Investigation finds many unfair strata contracts favour managers over apartment owners

ABC NEWS (Australia)

An ABC investigation has found many strata management contracts disproportionately favour strata managers over apartment owners. Some contract clauses guarantee commissions for strata managers and waive their liability even if they are negligent.

Transcript

00:00So, if you are one of the 2 million Australians living in apartments or townhouses, there's

00:08a good chance that you do use this contract.

00:12They are promoted by an industry-picked body called the Strata Community Association, or

00:18SCA, and this contract has been long marketed as the industry's best practice and standard.

00:26And that's why a lot of Strata firms across the nation, large and small, do use them.

00:31So why then might these contracts end up leaving apartment owners worse off?

00:36So what we have learned during this investigation from apartment owners, advocates, and specialists

00:42is that this type of Strata contract have really long legal documents with a lot of

00:47fine print.

00:48And this fine print will outline stuff like commissions or declare conflict of interest

00:55from the Strata managers, but oftentimes these contracts also include terms that offer

01:01your Strata manager indemnity, even if they neglect or require the owner's corporation

01:06to pay commissions on insurance, even if your Strata manager has nothing to do with

01:11securing that insurance policy.

01:13So one senior lawyer we spoke to really described this contract as appalling, disgraceful, and

01:20unfair to consumers.

01:22Okay, so if a group, a Strata group, want to terminate the contract, how can they do that?

01:29Is it easy?

01:30Oh, it's not easy at all.

01:31It often could cost them up to tens of thousands of dollars because they have to take their

01:36Strata manager to court in order to terminate them.

01:39It's also because the contract contains clauses that require mutual agreement to terminate

01:45the contract, or you have to prove in court that your Strata manager has indeed disappeared

01:49or refused to ratify the contract.

01:51Okay, and I know...

01:52So it's pretty hard.

01:53Yeah, and I know it's different between different states, the rules that each state and territory

01:58has and within each company.

02:01But what do experts, what have they been saying to you about the issue?

02:05So the fact that different states have different regulations is actually adding up to the problem

02:09as well.

02:10That's why many experts have called for comprehensive reviews across the state, asked the governments

02:16from different states to come in to provide a more balanced contract.

02:21And one expert actually pointed out there should be specific consumer protections built

02:25into this contract, and the government could also ban these unfair terms as a way to deal

02:31with it.

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