‘Dog’s breakfast’: Strata overhaul splits flat owners and industry

Apartment and townhouse owner advocates have lashed a long-anticipated state government blueprint to overhaul Victoria’s strata sector, saying it “insults the intelligence of apartment owners”.

While the government response to the independent expert panel review into the Owners Corporations Act drew a furious reaction from lot owners on Wednesday, the corporate strata management industry warmly welcomed the changes, praising the state for holding back on insurance commission bans.

Susan Chandler, general manager of Strata Community Association Victoria – the lobby group for professional strata management firms – backed the government’s decision to pause a recommended ban on lucrative insurance commissions and broker fee sharing until more research was done.

“SCA (Vic) has consistently advocated that the focus of reform should be on transparency, informed consent and consumer choice, rather than an outright prohibition on any particular remuneration model,” Chandler said. “We therefore welcome the government’s decision to undertake further market impact analysis before making a determination.”

The expert review – carried out by former Labor consumer affairs minister Marsha Thomson, economist Karen Chester and prominent strata lawyer David McKenzie – was given to the government six months ago and made 51 recommendations.

The government, in its response, supported 17 of the 51 in full. The rest were either categorised as supporting “in part”, “in principle” or not at all.

On Wednesday, the government introduced legislation to parliament to enact a first tranche of changes, including giving unit owners struggling to pay their owners’ corporation fees a standardised right to a payment plan.

The new laws will also lower the threshold for enforcement of basic rules in owners’ corporations from 75 per cent of all owners in a building back to 50 per cent or a simple vote of the smaller appointed committee, and loosen the voting threshold for owners to sell an older building for redevelopment.

However, among the 34 recommendations not fully committed to or those the state wants further time to consider were major ticket items owners’ advocates have long called for, including banning insurance commissions and other kickbacks, and banning developers and strata managers from harvesting proxy votes.

Advocates have also long called for an independent strata commissioner, matching NSW. Instead, the review proposed a new dedicated unit set up within Consumer Affairs – a recommendation the government said it was open to but was subject to funding.

On Wednesday, The Age pressed Consumer Affairs Minister Paul Edbrooke – who has been in the portfolio for only six weeks – on how Consumer Affairs Victoria (CAV) could be trusted to be the watchdog for strata. The expert review explicitly laid out how CAV had failed to execute a single enforcement measure, laid zero charges, and cancelled no strata manager registrations since 2019, despite nearly 1000 complaints and requests for help from owners each year.

In response, the minister claimed there was “no evidence” the regulator was failing.

He argued that a gentle “carrot instead of the stick” approach sufficed because “most OCs [owners’ corporations] are doing the right thing” – seemingly mixing up volunteer owners’ corporation committees with the multi-million-dollar commercial management firms accused of rorting them.

Financial Counselling Victoria said while payment plans were welcome, the review and the government response had left severe regulatory gaps that allowed commercial agents to slap in indiscriminate “late and administrative” fees and charges onto owners’ levies.

The organisation cited a case where a Melbourne apartment owner had a $1500 administrative penalty fee tacked onto a basic $3000 arrears notice. Many such fees have been ruled unlawful by VCAT on multiple occasions, but continue to be issued.

Owners’ advocates warn that strata living is unlikely to get any cheaper for Victorians, citing a failure to rein in kickbacks and tackle unlawful fees.

“The review is a dog’s breakfast and has failed to listen to owners,” said Adam Promnitz, founder of volunteer-run Strata Owners Alliance. “The government has consulted with the industry while completely ignoring owners who will have to pay for their incompetence with higher strata fees.”

Sam Reece, the chief executive of Australian Apartment Advocacy, said 1.6 million Victorians living in strata schemes had been left exposed to predatory corporate managers due to the state’s failure to establish an independent strata commissioner or eliminate structural insurance commission-sharing.

“With Consumer Affairs Victoria taking no action against strata managers in the last six years and owners waiting 52 weeks for a VCAT hearing, it is clear that the system is broken and urgent action is required,” Reece said.

Opposition consumer affairs spokesman Tim McCurdy reiterated on Wednesday that a Liberal and National government would consider establishing an independent commissioner if it won government.

”We will not tolerate dodgy deals, hidden fees or unlawful charges,” he said.

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