NAT: 5 Costly Mistakes Owners Make When Maintaining Their Buildings

This article stresses the importance of fixing leaks comprehensively to avoid costly damage and disruptions.

Mistake 1: Do Nothing

Too often we see the attitude of apartment owners of “I’ve bought into an apartment block and there should be nothing to do insofar as maintenance”. Do owners of houses have the same perception? I think house owners understand they will have to undertake continual maintenance on their house to ensure it stays in good condition. So why do apartment owners, in many cases, have their head in the sand that a unit complex won’t require maintenance?

In most cases, it is a lack of education when owners buy into a strata scheme. In many cases, there are issues that affect only one, two or three owners with the remaining unit owners thinking “well it’s not my issue” and “why should I have to pay for them?”. The reality is that common property issues may have to be paid for by all owners, (generally speaking and ignoring things like the benefit principle).

In my opinion, owners keep their head in the sand because when issues do arise, they don’t like putting their hand in their pocket and spending money, in many cases it’s money they don’t have. Recent purchasers of units focus on blaming the previous owners. This may be justified but the issues need to be fixed.

By doing nothing, it generally puts off the inevitable. At some point owners will be forced to undertake the works, e.g., when denied insurance, so why not just get on with it and fix the problem while it’s at its cheapest?

In nearly all cases, it is better, cheaper, and with less heartache to rip off the band aid off and fix the building’s problems. It certainly would have been for a client in the suburbs of Melbourne who has now spent millions of dollars fixing water leaks and the resultant damage that would have cost a couple of hundred thousand dollars if it was fixed when the leaks began a decade ago.

Mistake 2: Take the cheap (but often – do nothing) option

Applying the band aid mindset i.e., if in doubt, shove as much silicone around a problem as you can.

Patch up jobs are the usual fix for strata schemes when there is a problem – particularly for water leaks. I am not saying you should hit a tack in with a sledgehammer but leaks into apartments or common areas should be fully inspected, identified and triaged. We see so many cases where the patch up jobs are poor and the underlying cause hasn’t been identified and fixed. The poor strata manager is then blamed, despite doing their best to have this problem fixed. They are not trained (nor should they be) to understand if the works have been completed effectively.

In my opinion, any attempt to deal with water ingress should be signed off by someone who understands whether the “fix” has solved the problem.

Mistake 3: Not undertaking regular inspections of the property

Owners rarely see the importance of having regular inspections of a building to determine its health and to attend to any maintenance issues that arise. By having regular inspections, minor issues can be resolved, and major maintenance can be identified early.

Inspections of common property is relatively inexpensive, for example, these days drones, using lidar technology and artificial intelligence can accurately review the outside of a building to obtain accurate data and information about the state of the building from the roof to the façade. The cost can be approximately one third of traditional labour intensive methods of assessment. Combining this with visual inspections inside the property, allows for a complete overview of the property and peace of mind. From a strata manager’s point of view, this helps manage the building’s maintenance and budget.

Mistake 4: Report after Report after Report… Analysis Paralysis

Usually what I see with buildings with serious defects are a set of earlier completed reports attempting to analyse a fault – a plumber’s report, followed by another plumber’s report, followed by builder’s report, followed by expert report, followed by a different expert report – you get the picture!

Before we get to legal fees, the owners have spent over $50,000. I am not saying that reports aren’t necessary, what I am saying is that sometimes more reports saying more or less the same thing don’t help fix the problems. At some stage someone needs to scope the works and get them fixed.

You are probably thinking I am contradicting myself as my previous point was that owners should get regular inspections (and reports) as to the condition of their property. This is not the case because inspections ensure all the minor repairs and maintenance is conducted to prevent the big issues from occurring.

Many owners are fixated on taking legal action against the original builder. Whilst this is, in many cases, a valid course of action, it does not take away from the fact the building may have serious defects which need to be remediated without delay. Legal cases can take up to three years to be heard, costing hundreds of thousands of dollars, and the complexity of the cases might not return a favourable outcome. By delaying the remediation process to obtain a legal judgement, particularly with water ingress, may then create more issues and resultant damage. The delay may be more expensive than the original problem.

Example: The owners on the ground floor of a 38 lot apartment building had been forced from their units for up to 6 years while they built a case against the builder who ultimately went into liquidation, and then the builder’s subcontractors. The ground floor apartments had water ingress and a build-up of dangerous black mould. Remediating these units cost hundreds of thousands of dollars. In addition, there was the combined loss of rent and stress for the affected owners. A better solution would be to remediate the units and then form a legal case against the builder or the subcontractors.

Committees have a responsibility to their owners to fix a building’s issues as soon as possible, particularly with waterproofing or structural issues before the situation and cost becomes vastly worse.

Mistake 5: Fix it themselves

Remember the King Gee workwear advertisement from the 1980’s? The ad showed an experienced skipper warning a brash 1980’s businessman who was showing off to his clients that he may need to take two separate trips to get to his destination. The businessman responded, “don’t backchat me, I know boats!”. He then promptly jumped into the dinghy and fell straight through the dinghy into the water.

When dealing with owners corporations or body corporate committees, there is sometimes the “I know boats” person, who think they can manage the project to fix a building fault better than a professional defects remediation specialist. They may be the retired builder who stopped working 10 years ago, the lady with a builder nephew who can fix it or the busy, time-poor employed engineer who will scope, tender, and manage the remediation project whilst working 38 hours per week pro bono, but quickly gets bored, overloaded, or finds they are out-of-their depth.

At some point this approach fails and all of the work is put onto the building’s strata manager to scope the works, tender it and manage the construction through to completion. The strata manager doesn’t have the time nor the skills to undertake the work. They put together a list of problems and seek quotes from their usual list of contractors – not specialist remediation contractors. The scope is vague, the contractors may not be the right size and fit for undertaking the scope, and there is no real assessment as to the inclusions and exclusions that have been allowed for.

In many cases the wrong contractor is appointed with a poor contract that does not protect owners. The exclusions list from the contractor are extensive which allows for variations and additional costs which should not have occurred.

Conversely, when a defects remediation specialist is appointed, the following professional approach is implemented:

• Defects are scoped methodically, and the source of the issue is identified.
• A coordinated approach determines the list of four tenderers to ensure all are “Goldilocks” (not too small, not too large, just right) tenderers for that project, e.g.:
  
  • Do they have capacity to undertake the works?
  • Do they have the skills to undertake the works?
  • Do they have the want to undertake the works?
  • Are they the right size to undertake the works?
  • Have they got a track record at delivering projects at a similar size and nature?
  • Are they financially viable?

• Detailed tender documents are produced that protect owners
• Detailed tender review is conducted recommending the best contractor
• Preparation of the correct contract to ensure owners are protected against contractor variations
• Critical review of contractor claims and certification
• Critical review and negotiation of contractor variations to protect owners and ensure they are fair and reasonable
• 5% of the contract sum held in retention
• A detailed communication plan put in place to ensure all owners and residents understand what is happening and when

All this costs money though? Absolutely it costs money up front, but the money it saves far exceeds the money it costs.

Example: Building A received an insurance payout of over half a million dollars. The project was successfully completed for just over $200,000 pocketing the owners over $300,000. Building B had a contractor price a variation for $154,000, we negotiated this down to $45,000. Building C had been previously tendered at well over $400,000, we tendered it and completed the works for $240,000.

It is easy to see that by using the services of a defects remediation specialist for remedial projects saves owners time, stress and most importantly costs.

PASG Projects
E: [email protected]
P: 1300 167 796

This post appears in Strata News #746.

Read next:

• NSW: Q&A Unit owner requirement to maintain lot property
• NSW: When is an Owners Corporation not Required to Repair and Maintain Common Property?
• NAT: Strata committee tax responsibilities: Are hidden tax risks threatening owner finances?

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