33 sleeps. Day four. Friends no more

Late last Thursday night, in one of the last acts of the Gallagher government, Simon Corbell and Andrew Barr put their signatures to a final document. There was no accompanying media release, no fanfare. And no phone call to the parties directly affected.
Now those parties are accusing Andrew Barr of sneaky politics. And of breaking a promise. And lying.
It all dates back to a lunch on June 21 this year hosted by the Property Council, at which Barr was the guest speaker. I remember it clearly because I was the MC.
At the time Barr was well and truly on the nose with the property industry because of the hated lease variation charge. But that day he won the room over by promising to get rid of commence and completion charges for developers. These charges were also hated, because it gave the government power to fine developers who don’t start or finish projects within a certain timeframe.
I was surprised by the announcement, so much so that I asked a question of my own just to confirm in my own mind what it was Barr was promising. I, and it seems everyone in the room, left the lunch in no doubt the fees would be abolished.
Fast forward to last Thursday night, the eve of caretaker government. The document signed by Corbell and Barr put in writing there would be no fee relief for any extensions sought before the lunch. But what really made the industry’s blood boil is a nominal charge of one per cent of rates for the first four years of a development, but then a whopping 500 per cent for each subsequent year of delay.
Someone from the Property Council stumbled across the document on the weekend and erupted. The council’s Catherine Carter spent today trying to get confirmation from Barr or his office, but they didn’t return her calls. Out of frustration, she even called ALP secretary Elias Hallaj, but he also didn’t return her call.
But Carter has had it confirmed. And she’s been fielding angry calls from members all day who feel they’ve been double crossed. Some were so angry Carter actually had to warn them not to direct their abuse at poor public servants who were answering phones at the assembly.
I spoke to Barr tonight and he told me he was surprised by the reaction, and equally surprised “no-one in the industry knew anything about it.”
He points out under the laws builders have eight years to complete their project without attracting the big fee. If the project’s still not complete in that time and the developer can mount a strong case why not, the fee can be waived again.
That’s not the point for the Property Council. It believes a politician made a promise, and that same politician has now broken it. And in a way that looks very sneaky.

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8 responses to “33 sleeps. Day four. Friends no more

  1. I am becoming increasingly concerned about the honesty and competence of this Government. We don’t need surprises which contradict what we are told and what seems reasonable to expect. The property fees are just typical. Hospital waiting times, fixing wheel chair accessible taxis, disability support are other shockers.

    What seems a week or so ago a new women’s and children’s hospital was opened; now we are expected to be swayed in our voting because ACT Labor is promising to add more beds to it. Why didn’t they get the size right to begin with? Shades of the planning skills used for the GDE.

    Ms Birch seems to think putting 10 intellectually disabled people into a group of 4 houses in Harrison is a good idea – we could call it the Harrison Hostel because it seems just like the Bruce (aka John Knight) or Watson Hostels which were social failures. As the father of an intellectually disabled child I know there is no demand for this model of housing; we need small houses spread throughout the community. The last thing many people with an intellectually disability need is to live with another person with an intellectual disability; let alone another 2 or 3 of them!

    Reason enough to find another option for Government I honestly regret to say.

  2. I have looked carefully at the amending Regs following Minister Barr’s comments this morning on the breakfast program that the onerous fees do not kick in for 8 years and it is clear that the Minister is NOT correct….the onerous fees apply in year 5 not year 8…the Regs DO NOT mention 8 years at all. There is great anger in industry at the actions of the Gov’t on this matter and a strong belief that the ACT Gov’t has no understanding or empathy of how the private sector operates.

  3. 1. The increase is 600% if you consider that the rates need to be paid ontop of the EOT fees

    2. The amalgamation of rates into landtax effectively doubles the fees making it approximately 1000% when comparing it to the previous year.

  4. Dear Mr Solly, if the PCA is correct then there is no problem because developers don’t buy land simply to sit on it.

    The test might be how much has the property industry paid in these fees over the time they have been in place, if it was a small amount and thereby proof of their claim that it is unnecessary then that would be clearly demonstrable and prove as they claim that land banking is not an issue, but if this is true why the applause at the lunch you attended.

    A different question might be how much is owed by the industry under the preexisting system and how much might be foregone by the change.

    With respect to the application of this change my reading of the regulation is this, any existing covenant can be extended beyond its current term for an indefinite period but the first four years is at a nominal rate and from 5 years or more it is significant.

    Most leases have covenants with 12 month to commence and 24 months to complete. A developer with a four year completion covenant will get eight years but a developer with two years would get six years, timing is dependent on the lease.

    By way of example lets imagine that the rates for a property are $2k per year a four year extension to complete under the old system would have meant $2k for the first year $4k for the second year, $6k for the third year and $8k for the fourth year making a total of $20k.

    Under the new system the same extension of time would by 1% of the rates in this case $20 for each year of the sought extension. The first four years under the new scheme will cost a total of $80. A substantial reduction in anyone’s language.

    If a fifth year was sought the cost under both systems would be $10k for the fifth year still the difference would be $30,000 under the old system and $10,080 under the new.

    Under the new system for a modest sum a new purchaser can extend completion convents by four years so that the completion on a normal lease would not need to happen for six years, happy days for the neighbours and any undeveloped blocks around town.

  5. Punter – your analysis doesn’t make any sense. There is nothing in the regulations about 6 years or 8 years. What about all the people who are holding bills in their hands right now for hundred’s of thousands or even millions of dollars. Why are they being punished for trying to invest in the town? Why are they being punished for trying to build quality developments? How can anyone believe the politicians when the Treasurer says he’ll waive the fees and then does a complete backflip on the promise?

    • Angry you need to read what I said, but to clarify some more, the change in the regulation means that an extension which can be can be applied for any period however, the discount rate of 1% goes for 4 years if you add that to what ever the original completion covenant in the lease actually is then you get the most cost effective extension.

      The circumstances of each lease is different so each lease is assessed on its merits, as I said above if the lease when it was purchased had two years to complete and the lessee wants to purchase another 4 years then adding 4 years to the initial 2 that would give you 6 years (you get that by adding 2 and 4 together) the same applies if your initial compete covenant was 4 years you get eight years by adding 4 and 4 together. It is the effect of the regulation not in the regulation

      But to you main point who’s holding bills for thousands or millions of dollars, according to the Property Council developers in the commercial area don’t sit on land they buy it to develop it. It can’t be both an unbearable fee costing millions and not an issue because developers don’t land bank at the same time.

  6. Punter – it’s definitely an unbearable fee when you buy a block and want to invest but you can’t get tenants because the markets gone into a downturn. I know some small families who are in big trouble over this. This is what sends people to the wall

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