The collapse of the Champlain Towers in Miami, Florida should arouse both sympathy and fear. Florida is the birthplace of resort-style skyscrapers that have been copied in cities around the world, including Australia.
In the post-WWII economic boom, thousands of Americans faced the prospect of a comfortable retirement for the first time in history. To escape the harsh winters in the north, many were looking for a Florida second home with condos that perfectly met their needs.
With all the conveniences of a hotel and supposedly no home maintenance, condominiums have become the preferred option for retirees. When North American cities experienced 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 the Florida lifestyle and flocked to the sunshine state by the tens of thousands.
The result was an unprecedented boom in housing construction. In 1975 there were as many homes in Florida as there were in the entire United States five years earlier. The boom was driven by developers who promised a lifestyle of sun, sand and relaxation. The reality was darker, however, as developers exploited buyers through a series of nefarious practices that threatened to implode the condominium market. The federal government had to intervene and conduct a study in 1975. Reading this report in Australia feels like marmot day. It documents misrepresentations by developers, complex sales contracts, missing guarantees, underestimated maintenance costs to increase sales, long-term exploitative management contracts and building defects. All problems in our own Strata market.
The primary solution Florida came up with was “Disclosure,” a practice familiar to anyone who has submitted an Australian housing contract that is a folder thick. Disclosure theory states that if a developer reports a specific problem to a buyer and the buyer buys anyway, then they cannot complain. The flaw with disclosure is that an exploitative, inefficient, or downright dangerous contract term doesn’t miraculously stop because it’s disclosed.
Florida has never solved the core problem of ongoing building repairs. In contrast to developer marketing, no building is maintenance-free, and with elevators, systems and equipment, a high-rise is infinitely more complex than a free-standing house. The repair must be agreed by the owners with different financial resources and purchase motives. Owners are paralyzed in this regard when the building has underlying defects. As US researcher Professor Evan McKenzie argues, ‘the entire institution of housing of common interest rests on the honorary directors, but they are unpaid, untrained, often unskilled, and almost entirely neglected by the governments whose work they often do supported. ‘ It is up to governments to ensure that buildings are flawless and built on stable, safe land, not the citizens.
Australia has an advantage over the US, namely a single layer legislation that imposes repairs on the corporation. Our advantage ends here. Construction defects are common and many buyers buy into a world of pain. With all the excitement and noise about construction defects, one fundamental point seems to have been forgotten. It can be assumed that a brand new apartment building will be free of defects. Because builders are quite capable of building flawless buildings; they do this all the time in the commercial field. In the housing sector, they don’t because ownership is shared and they got away with it. The future consequences could be our own Champlain Towers. For the global housing market, Florida is the canary on 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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