High-Density Living: Understanding the Pitfalls

More than 3.2 million Australians live in high-density housing with this figure tipped to increase by another million over the next decade.

For those Australians currently enjoying a love affair with high-density housing, the Community & Strata Titled ownership landscape is changing and it’s important to understand how it’s changing and the likely impact on unit owners.

We have seen the size and scale of new developments grow as land becomes more expensive and the developers need to increase the density of these complexes to maximise the return on their investment.

There has been a dramatic increase in the number and size of defects arising from new buildings over the past decade. A 2012 study by City Futures Research Centre found that 85% of buildings constructed since 2000 reported defects such as water ingress (outside to internal), cracks in walls (internal & external), roofing and guttering faults, tiling problems and internal leaks (bathrooms). Of the reported defects, 75% have not been rectified and in some cases, the original builder is no longer operating. It is believed that this trend has been exacerbated due to the increase in properties purchased ‘off the plan’ and the quality of workmanship suffered once the sale had been made.

There have also been quite a few examples recently where highly designed and engineered properties have sustained exaggerated losses due to the use of certain building materials, construction defects or because of non-compliance to building codes at the time of construction.

Increased regulation of Strata Schemes management is likely. The NSW parliament recently introduced strata laws that are about to make life a little harder for everyone: developers, bodies corporate and strata managers alike. Proposed changes include new accountabilities for strata managing agents, a new democratic process for the sale and renewal of strata schemes and a new process for ensuring building defects are addressed quickly. These changes have the potential to affect the level of involvement that strata managers have in the placement of insurance.

It is likely that other state jurisdictions will take the opportunity to review their strata management legislation in the not too distant future. It’s a changing landscape and one that will affect a large number of Australians.

Topics: Property Insurance