Crackdown on strata sector will mean new penalties and offences, but Airbnbs slip net

New penalties, fresh offences and increased powers for Consumer Affairs will be introduced to crack down on bad behaviour in the Victorian strata sector, but the Allan government has stopped short of enforcing stricter rules on Airbnbs and banning insurance commissions.

Proposed legislation governing the state’s growing owners’ corporation sector will be introduced to parliament on Wednesday, alongside the public release of a long-awaited expert review.

The move by the government follows a report in The Age exposing unlawful behaviour by a manager at one of the largest strata firms in the country, involving a waterfront apartment building in Geelong.

The immediate laws set to be introduced in the first group of changes include giving unit owners struggling to pay their owners’ corporation fees a standardised right to a financial hardship payment plan, lowering the threshold for enforcement of basic rules in owners’ corporations from 75 per cent of all owners in a building back to a simple vote of the smaller appointed committee, and loosening the voting threshold for owners to sell an older building for redevelopment.

Under the changes, developers will face fines for failing to independently certify initial building maintenance schedules, while individuals who illegally stack voting blocs by breaching the statutory proxy cap will face prosecution.

The expert review, carried out by former Labor consumer affairs minister Marsha Thomson, economist Karen Chester and prominent strata lawyer David McKenzie and given to the government six months ago, made 51 recommendations.

The government in its response, obtained exclusively by The Age, supports 17 in full, three in part and 26 in principle. Three recommendations will be given further consideration while two are not supported.

Despite the expert panel’s finding that third-party broker commission-sharing and insurance kickbacks create a systemic conflict of interest that distorts manager incentives and drives up owner premiums, the government has kicked the idea of a total ban – which NSW is already exploring – down the road.

The government response says it supports the recommendation in principle but warns it needs further analysis because “a ban could potentially have strong market effects including an increase in the service fees [owners’ corporations] pay to professional managers and other market disruptions”.

The government rejected a recommendation to mandate a statewide occupancy cap of two people per bedroom for short-stay accommodation to safeguard owner-occupiers from wild behaviour associated with short-stay guests in their buildings.

Consumer Affairs Minister Paul Edbrooke, who took over the portfolio after a cabinet reshuffle in April, said a clean-up of the problem-plagued sector was necessary to give consumers confidence as the state pushes high-density housing plans.

“One in five Victorians call a strata property home – they deserve a fair go and that’s exactly what they’ll get under Labor,” he said in a statement.

The remaining aspects of the government’s response – including a proactive licensing scheme for owners’ corporation managers and greater compliance powers for Consumer Affairs Victoria – will not be introduced to parliament until next year.

On Sunday, The Age published audio of a senior Ace Body Corporate strata manager from the company’s Geelong branch openly soliciting unlawful kickbacks from a contractor, who was pitching for work on the building, without the knowledge of the owners in the building.

Ace Body Corporate Management is a subsidiary of the strata behemoth PICA Group, which has the largest market share of strata management in Australia.

The industry is largely self-regulated by the peak body Strata Community Association, which launched an investigation into the branch and the manager after being approached for comment. Consumer Affairs, which has prosecutorial powers over strata managers has not revealed whether it will pursue charges against the manager.

Advocates have long called for a strata commissioner. In its response to the expert review, the government said it would establish an owners’ corporation regulatory division within Consumer Affairs Victoria, though it noted the specialist unit was entirely subject to future funding.

Opposition consumer affairs spokesman Tim McCurdy has previously confirmed the Liberals and Nationals would consider appointing an independent strata commissioner if they win the election in November.

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