Submission to the Inquiry into Planning Bill 2022

Since 2010 the Owners Corporation Network (ACT) (a community volunteer association) has worked tirelessly with submissions to Legislative Assembly Inquiries to help address Building Quality in the Residential Apartment Building sector. Our concerns in commenting on this Bill fall into 5 main areas.

Building Quality for RABs

Let me start by referring to Government Inquiries and subsequent submissions by OCN. The first submission was provided in 2013 relative to Government Discussion Paper – Regulation of Design and Inspection Practitioners in the Construction Industry. The second submission was provided in 2016 relative to Government Discussion Paper – Improving the ACT Building Regulatory System. The third submission was provided in 2019 relative to the Building and Construction Legislation Amendment Bill 2019. All the points we made in these submissions should be revisited by the Government at this time.

Implementing all 48 of the Government’s own Recommendations resulting from the latest Inquiry into Building Quality would be a good starting point. In particular give priority to Recommendation 3 by Establishing a Building Commissioner as an Independent Statutory Officer. Recognising possible resource constrains in the ACT’s EPSDD much could be achieved by following some of the reforms in NSW where much has been achieved in the past 2 years. Several other initiatives could be taken similar to NSW:

  1. Establish a Residential Apartments Building ACT

  2. Implement “Latent Defects Insurance” referred to as Decennial Liability Insurance

  3. Implement increased trade licensing and Developer Registration - already promised by the Government

  4. Return to Government Certifiers for more complex buildings including RABs - already promised by the Government

  5. Provide Design and Building Practitioner’s Regulation and Design Guidelines Handbook

  6. Take on board a Builder and Developer rating system to inform community purchase decisions such as ICRT (Independent Construction Rating Tool)

  7. Community Consultation for Proposed Developments

The Government has always highlighted its intent for community consultation however the OCN has often experienced the results of consultation are not always transparent. It should be reasonable to expect that if community members and associations representing the community go to significant effort to provide input to Government or often Commercial Planning Companies representing developers, then the results of these consultations are communicated to the community with debatable reasons for rejecting or accepting the community views.

Environment Sustainable New Residential Apartment Buildings

The strata sector is keen to participate in supporting ACT Government programs for a sustainable environment. We support the need for new RAB developments to include infrastructure for areas such as individual water usage metering, Electric Vehicle Charging, use of renewable energy sources such as solar power and battery storage moving away from common use hot water provision and replacement of gas provided services.

Government Support for Environment Sustainable Infrastructure Retrofitting to Existing Residential Apartment Buildings

The Government has several programs supporting individual standalone house owners to implement environmental initiatives. These same programs may be available to owners of individual units within a Residential Apartment building however they are unusable as such infrastructure usually requires implementation by the Owners Corporation. The Government needs to tailor these programs for the Owners Corporations. The submission by OCN to the Government Inquiry into Electric Vehicle Charging addresses this type of requirement.

Lease Variation Charge

This contribution focuses on the Lease Variation Charge that could apply to re-development of a block that has buildings on it, for example, demolition of an old block of residential units and replacement with a high-rise building having a considerably larger number of units.

The OCN is aware of a case where a block close to the Canberra CBD has 50 residential units on it.  A developer has provided advice to the owners corporation that the estimated market value for the purposes of re-development would be about $10.5m.  This is based on replacing the old units with a high-rise development of approximately 150 units.  However, the Lease Variation Charge, calculated using the ACT Government formula, LVC = (V1-V2) X 75%, where: V1 = After Value and V2 = Before Value, would be approximately $4.5m.  This amount would be deducted from the land value, leaving a net payment to owners of about $6m. 

The net value of only $6m is well below the current market value of the existing property, which, in the current market, would be about $17m (based on 50 units at $340,000 each).  Clearly, in this example, there isn’t satisfactory business case for re-development of the site.  However, the LVC is a substantial proportion of the estimated re-development value and in other cases could be a significant factor in determining whether there is a satisfactory business case.

The ACT Government has a policy of ‘densification’, which, amongst other things, aims to increase the number of people residing in and close to the CBD.  The OCN suggests that the Government reviews the basis for calculation of the LVC to ensure that it isn’t a significant impediment to re-development and densification objectives.  The Government might also consider giving greater prominence to the flexibility in determining the LVC, as currently provided for in Clause 334 of the Act.

The OCN (ACT) would be pleased to be interviewed to further address the ideas expressed above. 

Gary Petherbridge
President Owners Corporation Network (ACT)
Telephone 0414627080
3rd November 2022