The collapse of Champlain Towers in Miami, Florida should elicit sympathy and fear in equal measure. Florida is the birthplace of resort-style high rise residential development that has been copied in cities around the world, including Australia.
In the post-World War II economic boom, thousands of Americans faced the prospect of a comfortable retirement for the first time in history. Keen to escape harsh northern winters, many sought second dwellings in Florida, with condominiums perfectly meeting their needs.
With all the facilities of a hotel and supposedly none of the maintenance of a house, condominiums became the preferred option for retirees. As northern American cities began to experience post-industrial decline, and baby boomers flew the nest, their parents often made Florida their permanent home. By the 1970s, the next generation had been seduced by Florida lifestyle, flocking to the sunshine state in their tens of thousands.
The result was an unprecedented condominium building boom. By 1975, there were as many apartments in Florida as there had been in the entire United States five years before. The boom was fuelled by developers promising a lifestyle of sun, sand and recreation. However, the reality was darker with developers exploiting purchasers through a range of nefarious practices so bad that the condominium market threatened to implode. The federal government had to step in, conducting a study in 1975. Reading this report in Australia feels like groundhog day. It chronicles misrepresentation by developers, complex sales contracts, lack of warranties, understated maintenance costs to boost sales, long term exploitative management contracts, and building defects. All problems in our own strata market.
The primary solution Florida crafted was “disclosure”, a practice familiar to anyone who has been presented with an Australian apartment contract that is a lever arch folder thick. The theory of disclosure is that if a developer tells a purchaser about a particular issue and the purchaser still buys, they cannot then complain. The flaw in disclosure is that if a contractual term is exploitative, inefficient or downright dangerous, it does not miraculously cease to be so because it was disclosed.
Florida never solved the core problem of ongoing building repair. Contrary to developer marketing, no building is maintenance-free, and with lifts, plant and equipment, a high-rise building is infinitely more complex than a freestanding house. Repair has to be agreed by collective owners with disparate financial means and motivations for purchase. Owners will be crippled in that regard if the building has underlying defects. As United States researcher Professor Evan McKenzie argues ‘the entire institution of common interest housing rests on the volunteer directors, yet they are unpaid, untrained, often unqualified, and almost entirely unsupported by the governments whose work they are often doing.’ Ensuring buildings are defect-free and built on stable, safe land, is the job of governments, not citizens.
Australia has one advantage over the US and that is uniform strata legislation that imposes obligations to repair on the body corporate. That’s where our advantage ends. Building defects are rife with many purchasers buying into a world of pain. In all the fuss and noise around building defects, a basic point seems to be forgotten. It is entirely reasonable to assume that a brand-new apartment building will be defect-free. This is because developers are perfectly capable of building defect-free buildings; they do so in the commercial sector all the time. They fail to do so in the residential sector because of split ownership, and because they have been allowed to get away with it. The future consequences could be our own Champlain Towers. For the global apartment market, Florida is the canary down the mine.
Cathy Sherry, UNSW Law and Justice, is the author of Strata Title Property Rights: Private governance of multi-owned properties.
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