Opinion
This is the one thing you shouldn’t miss when you buy a new apartment
The initial AGM of a new block may feel like another meeting that you could happily miss, but your new neighbours really need you to be there.
Jimmy ThomsonContributorIt’s been nearly a quarter of a century since I last attended the initial annual general meeting of a new building, so bear with me if I refer once again to my more recent venture into that arena.
For the unwary, an initial AGM can be like entering a lion’s den, inside a minefield, in a fog. However, in this case, we were lucky. The developer had almost as many votes as the owners, but he had chosen not to flex his voting muscle.
More than 2000 new apartment blocks of more than 50 units will be completed, across Australia, in the next 12 months. Scott McNaughton
That’s significant because that’s where the whole initial AGM concept often falls apart. Theoretically, owners are taking control of their new homes and their domestic destiny. In reality, the developer can turn up with enough votes to get exactly what they want and nothing that they don’t.
Recently, for instance, in a new scheme in the north of NSW a 25-year contract for management rights, supported by the developer, was approved against the wishes of the majority of owners.
There are three significant elements in an initial AGM:
- Confirming by-laws;
- Signing contracts; and
- Electing a committee.
This is the last time in the life of the strata scheme that owners will be able to adopt or change by-laws by a simple majority. After that, it will require a 75 per cent vote in favour, which has a ratchet effect – it’s too easy for a minority to block change.
When it comes to contracts, all deals negotiated with the developer theoretically end at the initial AGM and must be endorsed at the meeting if they are to continue. But resident owners and investors have had only a couple of weeks to examine them, and that’s if they even understand their terms and implications.
Don’t expect the strata manager to step in and tell you that, for instance, an embedded network could mean the cost of infrastructure that should have been paid by the developer is now covered by inflated maintenance fees to be serviced by the owners.
Until the meeting agrees to hire the strata manager, as they usually do, he or she works for the developer, not the owners.
Meanwhile, when it comes to electing the committee, these are people who barely know each other, and many of whom have never lived in strata before – let alone been to an AGM.
NSW strata commissioner John Minns told us in the Flat Chat Wrap podcast last week that he is pushing hard for the state to adopt a two-stage initial AGM so that the committee can be elected in the first instance, then go away and look at the contracts and by-laws before presenting recommendations to the phase two meeting.
Is it necessary? Aren’t there already legal protections in place? Well, yes, some. But should you really have to start your new life as a resident or investor in a new building by taking the developer to court?
Extrapolating figures from the 2022 Australasian Strata Insights report published by the UNSW City Futures Research Centre, more than 2000 new apartment blocks of more than 50 units will be completed, across Australia, in the next 12 months.
That’s four initial AGMs a week. If you are taking your investment seriously, don’t assume your co-owners will have you covered. If you don’t turn up and ask questions, you only have yourself to blame if unpalatable facts emerge after it’s too late to do much about them.
Flat Chat, Flat Chat Wrap podcast.
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