Published: 18 October 2007.

Written by: Sue Williams - The Australian

MANY residential apartment buildings across the country are riven with tensions between owners, anger at the way they are being managed, frustrations over the lack of accurate information given before units werebought and disagreements over budgets.

New research on apartment owners -- from the first study ever conducted in Australia on the sector -- reveals that they are far from one homogenous group.

Instead, they usually comprise people with completely different reasons for buying, degrees of understanding and levels of satisfaction with their choice of how to live.

"The conflict potential in many buildings is huge," says the author of the work on apartment owners, Kelly Cassidy, a final-year PhD student at Griffith University on the Gold Coast.

"There are so many stakeholders involved and, unlike with many entities, they mostly have different, and competing, interests."

The study, to be released at the largest conference on strata and community title to be held in Australia, which runs next week at Griffith University, has implications for state governments, which are encouraging the growth of high-density living as a solution to urban sprawl and the housing crisis.

"For the first time, this reveals what a mixed constituency strata owners are," says Christopher Guilding, the director of the service industry research centre at the university.

The results of the research, from questioning 931 apartment owners in Queensland, are being greeted around the country with alarm.

At the University of NSW, Bill Randolph, director of the faculty of the built environment, says the study is a major breakthrough in the understanding of the sector.

"Legislators, policy-makers and managers are all simply going to have to get their heads around this if they're going to manage the sector into the future in an appropriate way," he says.

Randolph is currently planning similar research, with separate surveys of 1000 apartment owners in Sydney and Melbourne.

Cassidy's research looked at the different people who own apartments: owner-occupiers; pure investors who rent out their units long-term; investors who rent them out for tourist accommodation; and "lock-up" owners, who use them only part of the time.

She found that, in many areas, their interests were completely divergent, and often conflicting.

As far as the management of their units goes, she found that the system of a resident manager who usually buys the management rights from the developer and also operates a letting business for the building -- a growing trend across Australia -- really suits investors, but not resident owners.

The latter record low levels of satisfaction with the style of management in terms of both service and value for money.

Similarly, those two groups also diverge dramatically in the field of owner involvement in the running of their blocks, levels of understanding of how strata works and the amount of pre-purchase research they undertook.

Motivations for buying even contrasted sharply, with owner-occupiers tending to buy much more for emotional reasons and investors buying for financial returns.

Only in one area did the groups all come together: all feeling disgruntled at the accuracy of most of the information they were provided with before they bought.

"The feedback beforehand was that there are a lot of dissatisfied owners with the way their properties were being managed," says Cassidy. "The numbers of resident managers are increasing as either the bigger companies buy up the management rights and put managers in, or individuals buy them with their retirement nest eggs, with little experience and no training for that position.

"Selling off those rights is just icing on the cake for developers, and overall it's probably having a negative effect on the industry. In the US, developers aren't allowed to sell management rights. There, the owners decide who they'll take on to manage them, which would be better here for everyone."

Guilding says that, in buying the management rights, managers are really buying commission on the lettings they are going to be allowed to operate.

"So resident managers may be keen to get rid of resident owners and convert them into tenancies," he says. "That can really sour relations between the groups."

The head of the Australian Resident Accommodation Managers Association, John Anderson, says he believes the system is working well for allowners, although differences in legislation between states can hamper progress.

"It runs best when a building is all owner-occupiers or all investor-owners because then they all want the same thing," he says. "Then, you have a lot less trouble and a better chance of pleasing people because they all want to do the same thing."

Others in the strata industry, who will also be delivering papers at the conference, say the findings of the new research were perhaps inevitable. John Hood, an independent strata title hotel and resort management consultant, says with the rise in the numbers of strata apartments, the degree of potential conflict was bound to increase.

"Resident owners see them as their home, and cherish it as their domicile," he says.

"The investor owners have a different attitude to it. They see it as aninvestment and have different aspirations. It can, and does, lead to problems."

Previously, most research into strata had been conducted among developers, strata managers and building managers, often about property prices. The Queensland research, however, shows a shift in thinking among apartment owners, as a key stakeholder group in the industry.

"This is the first academic study asking owners for their input," says Cassidy. "And the results are proving disturbing."

Cassidy's research, The Strata-Title Owners' Satisfaction Analysis, will be released on the first day of the Griffith University conference, on August 22.

Reply from: Alan

4:18pm Monday, 27 August 2007

I don't see how surveying 900 apartment owners, alone (as this article suggests), can offer an in-depth study of the entire property management sector? Were any managers interviewed? What about developers and brokers? Government legislators? Solicitors? Anyone at all who is actually involved in the MR industry?



Sure - the industry has its fair share of problems to overcome, as does any industry, and I'd welcome any research that can suggest changes to improve this. However this study (from the outset at least) sounds a bit one-sided to me - I'll be interested in reading the findings in full, where can we find these?

Reply from: Kip Smith

5:28pm Monday, 17 September 2007

This researcher does not deserve any credit towards her studies for this effort. As Alan pointed out, it appears she only asked an obviously ill-informed group - unit owners - for information to base her report on. The study would hold no surprises to any resident unit manager or body corporate manager. Any experienced RUM could have given her the same information, plus a view from the resident manager's perspective, in one afternoon's interview. What needs to happen is that prospective unit owners must be made fully aware of the nature of managed unit schemes before they buy not after.

Reply from: Ian

12:05pm Tuesday, 18 September 2007

The reasons for differences between live in unit owners, investors and managers are numerous and may vary between complexes.

Firstly many unit complexes are designed for investor purposes & today have management rights assigned to them, unfortunately the local government, real estate agents do not recognize this.

The many real estates agents have little or no training about strata property and even where they have knowledge often give miss information to their clients in a hope to optimise their chance of a sale...to avoid this better training, preferably have real estate agent for strata property shoud have their licence ( after appropriate training) endorsed to allow them to sell strata property.

The local government could designate certain property types as investor only, Currently only those owners that rent out the property are charged the 20% surcharge... what does a tenant that lives permanently in a complex use differently to an owner occupier that justifies a 20% rate increase???

What they need to do is recognize that the strata property is primarily designed for investment use.. whether holiday / permanent and charge the appropriate rate to all properties in tthat complex and the rate when issued / seached by prospective purchasers would clearly indicate what the property has been built for, is to be used for.

This won't stop an owner occupiers it will make them aware of the property's designated use and possibly make them aware of the different purpose of a particular complex.

Reply from: Nick Buick

21 September 2007

Did anyone know about / attend their conference? I hadn't heard about it until 2 days after it concluded, sadly.

Agreed, residents need to be more aware, and understand the legislation and ramifications of strata-titled property - and perhaps that's where research such as this Griffith study make a start... Identifying that a lack of knowledge exists in residents in the first place. But without reading it - I wouldn't know how effectivly it does this.

I find most new buildings are sold by project managers or agents who specialise in apartments anyway - so already pretty clued-up on what Strata-Titled property entails. Despite this, expecting them to educate prospects on the good and the bad, is unlikely to be a role they'd care to play... regardless of their training.

The concearn I have designating properties 100% rental is a danger of creating slumbs. Especially as more people enter and stay in the tenant system due to the 'housing crisis' (or 'property boom', depending on which side of the rent-cheque you sit). In my opinion, Tenants generally don't have the same sence-of-ownership that Owner Occupiers have in a building. Similarly, Investors don't have the same extent of live-in experience with the building as Owner Occupiers, likely less aware of issues needing attention. Without a balance of OOs to keep the building in check through the BC committee such buildings could more-easily deteriorate into slumbs. Multiple buildings under this arrangement could form entire ghettos. And that prospect certainly wouldn't help tenants, investors OR managers.

I strongly believe an understanding and diligent manager can, themselves, make all the difference in maintaining the harmony within a building. Perhaps training in basic psychology / conflict resolution as part of the Restricted Letting License would solve 90% of the problems in the first place?

Reply from: Ian

12:22pm Saturday, 22 September 2007

Strong dilgent managers do in fact help keep the peace, I am not suggesting OO's cant live in a complex and I dont believe for a minute that the council designation of investor complex will keep out OO's however it would make them aware of possible conflicts for their needs as OO's as manager, body corporate etc try to keep standards high to maintain best returns for investors. So I dont believe that ghettos will be formed.

OO's sold in by nonqualified realestate sales people are often told things by the selling agent which are misleading at best & untrue as worst and often conflict arises from what is normal in the industry but not in the mind of the purchaser.

Then community living is different to living in a house

Perhaps training in basic psychology / conflict resolution for all parties including OO's, investor owners & all other stake holders would solve 90% of the problems in the first place? But somehow I don't believe it would work even if it were to happen!!!

Especially when the OO's or anyone investing, that matter, are told misleading/untruths then correcting these is left to the Manager there will always be conflict as they are all who are left to direct the anger & the dissapointment of buying something which is not as the purchaser thought it should be..

Reply from: Nick

12:47pm Saturday, 22 September 2007

Sorry, I see what you're saying now Ian - I thought you were calling for mandated rental-only buildings. Council notification would be a good idea... I'm assuming you see this working more for established buildings / resales?

Reply from: Ian

5:02pm Saturday, 22 September 2007

Sorry Nick first post was not so clear, GCCC already charge investor owners, be it units or ordinary houses (for long term rentals only ) on the basis this use is different to OO's with a increased general rate and the skeptic in me says as these owners usually cannot vote GCCC can increase the rate without fear of loss of office at the next election.

Look I believe you can apply this style of rate increase to particular areas, let alone just complexes new or old

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