Strata title fine print

A professional strata titles surveyor wrote to me last week saying he was checking a sales contract when he noticed a clause that has a strong whiff of rip-off.

The clause allows the developers to sell the building management and security services to whomever they like.

It also commits the buyer to voting in favour of the deal and prevents them from delaying or rescinding the purchase if they discover they don’t like it.

“It seems to be designed specifically to get around the restrictions the Strata Schemes Management Act places on the appointment of caretakers by developers as well as the restrictions on retention of proxy votes,” the surveyor says.

“I don’t know how enforceable it is but it would certainly give the developer bullying power.

Given it seems to be designed specifically to get around specific consumer protection amendments to the act, I think it is worth publicising.”

Too right. The law was changed a couple of years ago to prevent developers demanding proxies in their contracts.

These contracted proxies were then often used to award their subsidiaries and mates nice, juicy contracts that were frequently long-term, high-cost and low-value.

That’s because they were negotiated by the developers but paid for by the unit owners.

Similarly, this new clause demands owners lock themselves into contracts they haven’t seen with firms they didn’t choose, paying fees they didn’t negotiate.

The developers plan to sell the contracts, so you can assume the caretakers and security firms will inflate their fees – charged to the owners – so they can recoup the money they paid to the developers.

Selling contracts is just another way of putting your money into developers’ pockets. Legally, the contracts aren’t theirs to sell unless they get the OK from the unit owners – hence this clause.

Fair Trading needs to get on to this quick smart. Even if savvy buyers get this taken out of their sales contracts, they will be outvoted by the majority who just go with the flow.

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