Strata reforms send bills soaring from just $5000 to $60,000
Warren* was staggered to learn last year he had to contribute $80,000 for waterproofing and concrete spalling repairs to his apartment building in Sydney’s eastern suburbs.
It was an enormous shock, particularly because owners had to pay within six weeks for the work that included fixing the degrading concrete.
Work to the 26-unit building cost well over $1 million – almost double the figure originally quoted – and was completed nine months later in November.
A more practical application of the act would save money, says Owners Corporation Network executive director Karen Stiles. Oscar Colman
Residents’ special levies ranged from about $40,000 to $100,000, and quarterly levies also spiked.
Warren has lived in the Elizabeth Bay building for more than 20 years. He could pay the huge levy, but others were hard hit: a couple on the age pension, a pensioner who had to borrow from her children and a couple who emptied their savings also took out a bank loan. Some had just bought and had substantial mortgages.
After the evacuation of Opal Tower at Sydney Olympic Park due to severe structural cracking in 2018, and Mascot Towers about six months later, the NSW government cracked down on the building industry.
Its response was the NSW Design and Building Practitioners Act 2020, which imposes complex obligations on practitioners and builders to ensure safeguards. An overarching law, the same regulations apply to new buildings as existing ones. NSW is the only state to enforce such rigour.
Patch repairs to mixed-use buildings and strata apartments – the fastest-growing form of Australian property ownership – are not permitted. Whole sections, often undamaged, involving multiple specialists, must be reconstructed, driving soaring fees.
Warren’s building underwent a makeover as increasing problems were exposed and treated in compliance with the new law.
It’s really hard to comply with this legislation because it captures too many things.— David Bannerman, lawyer
Registration of design practitioners, principal design practitioners, professional engineers, specialist practitioners and other building practitioners, is required, along with compliance declarations.
The executive director of the Owners Corporation Network advocacy group, Karen Stiles, says the red tape is causing cost and time blowouts. She suggests a more practical application of the act.
A recent survey by Sydney-based Bannermans Lawyers found the act generated time blowouts of at least seven months and cost escalations of 100 to 150 per cent more for the same job undertaken previously.
“There was no net benefit in the quality of the work,” strata lawyer David Bannerman says.
“It’s really hard to comply with this legislation because it captures too many things and in some regional areas they don’t have registered people to do the repair work. It’s pretty widely not complied with for small jobs because it’s just not economical.”
A representative for the Building Commission NSW said it was common for practitioners to fail to provide adequate evidence of design compliance with the act.
Research the commission conducted with the Strata Community Association NSW found serious defects of buildings reported last year more than doubled since a 2021 survey. Defects in newer buildings have decreased since 2020 while waterproofing and safety systems remained the most prevalent defect.
Some exemptions have been set, but it’s unknown if more will follow. The peak remedial body, the Australasian Concrete Repair & Remedial Building Association, declined to comment.
We spent $60,000 versus $5000 to $10,000 to remove the magnesite from an entire unit, even though the majority was not damaged.— Karen Stiles, OCN executive director
Stiles says that though regular facade and internal inspections can stop costs from snowballing, the new law is inflexible.
“My 55-year-old strata building, for example, has always required an inspection of the unit floor when renovations or carpet replacement are happening,” she says.
“An experienced engineer will identify any concrete spalling and, previously, would arrange repairs as required. With the unexpected application of the act, suddenly, in my building we found ourselves spending $60,000 versus $5000 to $10,000 to remove the magnesite from an entire unit even though the vast majority of it was not damaged. The increased cost included repairs to the steel reinforcement and re-levelling the floor.”
Magnesite, a levelling compound commonly used in the 1960s to 1980s, can cause concrete cancer.
The same problems apply to failed waterproofing: whereas the remedy might be to remove a row of balcony tiles, owners are now required to address the entire balcony.
Stiles says one engineer had budgeted $350,000 to waterproof planter boxes that were leaking. Due to requirements of the act, the cost spiralled to $1.5 million.
Owners’ corporations can opt for a strata loan, or impose a special levy.
“If you can’t pay the levies, you’re forced to sell at a discount,” Stiles says. “Owners can also arrange reverse mortgages and mortgage pauses in some cases.”
David Glover is frustrated by residents losing their ability to make decisions. Oscar Colman
Julia*, a retired owner in her 70s living in the Elizabeth Bay building, had to draw down from her superannuation to pay her $100,000 special levy.
“I had to liquidate shares in my super fund,” she says. “The more the engineers dug away, the more they uncovered … A good proportion of the costs went to consultants.”
One strata unit owner in south Bondi paid $60,000 in special levies over a year and increased quarterly levies for leakages and damaged brick work. The body corporate took out a strata loan in that case.
To avoid paying special levies for major defects, Stiles recommends people do not buy off the plan and do not buy a building less than 10 years old.
“In most new buildings, tradespeople are not trained properly, there’s no supervision and there’s zero care factor,” she says. “Ongoing expenses to fix the defects are devastating.”
David Glover, the body corporate chairperson of a 1998 strata building in inner-city Sydney’s Darlington, and an owner-occupier, describes how shoddy workmanship to repair one unit’s faulty waterproofing years earlierled to subsequent cost blowouts.
What should have been a straightforward job quoted at $60,000 before the new law blew out to $135,000 among 14 units.
“I’m frustrated that this legislation takes away our right to make decisions about our building and accept a reasonable risk,” Glover says.
Specialists are also uncertain about the level of professional indemnity insurance required and provided.
Dennis Stephenson, a registered design practitioner, says his engineering building consultancy, Diagnostech has forked out hundreds of thousands of dollars for insurance. To be compliant, he paid 10 years of retrospective insurance and 10 years ahead. Under the act, designers are just as liable as builders.
Fees increased about 800 per cent for design practitioners, forcing smaller players out at a time of labour shortages, he says.
*Names have been changed
Leading property coverage delivered to your inbox. Sign up to our weekly Inside Property newsletter.