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Developers working with Strata Managers

Tuesday, 20th October 2015

One of the most valuable lessons learned by successful property developers is to have a qualified and licensed strata manager working on the project from day one.

Not an add-on

It is a mistake for a developer to think that strata management is just an add-on or something that's only relevant once an owners corporation is established.  Right from the start a strata manager can offer expertise in certification, insurance and, importantly, clarifying some of the grey areas of legislative requirements.  Developing a site is a team effort.

A strata manager  can help a developer ensure a project runs smoothly and, with a good understanding of building codes and standards, reduce the risk of defect claims.

Easier approvals, bigger profit

Many local councils and lenders prefer strata schemes to less flexible company titles.  Strata titles can sell for significantly more than a comparable company title.

Town planners like the opportunities offered by strata, particularly by mixed-use buildings, that can combine retail and residential serviced apartments with professional suites, as well as more innovative industrial and warehouse solutions.

Community title projects can promise bigger returns but they're more suited to the highly experienced, larger-scale developer.  Some local councils might push for community title schemes that can see the developer fund major infrastructure such as roads and community amenities and initially provide landscaping, garbage and similiar services.

Strata schemes

Strata schemes can cover residential and commercial developments and increasingly popular mixed-use buildings.  They differ from other titles, in that the buyer or lessee buys or rents an individual lot within the scheme - apartment, townhouse, office, warehouse, shop - and then shares the ownership and access to common property.  Common property can include visitor parking, corridors, external walls, roof and garden and, in some instances, ducted air conditioning and facilities such as a pool or gym.

Before development starts

As all experienced developers know, regardless of where a site is located, local environment and development contral plans - LEPs and DCPs - must be researched before a proposal to build is submitted to the appropriate authority, which is usually the council. 

A strata plan must also be registered with the respective land titles office.

In both cases it can be critical to get the right advice from a strata manager who understands the approvals process.

Special bylaws

Each state and territory sets out standard or model bylaws for different strata schemes.  Each development can also draft its own additional bylaws.

Developers can save a lot of time, money and hassle by getting a strata expert to draft the scheme's first set of unique bylaws, particularly for mixed-use complexes. 

If development has a commercial premises or, say, a penthouse, it can be essential to add exclusive-use bylaws to assure the buyer of customer parking, storage, an outdoor dining area or restricted lift access to a top floor residence via what would otherwise be defined as common property for all-comers to use.

These decisions cannot only increase the value of individual lots, they're vital to help determine the first year's strata levies payable by all new owners and the developer on unsold lots.

Different states, different laws

State legislation varies from state to state.  Developers shouldn't believe that it can be easier to build in states or territories with few legal obligations than, say, New South Wales however, NSW has the strictest strata development regulations, especially compared to Queensland or Victoria.

Knowingly or unwittingly operating in the grey area of the law can have all sorts of pitfalls.

Again, here's where a strata manager can help interpret legislation and negotiate beneficial solutions, not only with regulators but with contractors.

Things change

New South Wales is currently in the final stages of a five-year reform of its strata act and big changes to developoer obligations are mooted.

Like building codes, strata laws also change so it's important for a developer to work with a strata adviser who's not only across the current obligations but who can anticipate the potential and real effects of new laws.

It's likely NSW will move to tightening up legislation around inspections plus liability for defects and warranties in new and refurbished strata schemes.

The developer needs to be able to ensure these changes are understood and responded to by all contractors, including the surveyor.  Again, it's where a strata manager can help.

Win/win

Working with a strata manager is a win/win for any developer.  Technically, a strata manager can only be paid or employed by an owners corporation.  The corporation is formed once 25 per cent of the lots reach settlement.

So, why would a strata manager seemingly work with a property developer for free?  It's all about reputation - the reputation of the developer and the reputation of the strata manager.

Developers are only as good as their last project.  The more smoothly it goes - the few defects, the more confident the buyers,  theless contract disputes and the less open current legislation is to interpretation and future problems - the better their reputation next time around.

For the developer, a good reputation mean better buying power, easier financing and the ability to source and work with better contractors and suppliers.  It also boosts buyer confidence and can help smooth the way with regulators.

The ame goes for the strata manager.  If developers and buyers have a positive experience, it's likely they'll stick with him or her and that's the key to building the business.

My preference is to work with developers who have pride in their work and demonstrate a higher quality of construction.

Choosing a strata manager

A strata manager with experience working with developers can advise on industry-specific issues ranging from zoning to regulations and WorkCover to provisions for exclusive use.

The peak body, Strata Community Australia has a consumer-focused fat sheet on choosing a strata manager.

Each state and territory government also has a register of licensed strata managers.

 

 

By Matthew Wrigley

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