Short-term operators power play
By Shane Scanlan
22 February 2019
Apartment towers are facing takeovers by short-stay apartment operators
able to turn them into quasi-hotels.
Operators are successfully harvesting owners’ corporation (OC) proxy
votes in majority-investor-owned towers – and it’s all perfectly legal.
Unlike NSW, there is no limit to the number, or total proportion, of
proxy votes that individuals can harvest in Victoria – and it looks
like the flood gates are about to open.
In the past, stories have emerged about OCs being taken over by utility
and other contractor-type vested interests. But organised
short-stay operators appear to be emboldened by the lack of regulation
Professional facilities manager and former Residents 3000 president
John Dall’Amico is involved in a draining struggle where an OC is being
swamped by representatives of a property company, which has a
short-stay apartment division and informal ties to a strata management
He said owner-occupier OC members were questioning the possible motive
behind having members on the committee with no actual obvious
connection with the building.
“They’re neither owners, renters or investors,” Mr Dall’Amico said. “I
will leave it to others to determine the motives behind their push for
control of the committee. And whether loop-holes in the law make it
possible to profit from residential buildings.”
“From my observations as a provider of facility management services it
appears there is very little that can be done given the current laws.
Most residents are first-time owners of apartments and have very little
knowledge or understanding of owners’ corporation matters. They
are perplexed and left not knowing what to do, or believe.”
In Docklands, a short-stay operator in November threatened a landlord
with a $100,000 lawsuit if he refused to pass over his OC proxy
vote. It is understood a number of similar letters were also sent
to other landlords.
A lawyer for the operator wrote to the landlord asserting the landlord
was in breach of the Residential Tenancies Act because building
management allegedly denied the lawyer’s client a right to “peacefully
enjoy their residence and access all common property in the building”.
The lawyer complained about “intimidation, physical and racial abuse”
of ethnic Chinese staff by building management.
The lawyer then suggested assignment of proxy voting rights to the
short-stay operator as a solution to the problem and asked that
irrevocable proxy rights be inserted into the lease. Suggested
amended lease wording included:
“The landlord may not revoke this appointment during the term of the
lease, including any further term/s, except in instances where the
tenant refuses to pay rent.”
“The landlord acknowledges that the tenant has entered into the renewal
of the lease at the specific rate in reliance upon the powers conferred
upon it by the preceding clause and that the tenant will suffer damages
and loss in the event it is prevented or attempts are made by the
landlord to prevent the tenant from exercising its proxy in the manner
set out above.”
Three days later, on November 30, the lawyer again wrote to the
“In not taking action, after our clients have raised their concerns
that the OC management is not allowing them to have quiet enjoyment of
their property, our client feels that he has no option but to hold you
liable as landlord. Our clients estimate that their total loss and
damages are in the range of $100,000.”
“If our clients do not receive a response from you detailing the
satisfactory steps you wish to take to immediately remedy the situation
by close of business on Monday, 3 December 2018, we have been
instructed to issue proceedings.”
At the last annual general meeting of the circa 550-unit Docklands
tower concerned, only eight people voted, leaving the OC particularly
exposed to takeover at the 2019 meeting. CBD News understands the
tower has less than 10 per cent owner occupiers.
Strata lawyer Tom Bacon said proxy farming was rife in Victoria because
the law was inadequate.
“There is little to curb this practice under the current OC legislation
in Victoria. Proxy farming is rife in the industry, and this has
allowed the rot to set in over many years as sophisticated short-stay
operators, managers, real estate agents and building caretakers have
exploited the situation,” Mr Bacon said.
“In NSW, the state government introduced sweeping legislative reforms
in 2016 to end proxy farming by permitting a person to only hold one
proxy vote at a time, made it unlawful for leases and other agreements
to include an ‘irrevocable proxy’ clause, and disqualified persons and
proxies from voting on certain matters when they had a pecuniary
interest in the outcome of the motion.”
Mr Bacon said the Victorian Government had been reviewing OC law since
2016 but secrecy surrounded its intentions.
“The rumour is that the legislation is being re-written secretly
because it’s already out of date, and because the reforms didn’t go far
enough to improve liveability for residents and owners,” Mr Bacon said.
“So, there is no cavalry coming over the horizon anytime soon. Many
high-rise buildings in Melbourne are highly exposed right now, and for
the foreseeable future.”
The government has committed to releasing an “exposure draft” of an
Owners Corporations Amendment Bill by June 30.
A spokesperson for Consumer Affairs Minister Marlene Kairouz said:
“We’re committed to working with the public to ensure the views of
stakeholders and the community are carefully considered.”
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