Category Archives: Building industry project structures
Dr Drane Reveals the History of Decay in Property Development Processes Leading to Defects and Tragedies
This is a history note and an update to place an important national event within the chronicle of tragedies and misadventure in the high rise multi-apartment sector of the Australian Property Development Industry which is currently focusing so much on the Opal Tower.
A Building Regulatory Reform Summit was held in February 2018 with the objective of addressing these issues at all levels from Government, Industry and Consumer perspectives.
Here is the summit web page with the emergent White Paper that was the product of the summit. The summit was expertly put together by the Building Products Innovation Council with other industry and government support.
https://www.bpic.asn.au/submenu1491260069/BRR-Summit-2018
The summit resulted in a white paper, a cohort of national experts and an ongoing initiative to solve this problem. I was an invited speaker at the summit because of my historical, systemic emphasis on understanding defects rather than a current technical emphasis.
This was brought to light in my earlier article ‘Defects a Builder’s View’ which was presented at the Strata and Community Title in Australia for the 21st Century 2015 Conference run by Griffith University. Here is the link to that conference and my article which drew some media attention at the time.
http://www.jondrane.net/wp-content/uploads/2016/08/Griffith-2015-Strata-Conference-Programme.pdf
http://www.jondrane.net/wp-content/uploads/2016/08/Drane-2015-Defects-A-Builders-View.pdf
I also attach this image gallery which places The Opal Tower in perspective with the emerging history of these issues.
I have also appended my web article at the time which covered this event on my web site when I was with Western Sydney University. See below.
That is all for now and I watch the Opal Tower matter unfold from the safety of the arm chair. For now at least.
BTW: If you want to learn more about the history of property development and how developer’s systems have aided these issues in the lower developer tiers, come to one of my Master Classes on Commercial Property and City Development Dynamics
Dr Jonathan Drane
Apartment Defects and a New Breed of Property Developer
Book Now For Dr Drane’s Master Classes on Property Development
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.
‘Defects A Builders View’ Read More on How the Industry Got Here
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.
Book Now For Dr Drane’s Master Classes on Property Development
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:
dd2-the-special-breed-choice-article
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Key Papers and Events
Book Now For Dr Drane’s Master Classes on Property Development
The New Breed of Property Developer
‘Defects A Builders View’ Read More on How the Property Development Industry Got Here
Read More on the State of Contemporary Property Development
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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:
“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:
The Developer Bond and the Invisible Developer
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:
The Defects Dilemma: Developers and Defects, by Dr Jonathan Drane
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:
Hello world!!
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
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Key Papers and Events
Book Now For Dr Drane’s Master Classes on Property Development
The New Breed of Property Developer
‘Defects A Builders View’ Read More on How the Property Development Industry Got Here
Read More on the State of Contemporary Property Development
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