Apartment Defects and a New Breed of Property Developer

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Image from Choice Article by, Jemma Castle, ‘Apartment Building Defects, What to look out for’  ( 15 September 2016) https://www.choice.com.au/money/property/buying/articles/apartment-building-defects

This Choice article is an important piece of journalism and research, not only for its exposure of the frightening scale of apartment development in Australia but the systemic failures in the industry which make our habitable apartment developments  increasingly vulnerable to defects.

Defects have always plagued buildings even with the best developers, builders and subcontractors. The quality of buildings has traditionally and historically been policed by the architect who  designed the building and together with what was called a Clerk of Works ( a long time ago)  inspected each element on site to ensure the works were installed properly.

With the advent of ‘design and construct’ practices which gathered full force in the 1980s, the architect’s role was subordinated to the builder who took over the role of design overview and quality inspection reducing the architect’s commission to a design and ‘attendance’ role which was a much diluted form of their previous ‘full supervision’ role. The Clerk of Works also vanished and is now a museum piece. (I would love to hear from Clerk of Works who worked in this important role).

Adding to this the advent of private certification in the early 2000s, the quality of BCA outcomes (fire safety and egress put simply) meant that the overall quality of both the design and the fire safety  integrity of the building was eroded further.

Adding to this the rise of private property development in Australia and its entry into the multi-apartment sector, the advent of a lawless, unknown developer employing a design and construct builder with an architect reduced to a ‘sketch designer’ status and a questionable private certifier meant that this breed of private property developer had a license to almost do whatever they wanted.

And this is exactly what is happening in a part of the multi-apartment sector which is between 3 stories and 8 stories high ( need sprinklers above this approx.). After all the quality developers and builders of which there are many in Australia can’t all be across every site that can be developed in the emergent cityscapes like Green Square.

Access to sites in these burgeoning precincts is not always the province of large balance sheet high quality developers, but that of ‘deal men’ who can put a foot on a site, package up a concept, obtain funding and become the developer of an important habitable building.

The ‘deal men’ are invisible to the naked eye and hide behind ‘sacrificial vehicles’ which are used specifically for project ventures. This makes these developers almost untouchable. This is the new breed of property developer.

Dr Jonathan Drane

www.jondrane.net

Read this article as a pdf:

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The Outer West of Sydney: The Great Dividing Range

The Outer West of Sydney: Where is the Great Divide?

Date: 18 May 2015 ( archival re-publication)

By Dr Jonathan Drane

At a university seminar last week, a recognised city strategist ended his talk with the words” what is Sydney going to do with Parramatta?”. The question may be “ What is Parramatta going to do with Sydney”.  The new Plan for Growing Sydney DOP&E Dec 2014) features a revisionist view of the Sydney metro right out west  to the mountains (see attached). The emphasis has been influenced greatly by the considerable voting power of the ‘wild west’ and the strong and sophisticated advocacy machines of such regional centres as Parramatta and Penrith and others. Their position on the map as strategic centres highlights that this is pulling the ‘great divide’ between east and west toward the Blue Mountains. So where is the great divide between east and west of Sydney?

If you asked someone from Rose Bay where the west of Sydney starts, they might say Strathfield? If you ask a Penrith or Parramatta person they would see some humour in this. The perception of the great divide between east and west has been the subject of regional irritation by those cities in the west who are forging a new direction for the face and complexion of Sydney to the Blue Mountains. Part of the realisation of a new vision and identity for the west, should surely  start with the question “where exactly is the west of Sydney?.

Dr Jonathan Drane

Read this article as a pdf:

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The Palmer Street Story

Case Study- The Palmer St Precinct 2012

Date: 1 June 2015

By:    Dr Jonathan Drane

A study of the proliferation of buildings in the Palmer Street and Railway Precincts Townsville, Far North Queensland Australia.

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“The Evolution of our Dining Mecca’ Townsville Bulletin, 2008, June 28, Page 7   raggatt-2008-evolution-of-dining-mecca

Townsville is a regional city in Far North Queensland, Australia. It is often described by Queenslanders as ‘the capital of the north’, and enjoys a mult- sector economy which includes, government, defence, tertiary education, resources and tourism, together with one of the major ports in Australia.

In 2003 to 2007 two cityscape precincts in Townsville were subject to intense development stimulation. The Palmer St precinct on one hand was transformed into an active eat street and hotel precinct, whilst the Railway Precinct saw patchy development in the same period, although both precincts were the subject of city visions and stimulus by local authorities.

In this case study, the ensuing phenomenon of ‘prolific building growth’ in these dilapidated cityscapes is explored and explained, by what is proposed as the central force of change – ‘the property development mechanism’.

An explanatory model of the ‘property development mechanism’ is created in the setting of dilapidated cityscapes which are seen as a ‘field of activation’ for the mechanism and its actor ‘the property developer’. The reasons for the different levels of activation are explored, and the findings both support and strengthen the model, and form a basis for future exploration and development of the model.To read about the project in more detail please see Jon’s research page “The Seed in the Cityscape” on www.jondrane.net   Link to Summary Of Doctorate

Dr Jonathan Drane

www.jondrane.net

Read this article as a pdf:

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The Cinderella City

The Cinderella City: Newcastle and Honeysuckle, NSW

Date: 1 July 2015

By Dr Jonathan Drane

For regional cities with dormant cityscapes, the Honeysuckle story is an amazing reminder of the transformation of what was a disused port goods yard into a modern accommodation and restaurant precinct.

But for those who believe this fairy tale story was without its problems, one should be reminded of the fact that Newcastle was once called the ‘Cinderella City’.

Snapshot 1991 Newcastle, NSW
“In a feature article for the local daily broadsheet newspaper The Newcastle Herald, journalist Terry Smyth (1991, p16) uses the phrase ‘The Cinderella City’ to describe the plight or at least the perceived plight of Newcastle at this time. “Newcastle has a chip on its shoulder … a legacy of decades of hard knocks and of being labelled a dirty coal town.This despondent city”, he suggests “desperately wants to be noticed. Not as a mill town … and certainly not as a quaint backwater, but as a city with distinct lifestyles, problems, resources, advantages and dreams … A city with a soul.” (Stevenson 1999).

A young phd student at the time (Deborah Stevenson)  captured the political power that was  focused on the old port good yard area of Newcastle harbour and was one of the first to track its amazing transformation and the agendas at work at the time. In her later seminal paper ‘Reflections of a Great Port City’ (1999, p108) she brings to life the power of state led manifestation brought to bear in the new vision for the old port on the Honeysuckle lands. The Building Better Cities nation building programme at the time included a $100m seed fund to activate the precinct.

But money wasn’t enough as it turns out, for the precinct to actually be activated, required an understanding of not only property markets but the political and other forces at work.

Snapshot 2015 Newcastle’s Honeysuckle Precinct

Honeysuckle is a world recognised example of gentrification of a prior port historical area into a mixed use precinct which houses harbourside restaurants, where one can eat around the world whilst gargantuan vessels ply the harbour almost within reach. It houses both commercial and government uses and has a burgeoning modern apartment based population.

To reveal the most recent history of the precinct and to bring the story to life since Deborah Stevenson surveyed the shorelines of Honeysuckle, Dr Jonathan Drane completed a four year research project on dormant cityscapes across Australia with a case study on Honeysuckle.

The case study is included in his doctoral publication see publications page and includes a detailed chronology and timeline of the catalysts and forces at work to create the exciting new precinct.

Jonathan reveals that there is more to revitalising a public land release than understanding of property markets, economics and politics, but how these forces move in what he calls ‘windows of alignment’ where new buildings are proliferated in ‘spasms’.

Read Jonathan’s Case Study on Honeysuckle by going to the following link, opening the doctorate publication and going to chapter 10 ( a summary is below)

Link to UNSW Library for Published Doctorate

Honeysuckle Newcastle Cinderella City

PRD article.

Case Study Newcastle- Honeysuckle Precinct 2013

Extract from Jonathan Drane’s thesis ‘The Seed in the Cityscape”:

A study of the proliferation of buildings in the Honeysuckle Precinct Newcastle,  Australia

Newcastle is a regional city 160km north of Sydney, which has enjoyed a rich history as a major Australian port, providing outlet for coal and its processing into steel, from the Hunter Valley region. Leading up to the early 1990’s, Newcastle suffered from slow economic growth and the decline of some of its key port functions. The result was the obsolescence of large tracts of the former port foreshore area called the Honeysuckle Precinct. With the advent of the federal Building Better Cities Programme in the early 1990’s, the precinct was awarded funding support to stimulate urban renewal and development . The Honeysuckle Development Corporation was formed (and later subsumed by the Hunter Development Corporation) and acted as a catalyst agent of change through the conceptualisation of the precinct, and its implementation by land release to private parties.

The result of this ongoing stimulation over 20 years until today has seen the foreshore change and grow into a popular mixed entertainment and tourist precinct, with related hotels, apartments and restaurants. The method of stimulation of these numerous developments was predominantly by the release of obsolete land parcels to private developers, the proponents of which would be chosen based on conceptual and commercial criteria.

As with the Townsville case studies, the focus of the case study is the proliferation of buildings from obsolete settings, through development stimulation both public and private. The study aims to reveal the catalytic nature of what is termed the ‘property development mechanism’, which works in waves and at alignments of certain  forces and factors.

Dr Jonathan Drane

Read this article as a pdf:

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Is Concord the Centre of Gravity of Sydney?

Is Concord the Centre of Gravity of Sydney?

Date: First published 5 June 2015

By Dr Jonathan Drane

PWC Geospatial Model 2015- http://www.pwc.com.au/analytics/gem.html

Think tanks and seminars continue to be held to try and understand the changing face of the city and its many forms in the  Sydney Basin. This is especially topical in light of the voting power of the west and its dynamic future population projections relative to the east. One graphical model of Sydney based on a geospatial economic lens shows Concord as the ‘centre of gravity of Sydney’

The emergent ‘geo-spatial’ view of the city and other techniques, is grounded in the grinding national statistics of economy and demography.These after all are the foundation statistics of our nation at a macro level, the ABS, census, economic and industry data along with other industry data sets. The resultant analysis and charting of such data can however only ever be as good as the data itself. Whilst we still use the economic or demographic lens as our key visor for the viewing of the city, we will only see it in such terms.

The economic and demographic lens has allowed us to view the city from the stratosphere, through national statistics that were not originally designed to describe the phenomenological changes in the face of the city and its forces and drivers.

Dr Jonathan Drane

Read this article as a pdf:

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Read more.

 

 

 

The Claw Back Clause

This  an archival post. The article was posted at the time the issue arose in October 2015. New legislation has been effected since as a result of the outcry due to this developer practice.

Dr Jonathan Drane

Claw Back Clauses: Are pre-sale apartments a new stock market: East Central Project?

Date: 9 October 2015

By Dr Jonathan Drane

Are our habitable multi-dwelling apartments becoming the instruments of a quasi- stock market? The recent example of the East Central project in Surry Hills is compelling evidence to this effect:

http://www.domain.com.au/news/multiple-class-actions-brewing-against-sunset-clawback-developers-20151009-gk3ewp/
To quote:

“After an investigation by Domain into boutique Surry Hills block East Central where seven contracts were rescinded by the developer Ash Samadi and most of the units were then resold for up to 50 per cent more, it’s been revealed that at least three other new buildings in Sydney are also embroiled in similar controversy”. Domain.

Many apartment projects are created through pre-sale agreements which have what are called sunset clauses. One intention is to ensure that the developer actually hands over the keys to the new ‘real’ apartment within a reasonable period. In this case the clause which is referred to as a ‘claw back’ clause allows the developer to rescind the contract and re-sell it to the open market after a certain period.

This means that the intention may never have been to honour the actual hand over of the apartments to the ‘originating pre-sale buyer’ but to use them as a stepping stone into a new market window. This in turn resembles the mechanism of a stock market in slow motion.

Some will also remember World Square where the pre-sale contract buyers were re-selling their pre-sale contracts on the open market. In that case, this was to the buyer’s benefit however in both these cases we  are not dealing with commoditised, securitised stock market shares but with habitable apartments.

The lawyers will say to unwitting pre-sale buyers ‘read your contract and get a decent lawyer’ but there is something fundamentally wrong with this concept and the actual original intentions appear to be that the developer never really intended to honour the original undertakings, and in fact intended to on-sell on a clawback ( or least keep his/her options open)..

What  a world! For those who are this evening waking at 4am to line up with the other hundreds of unsuspecting buyers on the streets of the pre-sale offices of our city, beware the claw-back clause. You might just sleep better through the whole, long, contract period leading up to settlement on your beautiful new dream apartment. The one that gives you an almost impossible leg onto the property ladder of the Sydney apartment market.

Dr Jonathan Drane

Read this article as a pdf:

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The Literature Map: Organising your literature search

Dr Jonathan Drane

Whether you are writing a university assignment, undertaking a masters thesis or doctorate , you will be familiar with the overwhelming feeling of data overload from all the sources you will gather in the initial literature review phase. How do you make sense of these articles and papers which all have some common thread to your topic. They must have a common thread right? Because you collected the article and put it in a folder or some place. So one way of sorting all this out is to create a literature map. It works a little like your desktop on your PC.

Look at your desktop now and see how you have spread the icons over the desktop . Each icon has a meaning ( an app, a file, a note, an image etc) and you probably place similar things together. This is how a literature map works. To get started why dont you clear your desktop for now with a clear space and then start creating small one line files and saving them to the desktop. e.g. write the title of one of your books you collected e.g. ‘The Communist Manifesto’ and then on the next line type the author ‘Karl Marx and Friedrich Engels’. Now save the note to desktop. It will come up with the title and an icon on your desktop. Now do this for more of your articles/books, it will not take long.

Then start moving them around so similar  are in one place. With either windows or mac you can give these icons a different appearance or colour depending on a theme within the article or book. A theme from the Communist Manifesto is ‘oppression of the capitalist system’ . Now step back and have a look at all these and see if you have learned something.

Below is an example of a literature map used in a doctoral situation (Dr Jonathan Drane 2015)

Lit Map 2 edn1

Want to learn more about literature mapping

Read More

Need a doctoral mentor-coach. Attend a coaching workshop run by Dr Jonathan Drane . Or arrange a group- minimum 10 students.

Read more

Read this article as pdf:

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The Developer Bond and the Invisible Developer

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The Developer Bond and The Invisible Developer
Dr Jonathan Drane

The current attempts to legislate for a ‘developer bond’ to provide security to multi-apartment strata schemes is in the process of being finalised. Forums run by the Office of Fair Trading to canvass such an initiative have been met with strong resistance by the builder and developer arena. The former because they are already seeing the developer bond being passed on into their building contracts on top of the existing defects liability provision which provides some protection to the developer/client from defects arising during construction. The latter because the developers see it as a double impost which they have to fund. The end result is that it will in many cases be passed on to the increased price of the apartment.

As I observe these ruminations, I cant help but remember why this all came about. One of the emotional triggers or markers was the terrible case of the young girls who were forced to jump off their apartment balcony to escape a fire in their apartment. One girl died in this process, a great tragedy. Her story should not be in vain.

The developer bond will not necessarily solve this nor solve the problems in buildings that are built by builder/developers who operate in the apartment developments schemes that are above 3 levels and below 25meters ( need sprinklers if greater). Whilst house building is licensed, these apartments are not. This leaves the delivery in some cases to people who call themselves developers but who are not licensed nor qualified to build such developments.

To add to this, property developers who know what they are doing will always create a special purpose legal entity to run the project through. Such a vehicle may have no funds nor balance sheet and be sacrificial in nature. The originating human developer who operates through these entities is virtually invisible to the whole process. Hidden behind the legal entity they will avoid any personal link to the liability of the project providing no personal guarantees to banks by using what is called non-recourse finance.

This, in effect is the modus and era of the Invisible Developer.

How did we get to this. An invisible developer type and people having to jump to their death in a fire?

There are many aspects to this and a deep history that has led to this endemic problem. See my article The Defects Dilemma which provides an historical view of the leading events; from the rise of private property developers, to non-recourse funding, the pre-sale agreement, design and construct delivery systems and private certification.

To solve the problem relies on a deeper understanding of this sector of the industry, its history and the increased scrutiny of developer vehicles that render the developer invisible. This however this is still just a start.

Dr Jonathan Drane

Read this article in pdf:

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The Defects Dilemma: Developers and Defects, by Dr Jonathan Drane

Jon Drane-5999

A little history of private property  development and its effect on defect levels in Australia.

Defects have plagued buildings for decades if not centuries, and no more so than in the post war era of the private developer and with the emergence of the ‘design and construct’ project- the sister act of development as a private system of creation of our titled buildings.

Although many D&C projects are created with minimal defects, the practice of D&C and its evolution out of the previous Architect and Master Builder era, has a large part to play.

This paper takes us through a brief history lesson including the emergence of private property development and D&C in the post-WWII era, and the associated vulnerability of standards of construction across professions and regulatory systems. The erosion of the regulatory process, both professional and authority-based, is also revealed in the emergence of private certification and the dilemma of the slippery deal. The end product of such a system is illustrated with a ‘horror’ case example of one of its offspring.

Finally a ‘Defects Scenario Matrix’ is put forward for ways to keep a handle on defects on the D&C project based on a review of the horror case example and then a case example with a low defects regime.

Read Jonathan’s paper:

Drane 2015- Defects A Builders View

Read this blog article as pdf:

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Hello world!!

Jon Drane-5999

Welcome to my new blog and web site. It has been refined to focus on my independent research and advisory profile.

This site is designed to allow prospective clients to understand how I combine my research profile with the analysis of complex construction problems in different situations including legal cases and project situations.

My previous blog which included articles on the city dormancy and property development has been archived and key articles will be revisited here. Please contact us on info@jondrane.net if you need a particular article.

This site also caters and focuses on my research into city dormancy and urban renewal so that students are able to tap into my works. I encourage students of the built environment to continue my work in this area of city dormancy and development.

My non-fiction book collection including my books on the Camino de Santiago are briefly referred to on this web site and will be expanded in another independent web site.

Thank you for your interest in my work.

Dr Jonathan Drane