Financial Disaster Beckons !

Unit owners across Australia have been following the Mascot Towers drama with more than passing interest.  Last June, cracks in the building resulted in residents being forced to evacuate with just the clothes on their backs.  It was days before individuals were allowed back under escort to reclaim wallets and personal property.  Since then the situation has steadily worsened.

Initially, the 132 apartment owners were told that remedial action to make the building safe would cost somewhere between twelve and twenty million dollars.  The Owners Corporation commenced civil action to recover costs against possible causes of the damage but the residents have remained locked out and the repair estimates keep growing ever larger.  The latest estimate to fix this building runs to thirty-two million dollars.

This would be a crippling blow to many families, coming on top of the mortgage they owe for the apartment they bought in good faith, and this is compounded by job losses  because of the virus pandemic. Many of the owners contend that this is a financial disaster that goes way beyond their ability to service the loans envisaged.

Now it is proposed to call a special general meeting of owners to consider the options available, and these include selling the building or converting the apartments to affordable housing.  Mascot Towers was a prestige address and the units were sold at varying prices according to their position and outlook.  Owners would obviously lose money on their investment, but they would recover some of that outlay to enable them to make a fresh start.

Selling Mascot Towers in its present condition would attract fire sale bids.  It would appeal to risk entrepreneurs looking to do the minimum to make the structure safe in the hope  rental returns would deliver an ongoing profit. That is not a venture for the faint hearted, but it seems the only hope for apartment owners to recover a portion of their investment.

This debacle raises the question in many minds as to how widespread is the risk of similar defects appearing in other buildings and what action can be taken to shield buyers from falling into an impossible debt situation.  In the vast majority of cases the purchase of a house or an apartment is the biggest financial transaction most people undertake in their lifetime.  Mascot Towers has brought home the reality of the risks involved in that procedure.

The onus falls on the state government as the lawmaker tasked with setting in place the inspection criteria to ensure buildings are constructed according to the appropriate regulations and that adequate funds are set aside on completion to remedy any faults that may later appear.  The experience that has befallen the residents of Mascot Towers and Opel Towers leaves gaps that are yet unfilled.