under Section 183 to have these unit entitlements reviewed. Based on Schrader v Owners Strata Plan No 12449 [2008] NSWSC 117, dispenses with this proposition. In the Schrader case, it was clearly determined that lot owners could not ask the CTTT or the Supreme Court to reconsider a unit entitlement dispute which is essentially the same as the previous dispute. The fact that it may be a different lot owner or different valuation did not mean anything to the Supreme Court. In the Schrader case, unless action is being taken on a fresh issue, unit entitlement disputes cannot be heard again.

If your owners corporation is seeking a redistribution through the CTTT or any lot owner is seeking a redistribution through the CTTT, steps must be taken to do it properly the first time around. Firstly, valuations need to be obtained which are clear and unambiguous; secondly, the valuation needs to comply with the principles in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; and thirdly the case needs to be run properly.

Although the CTTT is meant to be an inexpensive mechanism for justice, it has become a highly technical jurisdiction when dealing with the SSMA. We have seen at least 2 cases where lot owners have attempted to run their own cases and have lost out on justice because their first attempt was not undertaken properly. Even though we believe that this is unfair, considering the purpose of the CTTT, it is a reality. If you are an owners corporation seeking unit entitlement redistribution, please advise lot owners and members of the owners corporation to seek proper advice.

The Open House

Open houses have become the mechanism for showing potential purchasers or tenants through a property. An agent attends a property, opens that property to the public and then shows it to all and sundry. What you will get is 4 types of visitors:

•   A prospective purchaser or tenant;
•   An interested neighbour who wants to see how their property will stack up to the  marketplace;
•   “Tyre Kickers”; and
•   Burglars.

Don’t underestimate the organisational strategies of criminals and how inviting an open house is for those who wish to “case a joint”. The open house provides a perfect mechanism to enter, look through the premises and identify the security conscious and not so security conscious owners. I was advised many years ago that if a burglar wants to break in, no amount of security will stop them.

If you are a professional burglar, an open house will provide you with the following information:

•   The layout of the property;
•   What security measures have been instituted by the owner; and
•   What is worth stealing.

Unfortunately, differentiating between the 4 types of visitors is almost impossible. Agents don’t want to scare away prospective purchasers or tenants. It’s important that you make friends with the neighbour who may be interested in selling their property, and you never know the advantage of building a relationship with a “tyre kicker”. The burglar; he or she will portray themselves as a potential purchaser or tenant and s/he will not sign the ledger “potential robber”.

The agent has little control! The best an agent can do is protect themselves and provide some information for the police.

This is why we now suggest that every person attending an open house should be required to show photo ID. All prudent agents should have already implemented an open house sign-on list that could be used as the basis for building a database in relation to that property type. Many agents are not requesting photo identification and are relying on the honesty of a person to provide their correct name and mobile phone number. If you are a burglar, you will lie about your name and your phone number.

Photo identification will weed out those who are genuinely interested in the property and those who are not. If a person is seriously interested in a property, they will provide a copy of their photo identification. This is your first step in protection. A person who intends to rob the place will not provide you with photo ID and will move onto the next premises.

Moreover, if a robbery occurs, and it’s a person in the open house list, the police will have something to investigate. Many years ago, we consulted on a case where 1 hour after the open house the property was burgled. The agent had 2 protections:

•   A list of every person who had attended the open house, with an indication that they  had seen all photographic ID; and
•    A procedure for locking up the house, which had been followed.

It was clear that the agent had complied with a duty of care. They had identified each person who had entered the premises and could demonstrate that they had locked the premises up properly. Most of all, it provided the police with the tool to investigate every person who came to the open house. Yes, none of these were the burglars; however the agent was able to demonstrate their worth to the owner and value of the process to those who had attended the premises.

I know many will fear that this is an intrusion on visitors who inspect a property; however it is for your agency’s protection. In addition, remember a properly qualified open house list is the best means of building your database.

By-Laws: A Blank Cheque

I have taken nearly 6 months to talk about this case. We represented an owners corporation in a Court of Appeal decision handed down in the case of Casuarina Rec Club Pty Limited v The Owners – Strata Plan 77971 [2011] NSWCA 159.

The facts of this appeal were as follows:

• A land developer in the Tweed Coast area sold land to a developer that called themselves Resort Corp.
• There was a deal done between the developer and the land owner where the land owner would receive 4 contracts in return being a:

             (a) Caretaker Agreement;
             (b) Letting Agreement; 
             (c) Securities Agreement; and
             (d) Facilities Agreement.

• It was the Facilities Agreement that was at the centre of this appeal.
• When buyers entered into contracts to purchase units in the resort, the contracts of sale carried a requirement that they granted power of attorney in proxy to the developer to support the delivery of these 4 contracts to the land owner.
• The facility was a gymnasium that was 15 minutes from the resort known as Santai. Hence, the gymnasium was not on the common property of the Owners Corporation.
• The Owners Corporation gained the authority to enter into this contract by creating a by-law which gave them the power to enter into the facilities agreement.

The Owners Corporation argued that there is no function of the Owners Corporation that permits the entering into of contracts which were not on the common property. It was further argued that a by-law could not be created unless it had a basis or link (nexus) within the functions of the Owners Corporation.

The court of Appeal accepted the argument that there must be some link between the by-law and the functions set out in chapter 3 of the Strata Schemes Management Act 1996 (SSMA). Justice Young indicated that this nexus only needs to be slim. Two things seemed to sway the Court of Appeal’s decision:

• That all owners knew of the facilities agreement when entering into their contract for sale of land.
• This is the type of contract which a resort may require to engender the use and enjoyment of the properties by their lot owners.

In relation to the first point, we are somewhat shocked. We undertake conveyancing for a number of strata units and we are well aware that lot owners do not understand everything that they are advised of when entering into a contract for the sale of land. Most of all, when they are purchasing off-the-plan, as these people were doing, it’s almost impossible for them to understand the ramification of these contracts without a clear vision of how it would operate.

In relation to this second aspect, evidence was introduced to the court that there were less than 60 visits per annum to the gymnasium. This meant that the Owners Corporation were paying approximately $1500 per visit. Justice Young said that maybe a tennis court in London would not be permissible under the by-laws, but didn’t go on to indicate what the boundary limit may be. Perhaps a tennis court in New Zealand or a tennis court in Brisbane? Well we don’t know after Justice Young’s decision.

What it indicates is that, provided that there is some slim connection with the functions of an owners corporation and it is applicable to the strata scheme, owners corporations under the SSMA have a blank cheque in making by-laws. We don’t know what the limitations are. It’s only when this decision is challenged in the High Court, or heard again by the Court of Appeal, that this principle will be revisited.

Continuing Professional Development

We have now been made aware that the National Licensing Program for Property will not go ahead on 1 July 2012. We understand that there are some key issues in dispute in relation to the details of the new licensing regime. At the core of the dispute seems to be the future of continuing professional development (CPD) of real estate and property agents.

We understand that states like Victoria and Queensland are promoting that real estate agents do not need to do CPD. These are the pushes that are coming straight out of the REIV and the REIQ. Why may you ask? The REIV and the REIQ require CPD to be undertaken as a membership requirement for their organisations. Considering they have control of certain documentation and access to certain products that are required by industry participants, this is a move to control the CPD industry.

What will have to be done in the future under these regimes is that state bodies will control CPD. If you want access to the material or products held by those non-government organisations, you will need to do their CPD. It is essentially a way of creating an monopoly for the peak bodies in this industry.

What’s worse is that it’s a poor reflection on the property industry. To declare to the world that real estate agents do not need any continuing professional development when they are selling the largest asset that most private citizens will ever own, can only serve to indicate to the public that real estate agents are either stupid or are not worth training.

Solicitors need to undertake 10 hours of training each year. This is usually the cost of about $150 per point. In essence, it costs a lawyer $1500 each year to do CPD.

Licensed Conveyances are only required to obtain 5 points of CPD, at a cost per point which is the same as lawyers. In other words, it costs them about $750 each year to do CPD.

Builders have to obtain 25 points each year. Even fitness trainers have to obtain 18 points a year. So what is the Government saying, real estate agents don’t need to be trained! They don’t need to be trained to be able to sell the most important asset of a person’s life! It would be folly for Government to demonstrate that they are willing to allow persons to continue to work in a fast moving legislative industry without ongoing training.

It may be said that this newsletter is speaking from a hip pocket perspective because we conduct CPD training for agents. Well, that’s the way the critics of this perspective will look at it!  Yes, we do earn income out of CPD, but at a cost of between $160 and $200 per year, it is not our primary earner.

The earnings are furthest from my mind. I have been involved in this industry continuously for the last 15 years and I have probably dealt with 7000 to 10,000 agents over that period of time. I have seen the good, the bad and the ugly, and have recognised that their knowledge of the framework in which they work is limited without CPD or training. Most of all, CPD is an integral part of this industry that we love and it’s important if the industry wishes to maintain creditability within the community.

Where we can, we will continue to place pressure on Government to continue looking at this industry seriously and having serious guidelines to create a better industry. We hope that you will participate in this process.