It's not that Shafston University Mansions isn't a good investment. In fact, it proved to return well over an extended period.

The problem is with managed units in general in Queensland, and the problem could be readily fixed if the Office of Fair Trading did it's job; the Queensland Government cleaned out the apparent corruption; the Office of the Commissioner for Body Corporate and Community Management did its job properly for the benefit of unit owners and not for agents who are ripping off their clients; and the PAMD Act was modified to provide strict regulation against agents interfering in body corporate management for their own financial benefit.

Shafston was a great investment before Brisbane City Student Accommodation (Richard Arbon, Danny Little and John and Kerrie Shaw) took over management.  Even under BCSA's management, it has generated fair returns, though apparently less than unit owners felt entitled to expect, and apparently some unit owners suffered significant losses.

The problem with ALL managed units is that when agents breach their obligations, bodies corporate struggle to enforce their rights for the benefit of owners because the OFT don't police agent conduct properly and the OCBCCM system is a dismal failure. 

The legislation doesn't stop agents 'vote buying' and influencing voting in the body corporate improperly.  It does theoretically stop the use of bullying and threat, but in reality it doesn't because the legislation is so difficult to enforce.  If the BC takes an agent on in the courts, the agent uses clients' money to drag out proceedings and avoid accountability while the BC has to increase levies to pay legal costs.  Meanwhile, agents are able to buy support from some owners by illegal favouritism, and privacy laws prevent detection of that practice.  The favoured owners create disruption in the body corporate, imposing more cost and stress and often obstructing the enforcement of rights, thus disadvantaging the other owners.  

Lawyers advise that ultimately the OFT is the only effective recourse owners have against agents who do not honour their legal obligations, but several bodies corporate have complained about the OFT failing to act on complaints against letting agents and managers and releasing reports that contain misrepresentations improperly favouring agents and denying clients fair dealing.

There are records of unsuccessful appeals to the Minister from lot owners who suffered threat of termination of their income if they did not refrain from demanding compliance with law.  There are even reports that owners who demanded legal compliance did suffer termination of their income by way of retaliation, but, alarmingly, no action was taken to penalise the agent concerned.

The system is a farce and a disgrace!  Legislators and law enforcers in Queensland should hang their heads in shame.

Until the system is fixed, buying ANY managed unit in Queensland is a recipe for disaster.  Thankfully, Shafston unit owners can exit the letting pool and either occupy their units or let privately.  Right now, I'd say the units are a wonderful investment, as the asset value will undoubtedly soar as soon as the issues with the letting agent are resolved. What you gamble on if you buy, though, is that ultimately right will prevail.

All property investors in Queensland should unite to demand reform for the protection of investors in managed unit complexes. Write to the Minister for Fair Trading, the Office of Fair Trading, the Commissioner for Body Corporate and Community Management, the Premier, and the Attorney General demanding legislative reform and action to enforce the provisions of the PAMD Act strictly and without favour – including imposing heavy penalties for agent breaches and providing strong protections and agent-funded compensation for unit owners. 

Advertise your warnings to all investors to avoid investment in any Queensland property with a body corporate attached until there are satisfactory legislative reforms and evidence that policing authorities are doing their job properly. 

Investors need to unite to reduce investment risks. Managed units SHOULD be good investments.  Developers and sellers of managed units need to feel pain so that they also will call for reform for the protection of their buyers, and so that developers will structure initial letting and management contracts to provide fair protection for unit owners and to ensure letting agents and managers are compelled to earn their returns, and are not able to abuse their power to bully or defraud.

Right now, it appears a letting rights business is a great business to be in, because it allows agents to defraud clients without accountability.  There are doubtless many honest, diligent agents – but there are also some very bad agents who will stop at nothing to line their pockets at unit owner expense.  These bad agents profiteer for a short period, then offer their business for sale at a hugely inflated price over what they paid for it.  If they sell at the inflated price, the replacement agent cannot make a profit by honest dealing other than by imposing massive fee increases.  Owners suffer long term loss, or the new agent goes broke, giving the complex a bad reputation.

That's what almost happened at Shafston, but, fortunately, the sale of the business for over $3 million did not proceed, and the very active and competent BC committee was able to force some reforms for owner protection.  The result is that units are still providing a reasonable but not optimum return and asset values are holding better than might be expected.  If the BC ultimately prevails in its attempts to terminate BCSA, the units values are likely to rise quite quickly.  Ongoing returns, of course, depend on the quality of the replacement letting agent, but the BC has learned a valuable lesson about evaluating agents and ensuring contractual terms deliver fair protection to unit owners.  All that is needed now is for legislators to take notice of the many examples of failure of the current system, and take the appropriate steps to ensure investors interests are fairly protected against bad agents and managers.