Apartment Giant Meriton Selling Strata Business due to changes to NSW Laws
Posted 29 September 2016
Category: Strata, Strata Reform
Australia’s richest person, billionaire property developer Harry Triguboff, is selling his company’s strata-title management business, pointing the finger at changes to NSW laws for his decision.
Triguboff, who founded Australia’s largest apartment developer Meriton, said he was selling the strata business because incoming laws would “effectively shut developers out”, and others are expected to follow suit.
Meriton, which has built more than 70,000 apartments across the east coast of Australia over the past five decades, looks after 6194 strata apartments spread over 33 schemes in Sydney and the Gold Coast.
The laws will bring new pet bylaws, forced sales of apartments to developers, and parking inspectors into strata schemes among more than 90 changes to existing laws and regulations.
They also stipulate that the developer of a strata scheme, or a person connected with the developer, can’t be appointed as the strata managing agent until 10 years after the registration of the strata plan.
Triguboff said the new laws meant Meriton, as a building developer, wouldn’t be able to play a role in managing its new developments.
“One of those reforms effectively shuts Meriton, and other developers, out of having any role in the strata management of their properties until the buildings are 10 years old,” he said.
“We are veterans in this business and haven’t taken the decision to exit it lightly,” he added. “We’ve always run our own ship at our own developments and things have gone swimmingly and with great success.”
The principal of strata law firm Bannermans Lawyers, David Bannerman, said the changes were in the best interest of consumers, as volunteers on new owners’ corporations were often strongly guided by their strata management.
“They need people guiding them, who give good advice that are free of a conflict of interest,” he said. “There’s a conflict between what’s in the owner’s best interest and the developer’s best interest and the law has come out and said that tension shouldn’t exist.”
He noted it was not uncommon for building defects in new developments to be fixed with building maintenance funds, instead of being corrected by the builder or developer under statutory warranty.
“Some developers might manage it well, some might not … but it’s best to no longer have that competing conflict of interest.”
He added that the product that comes to apartment owners via the management system and laws will be far superior under the changes, and he expected more developers to to put their strata portfolios on the market. He noted that while Meriton would see its strata portfolio dwindle under the new regulations, it would still be a viable asset that he believed would attract strong interest on the market.
Meriton Strata Management general manager Ryan Walmsley said base management fees and insurance commissions generated more than $1.1 million of the business’ gross annual income and that two-thirds of their schemes were under contract until at least 2018.
He was optimistic about selling the business portfolio – which he said offered big, well-maintained schemes – at a time when strata-management companies were jostling for position and aggressively targeting acquisitions.
“That’s happening against a backdrop of Australia turning into a nation of apartment-dwellers,” he said. “Nearly one-third of NSW residents already live in apartments and one estimate is that the figure could climb to 50 per cent by 2040.”
The NSW Property Council believes the 90 changes to existing laws will improve the accountability of strata managers, establish a transparent process for the collective sale and renewal of strata schemes, and introduce a simpler, clearer process for dealing with disputes.
“More than two million people in NSW own, live or work in strata titled buildings. The changes represent the first major reform to the strata laws since 1973 and will bring the legislation into the 21st century. As a consequence, the Property Council has been largely supportive of the reform package, said NSW Property Council executive director Jane Fitzgerald.
***The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.
