Strata Defects Whistleblowers
Is the future direction for defective strata buildings in the hands of whistleblowers ...
Recent reporting that the NSW Building Commissioner is acting on information from whistleblowers prompts me to wonder if that’s the right solution to the strata building defects problem. Or, might it backfire on everyone [including the whistleblowers] and become a game of strata building defects musical chairs …
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Whilst I was vacationing last week, the Sydney Morning Herald reported in ‘Construction watchdog: Body corporates are not reporting known defects’ about the latest actions and musings of the media-savvy NSW Building Commissioner, Mr David Chandler, OAM.
The article prompted me to wonder about the tone and direction the recent flurry of government-related strata building defect activity is taking in relation to a few issues as follows.
To be honest, I was a bit alarmed by it.
Whistleblowers & whistleblowing
According to the reporting, a 200 apartment strata building in Sydney has ‘scandalous’ defects which David Chandler was alerted to by a whistleblower and will now be subject to an audit by the NSW Building Commissioner. The article suggests that the audit of the strata building’s defects will lead to public orders to get the defects fixed.
Further comments were reported that were critical of strata owners in that building and that included warnings to strata buildings public disclosures.
Identifying building defects in strata buildings is a good thing and I’m all for it.
But, blaming the strata building and the new or current strata owners for those defects and lack of action in relation to them [as some of the comments reported in the article seem to] feels a lot like victim-blaming to me.
After all, the strata owners didn’t develop or build the strata building, couldn’t know of the existence of the defects when they purchased their strata lots, may not be aware of the defects even now, and, have few if any rights easy or effective rights to get compensation for the defects. Rather, that all occurred under the NSW Government’s watch.
Plus, if the way to get the NSW Government’s attention for strata building defects is via whistleblowers, then why not blow the whistle on most [or every] strata building built in the last 25 years as virtually all of them have building defects?
In fact, I’m happy to do it here and now [as a generic strata building defect whistleblower] if that helps.
But, as we all know, that’s not a universal solution to the strata building defect problem for existing buildings since their predicament is far more complex and nuanced, and doesn’t have just one easy solution imposed on strata buildings by the regulator; ie – fix the defects.
And, what’s does the reported statement that the audit of the strata building’s defects will lead to public orders to get the defects fixed quote mean?
Will the NSW Building Commissioner dob in this 200 apartment strata building in Sydney to the local council with supporting audit reports so the local council can issue orders against it?
That would be an ironic twist if the strata owner whistleblower in that building found themselves in a defective building, with local council orders to fix the defects, no Home Building insurance [since it’s almost certainly over 3 storeys], and having to pay special levies and/or borrow money to do that. Oh, plus having their building defects publicly revealed.
It’s probably not the kind of help the whistleblower hoped to get from the NSW Building Commissioner.
Self-reporting strata buildings
According to the reporting, there’s also unhappiness that NSW strata buildings with defects are not reporting them to the NSW Government as a result of a comparison made of identified defects in 500 recently constructed strata buildings and the results of a NSW Fair Trading and SCA (NSW) survey.
The NSW Building Commissioner is quoted as saying the following about this:
‘What that is telling us is that a large number of body corporates are sitting on known defects and not reporting them.’
and
‘We have got a fair degree of under-declaring going on in NSW.’
Further comments were reported blaming cheap stake strata owners who didn’t want to spend money on their strata buildings and singling out overseas owners.
Given that there’s no obligation to report strata building defects to NSW Fair Trading [or anyone else really] I’d say this is more than a bit of wishful thinking for strata buildings to self-report building defects by the NSW Building Commissioner and overstepping his authority. I also wonder what power he has to enter and inspect existing strata buildings after an occupation certificate has been issued.
But, even if strata buildings were obliged to report defects, there are lots of [good and bad] reasons why they might not do so including:
they aren’t aware of the building defects because they have been reported or identified by anyone,
the defects are latent building defects and haven’t manifested themselves yet,
they’re still investigating the building defects,
the builder or developer has promised to fix the building defects,
the builder or developer has already fixed [hopefully properly] the building defects,
they have litigation or other claims underway over the building defects which might be prejudiced by disclosure,
they are negotiating a settlement of a building defects claim that might be prejudiced by disclosure,
they may have settled a building defects claim with confidentiality obligations about the building defects,
they propose to fix the building defects themselves without fanfare,
they’ve decided to live with the defects,
they don’t have any rights to recover compensation for the defects [insolvent builder and no Home Building insurance] so want to keep things quiet, and/or
they want to sell their lots to a new set of owners without losing too much money.
Now I know that the last reason seems wrong and unfair to many people.
But, how many strata owners have done that before and what would you do in that situation [honestly]? And, isn’t that what the developer did to the first strata owners anyway; sell them an apartment in a defective strata building?
It’s equally unfair that the set of strata owners that have to foot the bill for strata building defects are the ones left holding the parcel when the music stops. It’s not [or shouldn’t be] a game of strata building defects musical chairs.
Public shaming of strata buildings [and strata owners]
According to the reporting, David Chandler also said body corporates risked defects in their buildings becoming revealed in a ‘very public way’ if they didn’t report them to NSW Fair Trading.
Presumably, that would occur off the back of blown whistles and resulting audits.
So, does the NSW Government intend to publicly name strata buildings with defects? It certainly looks like they would like to.
It’s also consistent with statements made earlier this year by the NSW Minister for Better Regulation and Innovation, Kevin Anderson, about the idea of a Strata Information Hub which appeared to focus on registering defects in strata buildings rather than strata operational information when he said:
‘It will also let the regulators keep a close eye on each strata building to make sure NSW homeowners are not burdened with avoidable building defects when maintenance is neglected.’
I wrote about that in my article ‘What will a strata Information 'Hub' provide for stakeholders ...’ and was in the reporting by Urban in ‘Find out which government is proposing a centralised digital strata hub’.
Given the significant commercial and practical impacts that outing strata buildings with defects would have on the strata owners, residents, lenders, and other strata stakeholders in relation to saleability, rentability, rents, property values, and capital equity ratios, do we really think that this is something the NSW Government should be doing to its constituents?
It’s also a bit rich when the NSW Government is simultaneously refusing to publish the list of 440 buildings with combustible cladding in the state as reported in this ABC News article ‘List of 440 buildings clad in flammable material in NSW not to be released publicly’.
I’d say that this kind of public shaming of strata buildings and strata owners who have inherited buildings with defects and already have enough challenges dealing with the defects, is also counterproductive.
Perhaps, the NSW Government could help them fix their defects instead?
After all, the defects exist because of the terrible history of government management of the strata building construction quality in NSW that I wrote about in ‘The Saga of NSW Strata Defect Claims’.
Conclusions
It’s important that the strata building defects are identified and remedied properly and cost-effectively rather than being ignored [intentionally or otherwise].
And, it’s great that the NSW Building Commissioner is actively pressuring builders and developers of new buildings over construction quality and making noise about it to draw attention to the problem.
But, blaming the victims of past regulatory failures over strata building construction quality when their rights have been consistently eroded over the last 25 years, isn’t right.
So, perhaps a more understanding and supportive approach should be taken for those strata buildings affected by all kinds of building defects [just like they’re doing with the 6% of strata buildings under Project Remediate]?
After all, why should just some strata owners [those who happen to be there when the defects music stops] have to bear all the costs of their predecessors [developers, builders, regulators, and previous strata owners] failure to address the problem?
July 14, 2021
Francesco …