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Combustible Cladding

June 2021 marks four years since the devastating Grenfell Tower firs in London. More Recently, fires in high-rise residential Dubai properties, alongside Melbourme sites Neo200 and Lacrosse, have led to increased media exposure and public anxiety around the issue of combustible cladding. So what exctly is cladding, how can property owners identify combustible kinds, and most importantly, what can be done to mitigate the risks? 

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Moving forward with Maintenance Plans

All too often when undertaking site inspections, we leave the site with the impression that the Owners Corporation is not adequately maintaining their investment which is, more often than not, due to a funding issue. This will likely affect the sale value of the lots and increase the risk of large special levies when the works can no longer be ignored.

Why is this?
The main reason is simply, in many instances, having the owners invest their money into an account they don’t control, and when it’s not mandatory for the owners to invest their funds over time, it can be like getting blood out of a stone. The result being that property maintenance decisions are made reactively rather than proactively.
 
New legislation only requires 51 lots or more to approve a maintenance plan, which is a positive step forward for the industry, however many properties less than 51 lots still require funding for major works such as passenger lifts, roof replacement, external painting and other plant and equipment.
 
Encourage Owners to take action
We advise all Owners Corporations to take action, be aware of their buildings and specific needs, and develop a maintenance plan or ensure some form of funding is in place regardless of the number of lots of their building/s. We encourage the following:

  • Owners to have a maintenance inspection undertaken.
  • To identify the known and potentially unknown cost cycles (the earlier the better).
  • The committee to have a “Maintenance Plan Review Meeting.”
  • The committee should ask questions and understand the plan.
  • Don’t set and forget and be proactive.
  • Review the plan and budget at least every 3-5 years.
 
Explain the benefits to the Owners
  • Long term needs of building assessed and funded.
  • Potential problems may be identified when plan is being prepared or reviewed.
  • Allows works to be undertaken when needed and as funds are available.
  • Promotes a view of a well-maintained building and prudent Owners Corporation.
  • A fairer system of funding for all stakeholders.
  • Special levy is typically not required.
  • Financial certainty for all owners.
  • Add value to their investment.
  • Promotes saleable units and liveable Owners Corporations.
 
Case Study
In late 2019 Mabi was engaged to work with an Owners Corporation committee to inspect the property for defects and establish a long-term maintenance plan. What we discovered was a perfect example of the importance of proactive maintenance and establishing a fund as early on as possible, regardless of the size or number of lots.
 
The development in question consisted of 35 lots, as such did not require a maintenance plan under the previous legislation, nor does it require one under the newly adopted legislation as of 1st December 2021.
 
The development was 45 years old and had common property infrastructure such as a passenger lift, four separate metal roofs, timber balustrades to balconies and common walkways and a known issue with subsidence to the under-croft car park.
 
Upon completion of the defect survey the following was determined:
  • The passenger lift required immediate overhaul and was unsafe
  • Structural engineer advice determined the brick ties had corroded and parts of the brick fa├žade required re-building
  • Concrete spalling to the cantilevered concrete balconies was significant
  • Three of the four roofs require replacement within 5 years
  • A number of timber balustrades had completely rotted, and the steel supports were corroded
  • One balustrade had recently fallen out of the building leaving a tenant with a balcony with no fall protection
  • Timber windows were also rotted and had not been painted
  • Geotechnical engineer had determined a serious subsidence issue within the under croft.

Without allowing for all other required maintenance (such as internal hallway painting and carpet replacement, essential safety measures, mechanical, CCTV and other normal maintenance costs cycles), the total for the urgent works exceeded $1.4 million required within the next 5 years. The average cost per unit for the next 5 years exceeded $10,000.
 
This is a perfect example of why an Owners Corporation must consider the specifics of their building/s and not just the number of lots. The Owners Corporation had zero funds set aside for maintenance and no formal or informal plan. The owners were reluctant to have the works carried out as they had no money, and no decisions were ever made until it was too late.
 
Whilst this case study is a ‘horror story’ it does illustrate that nothing lasts forever, and a more pragmatic approach must be taken when maintaining common property and how it is funded.
Not all Owners Corporations will require substantial repairs as per this example, however many lot owners will be dealt a blow when they realised the sums of money they are required to individually contribute often coupled with the fact that they are effectively recouping funds that should have been contributed from day one and potentially from past owners. 
 
The earlier a maintenance plan budget is set up, the easier the process and the fairer the financial requirements are for all stake holders over the long term.
 
Kingsley Osmond
Director
Mabi Services
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Example of concrete spalling to concrete ceiling with no action taken by Owners Corporation for 15 plus years


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Example of timber fascia that has rotted past the point of repair
 

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Paying twice for remediation work


27 Jun 2023

Will I be required to pay the special levy for cladding leak remediation even though I have already spent $7000 to fix a leak in my apartment’s exterior wall out of my pocket?

 

I have already spent $7000 to repair a leak in the exterior wall of my apartment, repaired by a tradesperson from inside my unit. The owners corporation plans to collect a special levy to address cladding leaks on the building’s exterior, with a special resolution meeting scheduled for next month. Since I have already covered the cost of fixing the leak in my unit, am I required to contribute to the special levy? In other words, will I be expected to pay twice for the remediation work I have already taken care of out of my pocket?
 

Carrying out repairs to the common property is an owners corporation responsibility.

 

The location of the boundaries, as shown on the plan of subdivision, will determine whether the works were to private or common property. Also, the layout of the building would help to determine how the benefit principle should/could be applied. Although I need more information for a definitive answer, I have provided some general information that might assist.

How did you keep the owners corporation in the loop, and what agreements were made? Carrying out repairs to the common property is an owners corporation responsibility. If the building walls are common and the cladding system providing waterproofing requires repair, the cost are usually split by lot liability as the collective owners corporation all benefits from having a water-tight building.

If the work you have done reduced the repair work by the owners corporation, you could argue that you should be credited the cost savings. A sympathetic owners corporation may agree. However, these complicated matters are often not that clear-cut.

Was the work you carried out absolutely necessary at that time and could not wait for the owners corporation to carry out the full repairs? If so, what evidence do you have to support this view? Was there any agreement requested of the owners corporation? If so, did they provide a reasonable response?

The answer to these questions will help to ascertain whether the owners corporation failed in its duty to repair and maintain the common property and you perhaps had no option but to have repairs done to protect your property and mitigate against other possible costs and damages. The answer to that might assist in working out if none, some, or all of your costs should be reimbursed.

The owners corporation might argue you had other options available and that the $7000 need not have been spent and might not reduce the overall cost.

Professional people with good building knowledge could probably work through this and come to a fair assessment of what if any, costs should be reimbursed. Perhaps you and the owner’s corporation could agree to engage an independent building expert to make a determination and both parties agree to their findings. Unfortunately, their costs would need to be shared too and could be
a few thousand dollars. You might prefer a negotiated settlement.

The complexities of such matters mean that they often end up in VCAT, which is costly and time-consuming. I suggest trying to negotiate a fair and reasonable settlement.


Please note that this is intended to assist with a practical way forward and is not legal advice.
 

Anton Silove | MBCM Strata Specialists Frankston, Mornington and Chelsea