Dodgy Property Developers Cutting Corners to Save Money (Apartment Tower Defects in Australia)

On Christmas Eve 2018, about 3,000 residents at the 36-storey Opal Tower apartment complex in western Sydney were evacuated after cracks were found in the foundations. Hundreds of residents have been in temporary accommodation for more than seven months while repairs are still being completed. Due to a drop in value of their apartments and a loss in rental income, the owners are seeking millions of dollars in compensation in a recently-filed class-action lawsuit.

The lawsuit claims a “breach of warranty” and that the tower was “not designed or constructed with due care and skill”.

Some of the apartments in the building cost up to $2.5 million. Larger apartments were renting out for more than $750 per week. The owners, understandably, are furious. How could a building that cost so much money be of such poor quality?

Just last month in June, residents were forced to evacuate the 10-storey Mascot Towers in the inner-south of Sydney due to rapid deterioration of cracks within a primary support beam. Under NSW law, building defects are covered under warranty for six years after completion of a development. The Mascot Towers is 10 years old, so unfortunately, the owners of the units have to foot the expensive repair bill themselves.

Stephen Goddard, spokesperson for the Owners Corporation Network (and a strata lawyer himself), spoke of the legal issues facing owners of apartments in these towers.

Michael Xylas, principal real estate agent at MGM Properties, has one of the one-bedroom units in Mascot Towers on the market for $740,000.

Mr Goddard also spoke of the ongoing implications for owners. He said,

“The building will become toxic, just like Opal, where you won't be able to sell out of it because people know of the structural defects. For many years, ever-increasing property prices have 'wallpapered' over the issue. We're now seeing owners confronted with the possibility that their investment may be lower than their outstanding mortgage.”

Speaking about other ‘toxic’ apartments in Sydney, owners of the ‘Sugarcube’ apartment development in the inner-city suburb of Erskineville, were refused access to their apartments due to concerns over toxic land underneath it.

But yet another apartment block was evacuated in Sydney late last year in the inner-eastern suburb of Zetland. It was evacuated due to extensive water damage and subsequent faults with the fire alarm system. It has now been empty for over eight months.

Brisbane apartment towers have also been in the news. Dr Louisa Carter purchased a new four-bedroom sub-penthouse in The Johnson apartment tower in inner-city Brisbane back in 2017. Just days after moving in, the roof began leaking forcing her family to move out. She said,

“In the first big storm, suddenly there was water pouring into the main bedroom. This is a state-heritage listed property — it's meant to be kept for future generations. We've got a colander for a roof pouring down through the concrete.”

Dr Carter has made a number of complaints through various channels. She first raised issues with the developer and the body corporate. She then complained to the Queensland's Building and Construction Commission (QBCC), who in turn demanded that the developer, Maxcon, fix the leak. Some works were carried out, but the body corporate’s insurance company found that there were still defects within the building.

Dr Carter said she has lost thousands of dollars after having to rent another property. She said,

“We're in limbo. We're caught in a stalemate between parties — I feel like collateral damage in a financial equation and it's just not good enough — it's my home. My issue is, as an individual unit owner, I don't have any control over the common lot — the roof — so I'm caught.”

Of course, there are many other stories about apartment tower defects throughout Australia, but there are just too many to list here. Surely, these published articles are just the tip of a very big iceberg. After reading the articles for myself, my only piece of advice is this.

Don’t buy a new apartment, especially if it’s over three stories high.

In most states, home warranty insurance is not a requirement (or even available) for new apartments over three storeys high. If you’re going to buy an apartment, buy a smaller, simpler one in a walk-up building. Too many things have been going wrong with these big buildings of late.

Unfortunately, while chasing the Australian Dream, many of these residents have found themselves in the midst of an Australian Nightmare.

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