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Apartment owners paying for defective buildings


Australia’s building industry has been under scrutiny after a series of significant defects were found in high rise buildings, including the Opal and Mascot Tower complexes in Sydney.

These incidents have focused attention on the lack of protection for owners when things go wrong, and the impact of the building boom on quality


TRACY BOWDEN, REPORTER: More than 2.3 million Australians live in apartments.

The number of people choosing high-rise living has jumped by 78 per cent in 25 years.

But what happens when your biggest investment becomes a disaster?

GEOFF HANMER, ARCHITECT: You’ve got better protection if you buy a toaster than if you buy a unit. If something does go wrong, there’s really nobody to turn to.

MAREE PETERS, MASCOT TOWERS OWNER: We have an asset worth $1.5 million that, right now, is worth nothing.

BRIAN TUCKER, MASCOT TOWERS OWNER: We’ve just hit a brick wall and I can’t see a way out of this at the moment.

TRACY BOWDEN: As the spread of residential towers has grown especially in Sydney, Melbourne and Brisbane, oversight and quality have lagged behind.

SHADY ESKANDER, OPAL TOWER OWNERS CORPORATION: Build it quick, build it fast, sell it quick and move on to the next one and the government has allowed that to happen.

Welcome home!

This is my beautiful apartment, my home in Opal Tower.

TRACY BOWDEN: That is a remarkable view!

SHADY ESKANDER: This is what we bought into.

TRACY BOWDEN: Shady Eskander finally returned to his apartment in Sydney’s west eight months after the building was evacuated.

SHADY ESKANDER: We’re excited to be home, but there’s just uncertainty with what the future holds.

JEREMY FERNANDEZ, ABC NEWSREADER: The New South Wales Government has ordered an urgent investigation into the structural integrity of the Opal Tower.

NEWS REPORTER: Residents of the crumbling Opal Tower were hoping for answers…

NEWS REPORTER: The situation inside Sydney’s cracked Opal Tower…

NEWS REPORTER: The apartment block, the Opal Tower…

TRACY BOWDEN: Christmas Eve, 2018 – an event that would shake the foundations of Australia’s construction industry. After cracking sounds were heard, all 392 apartments were evacuated.

SHADY ESKANDER: Oh, it’s been devastating. I mean, financially, it’s been huge.

There have been people in the tower who have wanted to sell and, of course, cannot sell and so, you can imagine you’re going to the bank, you’re saying to the bank, “I’d like to borrow money.”

They say “Okay, let me look at your assets. Oh, one of your assets is Opal Tower…”

PROFESSOR MARK HOFFMAN, DEAN OF ENGINEERING, UNSW: The Opal Tower was a significant event in the lifetime of the Australian construction industry.

Not a fortunate event, but certainly caused everybody to step up.

TRACY BOWDEN: Dean of Engineering at the University of New South Wales, Professor Mark Hoffman, co-authored an independent report into what went wrong at Opal – a change in designs meant a key structural element wasn’t built to standard.

MARK HOFFMAN: The beam is much weaker than it should have been and, ultimately, failed.

In another place, there was similar sorts of situation where. but one beam failed and what we found in that beam is it had a lower-strength concrete than the other beams.

TRACY BOWDEN: The Opal report, released in February, makes a series of recommendations to the New South Wales Government.

These include that all engineers that approve designs should be registered, designs are independently verified before construction starts, and that during construction, a registered engineer makes critical stage on-site checking.

Those recommendations are being considered by the government.

The Opal builder, Icon, has so far spent $29 million on repairs and allowances.

JOHN FLECKER, CEO, MULTIPLEX: It’s over half a billion dollars’ worth of work, this project, and several years of construction over about 14 separate phases.

I would say that the building industry generally in Australia is actually world-class, and I’d go as far as to say, in some circumstances, in quality and safety, that we’re world-leading in many respects.

They are just such a complex industry…

TRACY BOWDEN: Multiplex CEO, John Flecker, says the confidence crisis in the industry has sent business towards the big companies.

JOHN FLECKER: We’ve had more enquiries, but we will price work at what we think it costs to deliver the quality that’s required and if the developer doesn’t like the price we offer, we don’t do the work.

TRACY BOWDEN: But there must be some people out there doing the wrong thing?

JOHN FLECKER: There may be some bad apples, but I think it’s more a case of probably, in a circumstance where there is a lot of work in a boom situation in some states, that you just can’t spread the appropriate skills and training far enough to deliver the product that needs to be delivered.

TRACY BOWDEN: It’s a grim situation for the owners at the 10-storey Mascot Towers in Sydney’s south.

Their building is more than a decade old, so the statutory warrant period has ended.

It’s up to them to fund repair.

MAREE PETERS: It’s your home. It’s everything that you’ve worked for, that you think is safe, and that is protected.

ANDREW BURRELL, MASCOT TOWERS OWNER: I feel like it’s a black hole with a never-ending siphon of money into it and how we’re going to get out of it, is the worrying thing.

TRACY BOWDEN: In June, the building was evacuated when cracking appeared in the basement.

ANDREW BURRELL: I took early retirement with the view to using the money from Mascot Towers’ rental money to fund that until I’m 60, when I can draw down my super.

Well, it hasn’t worked out that way.

BRIAN TUCKER: Well, we did everything that I believe a responsible person would do.

We absolutely did due diligence in inspecting the books and inspecting the, doing a visual inspection of the building…

You’ve got the intersection of the path there…

TRACY BOWDEN: Apartment owner Brian Tucker is a surveyor but even his knowledge of the building industry didn’t protect him when he bought into Mascot Towers.

BRIAN TUCKER: That should all line up with this…

At the moment, we have a building that’s, if we don’t do anything, it’s worth nothing and unless we put money in to try and get some value back, we’re left with an asset that is worthless.

TRACY BOWDEN: Having just learnt that the cracks in their building are widening, owners will meet now to decide between a commercial strata loan or a multimillion-dollar levy to pay for urgent repairs.

Stage 1 of the levy would cost around $7.7 million.

MAREE PETERS: For nine months, it’s about $10,500 a month.

TRACY BOWDEN: Where will you find that?

MAREE PETERS: Out of super, out of some savings that we had that we retired on. Family will help us if we need be.

TRACY BOWDEN: Andrew Burrell and his partner, Alex Chan, can’t see how they will afford the payments.

ALEX CHAN, MASCOT TOWERS OWNER: It’s just bundled together like we’re sort of on the Titanic. We’re actually sinking together. We have no way to actually escape.

The worst comes to the worst, I think the only way we can find a way out is to declare bankruptcy.

TRACY BOWDEN: It’s probably no surprise that there’s been a drop in confidence in the high-rise residential sector, and that’s affecting prices.

TIM LAWLESS, HEAD OF RESEARCH, CORELOGIC: A couple of years ago, the market was very different. Values were still rising, in fact, quite quickly.

TRACY BOWDEN: 7.30 can reveal a significant change in the value of off-the-plan projects in Sydney and Melbourne.

TIM LAWLESS: In Sydney, about 60 per cent of off-the-plan apartments at the time of their settlement are valuing lower than the contract price.

In Melbourne, it’s closer to 50 per cent, about 53 per cent.

TRACY BOWDEN: That means that, for more buyers, the apartment is worth less on the day they settle than when they signed the contract.

Two years ago in Sydney, less than 16 per cent of off-plan properties were selling below the contract value.

Why is that happening?

TIM LAWLESS: There’s a whole lot of reasons. I mean there’s the organic factors around the fact that values have fallen over the past two years . Sydney’s down 15 per cent, Melbourne’s down 11 per cent.

But there’s also the fact that we have seen quite a significant oversupply in that high-rise sector of the marketplace.

TRACY BOWDEN: Many in the industry believe the only answer is tougher, enforced regulations.

GEOFF HANMER: The new construction will be different than construction up till Opal, if you like.

But that still leaves us with 500,000, four-storey-plus units which have been built over the last 30 years which are potentially defective.

TRACY BOWDEN: Architect, Geoff Hanmer, has been in the industry for more than 30 years, and says calls for an overhaul of regulations go back decades.

GEOFF HANMER: I just wish somebody would do something about this. We first started working on this issue in the 1990s, and since then, things haven’t got any better.

SHADY ESKANDER: You’ve got defective buildings that are coming up and what’s it going to take? Does a wall have to fall on someone and injure human life in order for them to turn around and realise that we now need to regulate our industry?

Changes need to happen.

Your life does get turned upside-down.

TRACY BOWDEN: Back at Opal Tower, Shady Eskander and his fellow residents are planning a legal class action in a bid to recoup their losses.

Do you feel safe in this building?

SHADY ESKANDER: Well, let’s be honest – you hear a little creaking, you hear a little bit of cracking, your mind starts to question.

Again, time will tell…

#suretyproperty #buildingdefects #defectiveapartments #buyerbeware

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