The war on strata law: Are apartment owners the housing market's ‘second-class citizens’?

Are apartment and unit owners the new ‘second-class citizens’ of the Australian housing market?

With the release of proposed strata title law reforms in NSW, it’s a question that needs to be asked. This new legislation, if passed, will for the first time enable a majority of lot owners in a strata scheme to force their neighbours to sell against their will.

Are we seeing the beginning of the strata law wars - where neighbours can now force you from your home unit?

If a block of units is old and costing too much in strata levies, currently every single owner within the apartment building must agree before the strata scheme can be demolished, or sold to a developer. However, under the new laws put forward by NSW Fair Trading minister Anthony Roberts, only a majority of 75% is required.

In what other form of residential property is your home at the mercy of your neighbours? If you own a free-standing house it’s yours for life; as long as you continue to pay the mortgage, you live in the home that you love until the day you die. (The only rare exception is where the RTA requisition land for road building, but even then you’re given plenty of notice and fair market vale for your property. And besides, it’s a government planning initiative).

This is different. These strata laws potentially set neighbour against neighbour in a fight to control your housing destiny. That’s powerful, emotive stuff. Strata is already notorious for conflict amongst residents, but this proposal could take disputes to dangerous new highs.

Apartment living has skyrocketed over the last decade and the trend is forecast to grow exponentially over coming years. Indeed, the NSW government predicts 50% of all residents will live in strata schemes by 2050. That’s amazing growth, and the surge of money and capital into apartment complexes by property investors and developers is no surprise.

But what if the effect of these laws is to create an underclass of home-ownership? “The home you have, when you may not have a home for life?”

Home ownership is a ‘sacred cow’ in Australia. Our whole culture of wealth creation is built around housing – 70% of total household wealth is held in property. So how will the market for unit and strata title apartments hold up when the core notion of housing – a secure place to live and a repository for wealth in retirement – is threatened by these laws?

I think it’s possible values for strata title property could fall. Particularly if there are insufficient safeguards or these laws are poorly implemented. And you can just see the inevitable TV news coverage: imagine the first elderly resident forcibly removed from their home to make way for the bulldozers. What a bad look. And not just for the resident, but for market confidence in strata as a class of investment asset.

I’m not suggesting that these laws don’t need reform, they clearly do. But the danger here is that by setting ‘neighbour v neighbour’, the popularity of strata living could tumble.

At the very least, substantial processes and dialogues among the lot owners will be required for any strata schemes where sale, demolition or redevelopment are being considered. At Housenet, we’ve been thinking about this for a while. Which is why we created our ‘strata pages’ feature – a free management tool for lot owners and managers. Strata schemes can create private online social networks that are a big help with:

• Communication

• Ready access to strata scheme information

• Rumours and disputes

• Managing events and maintenance

• Dialogue and relationships between lot owners

Clearly strata lot owners in NSW – and perhaps elsewhere if these reforms are adopted by other states – will have a lot to talk about in coming months and years. Let’s hope they’re implemented with care and that all lot owners get a fair outcome.

This article was originally published at Housenet. You can read the orignal article here.