Further Pending Changes to the Role of Building Managers in NSW – Part 2

FURTHER PENDING CHANGES TO THE ROLE OF
BUILDING MANAGERS IN NSW – PART 2

In last month’s article, I outlined some of the key issues raised in the current review by the NSW Government of the Strata Schemes Management Act 2015 and Strata Schemes Development Act 2015.

These issues included:

  1. Amending the definition of a Building Manager under the Act to more clearly distinguish the role of Building Managers from that of other contractors who engage with the Owners Corporation from time to time; and
  2. Imposing on Building Managers a higher degree of disclosure to the Owners Corporation of potential conflict of interest issues when engaging contractors and receiving referral fees etc.; and
  3. Further consultation in relation to the ongoing review of the term of Building Management Agreements (currently capped at 10 years).

Further recommendations which directly relate to Building Managers include:

  1. Building Managers be subject to a statutory duty to act in the best interests of the Owners Corporation in carrying out their duties.

               Background – Some stakeholders argued that, in addition to conflict of interest controls, Building Managers should be subject to an explicit statutory duty to act in the best interests of the Owners Corporation. For example, the Property and Stock Agents Regulation 2014 requires managing agents conducting letting to be licensed professionals subject to a fiduciary duty and an explicit duty to act in the best interest of their client.

  1. The Department of Consumer Service to consult with the strata and facilities management industries about ways to improve the expertise of Building Managers, especially in the management of defects, including the possibility of a licensing framework in the longer term.

          Background – The review panel noted that the maintenance and repair of common property is a critically important duty of the Owners Corporation, in order to ensure the ongoing safety and amenity of strata buildings throughout their life. In complex, multi-storey strata buildings, the Owners Corporation of necessity relies more on the Building Manager than in simpler buildings, for expert advice on managing defects, safety, repairs and maintenance. The lack of expertise of the Owners Corporation when dealing with issues of building defects, fire safety and maintenance has led to suggestions that overall management of maintenance and repairs should rest with an accredited or licensed Building Manager, who is subject to statutory duties to ensure the upkeep and safety of the building.

               The Facilities Management Association of Australia argued for the licensing of facilities (or building) managers and for a requirement to engage a suitably qualified Building Manager for buildings of a certain complexity. Other submissions were concerned that placing such a duty on a Building Manager would be unfair if, for example, they requested approval for repairs or upgrades but were refused by the Owners Corporation. The review considered that any proposal to delegate the obligation of the Owners Corporation to maintain and repair the common property to a Building Manager would require suitably qualified Building Managers supported by a licensing scheme and compulsory qualification requirements. Without such uniformity and oversight of qualifications, imposing such a duty could be unfair to some Building Managers who would not have the right expertise, and could risk dangerous practices and Owners Corporations placing their trust in unsuitable candidates.

              However, it was noted that at this time, there is a lack of a properly recognised qualification in the vocational educational framework that could be used to support such a scheme. Further, developing and implementing a licensing scheme would involve substantial costs which would be borne by the Government, the industry and Owners Corporations as the end consumer. The review therefore did not consider that a licensing scheme is a viable or supportable option at this time. Nevertheless, the review recognised that there is substantial support for improving the expertise of Building Managers, especially in the management of defects.

  1. Building Managers be subject to explicit statutory duties to:
    • disclose to the Owners Corporation the qualifications and experience that make them suitable for the role;
    • familiarise themselves with fire safety and building safety obligations to which the Owners Corporation is subject;
    • take all reasonable steps to ensure that the Owners Corporation complies with these obligations; and
    • promptly bring to the attention of the Owners Corporation any maintenance, repair or safety problems with the building, and provide a proposal for how these could be best addressed.

               Background – It was the opinion of the review panel that, prior to an Owners Corporation entering into Building Management Agreement, a potential Building Manager should be required to disclose to an Owners Corporation the qualifications and experience that make them suitable for the role. While such disclosure may already be common in practice, mandating it will ensure that all Owners Corporations are required to explicitly consider the qualifications of a prospective Building Manager.

  1. That a failure by a Building Manager to disclose to the Owners Corporation any commissions it has received be added to the existing grounds for termination of Building Manager Agreements under the Strata Schemes Management Act.

Current termination grounds are:

  • a failure to satisfactorily perform the duties;
  • if the caretaking fee is unfair;
  • a failure to disclose a connection to the original developer; or
  • that the terms of the Agreement are harsh, oppressive, unconscionable or unreasonable.

Background – The Discussion Paper asked whether any further grounds for termination of Building Manager Agreements should be added or if the grounds should be the same as those for strata managing agents. Submissions supported the current grounds for termination of Building Managers in section 72 of the Strata Schemes Management Act and the review recommended their retention. Given the recommendation that Building Managers be subject to the same requirement to disclose commissions and training services that applies to strata managing agents, the review recommended that the Tribunal should also be able to terminate a Building Manager’s contract on the grounds that the Building Manager has failed to make these commission disclosures or has failed to make them in good faith.

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Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice

Difference between Old System, Torrens, Company, Strata and CT in NSW

UNDERSTANDING THE DIFFERENCES BETWEEN
OLD SYSTEM, TORRENS, COMPANY, STRATA AND COMMUNITY TITLES IN NSW

There are different title systems for ownership of property in NSW. The following is a snapshot summary of the different ownership.

Old System Title

In the early years of the NSW colony, there was no system for recording land transactions. In some cases, brief particulars of a sale were written on the back of a land grant but in many cases, ownership changed hands without any evidence at all. This changed in 1802 when the Judge Advocate invited parties to record their land dealings, forming the first book of the ‘Old Register’. From then on, landowners would have to show a ‘good chain of title’ to prove their ownership to land. This was (and still is) called ‘Old System Title’.

Under Old System Title, a landowner had to retain (as evidence) the complete chain of documents that ultimately led to that person’s ownership of a property. This chain of documents would often go back over many generations.

(These days, we see very little Old System Titles in NSW.)

Torrens Title

The Torrens Title system was introduced into NSW with the commencement of the Real Property Act 1863. Torrens Title is based on the notion of ‘ownership by registration’. You register your ownership of land with NSW Land Registry Services (LRS). Essentially, if you have registered your name as the owner of land then you are deemed to be the rightful owner – despite any other claims. Your ownership is said to be “indefeasible”.

(Torrens title is the most common form of land ownership in NSW – being your traditional parcel of land or your house/land package.)

Company Title

Under Company Title, the building is owned by a company. When purchasing a unit within the building, buyers do not actually own the unit. They are effectively buying ‘shares’ in the company, which in turn allows them the right to occupy a particular unit.

You also receive a ‘Share Certificate’ rather than a title deed.

The good thing about Company Title units is that they are generally cheaper to buy and, because of the restrictions on shareholders, many company titled properties are occupied only by the owners – meaning less turnover and less risk of noise and other issues that occur with short-term rentals.

The downside with Company Title is that you do not actually own the unit, but rather you own ‘shares’ in the company.

Also, banks are more reluctant to issue loans for company titles units and interest rates are generally higher.

Renting your apartment out may not be possible (or could involve limitations) depending on each company’s constitution (which can vary significantly).

(It is my experience that Company Title works very well in certain limited situations. It is ideal for smaller complexes, where owners want control over who their neighbours may be and also don’t require bank funding to purchase their property.)

Strata Title

The strata system was invented in Australia in 1961, and has since been adopted globally.

Strata Title is ideal for ownership of larger, multi-level buildings, where ownership of each unit is separate, but no unit owner owns the physical building which comprises the units or the land on which the building sits.

The building itself and the adjoining land is referred to as ‘common property’ and includes things such as entrance ways, hallways, swimming pools, tennis courts, driveways, lifts and so on. No single unit owner will own any of these areas. All the unit owner owns is the cubic space inside each unit, other than the paint on the walls.

Common property is managed through the creation of an Owners Corporation. All of the owners of the individual units automatically become members of the Owners Corporation and have a right to participate in the decision-making of the Owners Corporation. The Owners Corporation is created as soon as the strata plan of subdivision is registered with the LRS.

The Owners Corporation is responsible for maintaining and repairing common property, taking out relevant insurances, managing the Owners Corporation finances, keeping records and administering the by-laws (e.g. parking and pets).

The Owners Corporation is financed by the levies that are raised against each of the units. Levies are usually paid every 3 months. The levies that a particular unit owner will need to pay will be determined by the ‘unit entitlement’. When the developer of the strata development first registers the strata plan of subdivision, he or she gives the entire building an ‘aggregate unit entitlement’ (e.g. 100 unit entitlement). A share of the unit aggregate is then attributed to each unit based on their individual value, which involves a consideration of unit size, location, aspect, rules attributable to the unit and so on. In most cases, the allocation of unit entitlements will need to be carried out by a qualified valuer.

The higher the unit entitlement allocation for a particular unit, the more that unit owner must pay in levies to the Owners Corporation. The unit allocation can also affect voting rights, so it is important that the allocation is done properly and fairly.

Community Title

A Community Title in NSW relates to properties with at least two lots that share a common area, such as a driveway or recreational land. Community Title is often used in developing large estates, which could include residential lots, as well as commercial and retail outlets. A good example is a gated community estate. Within the estate there may be, say, 20 houses, each separated by boundaries and each owned by different people. The owner of each house will own all of the building and all of the land on which the building is situated – like a traditional Torrens housing lot.

At the centre of the estate there may be a tennis court, swimming pool and parking area. To enter the estate, you need to pass by an electric gate, which is monitored by a security company.

In this example, each owner still owns their individual house and adjoining land, but they all share common amenities, including the security system, the entrance gate, the tennis court, the swimming pool and the parking area.

A community title scheme is created by the registration of a Community, Neighbourhood or Precinct plan and (much like a strata scheme) is managed by a body corporate consisting of all lot owners, known as the Community Association. All common areas (including all roads, recreational facilities, promenades and parklands) are referred to as Association property. Unit entitlement is based on site values, which determines unit owners’ voting rights and contributions to maintenance and insurance levies.

The management of a community title scheme can be complex and multi-tiered. Usually found in big developments and complexes, they can often span large areas of land and consist of a mix of commercial, residential and retail lots with conflicting interests. Much like in strata titles, everything is managed via Association meetings. The community scheme committee deals with day-to-day issues and general meetings are held for larger issues, which each individual lot owner may attend.

Community Title lots can be subdivided by strata titled buildings, which means that sometimes the by-laws of both the strata scheme and the community scheme apply.

All by-laws in a community title scheme are detailed in a Management Statement, which differs with each plan.

As every community scheme varies in nature, the by-laws are therefore far less standardised than strata scheme by-laws.

 

Article Written by Col Myers of Small Myers Hughes Lawyers

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Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

New Disclosure Requirements for NSW Sales and Qld BC Records that may be accessed

NEW DISCLOSURE REQUIREMENTS FOR NSW SALES

and

WHAT QLD BODY CORPORATE RECORDS CAN BE ACCESSED

 

  1. New Disclosure Requirements for NSW Sales

 

Real Estate agents in NSW should be aware of a recent change to the Property and Stock Agents Regulation 2014 in relation to agents’ material facts disclosure obligations.

 

From 1 September 2021, agents must disclose any order that is in force under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (the RAB) to prospective purchasers.

 

These orders can include a:

  • Building work rectification order – requiring the developer or builder to carry out or refrain from carrying out building work to eliminate, minimise or remediate serious defects or potential serious defects, or
  • Prohibition order – prohibiting the issuing of an occupation certificate for the apartment building, or its registration as a strata plan. The Building Commissioner may make such an order when:
  1. an expected completion notice was not given or was given less than 6 months before the application for the occupation certificate was made;
  2. an expected completion amendment notice was not given or was given less than 6 months before the application for the occupation certificate was made;
  3. a serious defect in the building exists;
  4. a building bond has not been given.
  • Stop work order – to ensure building work stops due to the likelihood of significant harm or loss to the public or occupiers, or significant damage to property.

Agents who are aware of a material fact set by the regulations, or ought to reasonably know, and fail to inform prospective purchasers (whether intended or not), face a maximum penalty of $22,000.

 

NSW Fair Trading is introducing these changes to restore confidence in the residential construction industry and to make sure that apartments being built are trustworthy. The Department will continue its compliance and enforcement role to ensure real estate agents are meeting their disclosure obligations to buyers. This will include targeted audits of agents who are selling properties where RAB orders have been issued.

 

  1. Qld Body Corporate Records that may be Accessed

 

What constitutes a “record of a body corporate” is much broader than the compulsory list of documents set out in the Queensland regulation modules, and has ramifications for the duties of a body corporate and the breadth of access allowed to an owner or prospective purchaser.

 

The Three categories

 

Consistent with the approach of department adjudicators, the Queensland body corporate legislation in effect creates three categories of records:

  1. records that must be kept;
  2. records that should be kept;
  3. records that are

 

‘Records’ are defined to include the rolls, registers and other documents kept by the body corporate under the Body Corporate and Community Management Act (Qld) 1997 and applicable regulation module. They include paper and electronic documents.

 

What records must be kept?

 

The body corporate regulation modules set out a long list of documents that a body corporate must keep, with varying requirements about the length of time each document must be kept.

 

Examples of these documents are:

  • accounting records for each financial year;
  • insurance policies;
  • orders made against or in relation to the scheme or body corporate;
  • correspondence received and sent by the body corporate;
  • minutes of committee and general meetings.

 

These are however, not the only documents that form part of the records of a body corporate.

 

What records should be kept?

 

A body corporate has a statutory duty to act reasonably in anything it does in carrying out its function given to it under the body corporate legislation and community management statement.

 

Acting reasonably, a body corporate would be required to keep:

  • additional maintenance records;
  • records relating to its obligations under workplace health and safety and fire safety legislation;
  • any other document retained by the body corporate for the purpose of discharging its functions.

 

If records are not kept that are records that a body corporate, acting reasonably, should have kept, then a department adjudicator may find that the body corporate has not acted reasonably in responding to an owner or prospective purchaser’s request to access records.

 

Records that are kept

 

There are often records that are kept by a body corporate that are beyond the scope of records required to be kept under the body corporate legislation.

 

These records also form part of the records of a body corporate and an owner or prospective purchaser may be allowed to access these records.

 

However, there are ways that a body corporate may withhold access to records under certain circumstances, and if a body corporate is unsure as to what documents constitute body corporate records or how to withhold access its records, it should seek assistance before or during the seven day turnaround time for record requests.

 

Article Written by Col Myers of Small Myers Hughes Lawyers

 

 

Liability limited by a scheme approved under Professional Standards Legislation

Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

Fixing the Lottery this is Building Defects in NSW Strata Buildings

FIXING THE LOTTERY THAT IS BUILDING DEFECTS IN NSW STRATA BUILDINGS

 

We have all heard about the appalling building defects that have occurred in a number of new strata buildings in Sydney in recent years. Complexes such as “Opal Tower” and “Mascot Towers” are shocking examples of innocent mums and dads buying their dream residence, only to find that their unit and their complex were shoddily built and their dream has turned into a financial nightmare. Karen Stiles, from the Owners Corporation Network (which represents apartment owners) has said it “beggars belief that buildings so badly built received occupation certificates which allowed developers to settle on apartments.” How was this allowed to happen?

Design and Construct Contracts

Contractual arrangements for multi-storey projects differ, but commonly developers engage a builder to undertake a design-and-construct project. This means the builder is responsible both for the development of the design and the construction of the building. Whilst the developer might initially engage architects and engineers to prepare early designs to obtain planning approvals, these consultants then become subcontractors. Once contracted, the builder will work to find efficiencies and cost savings in the development of the design and construction of the building.

Although building approvals are required, the nature of a design-and-construct project means that many aspects of the design change after the initial approval is obtained. Many certifiers approve, allow, or are not aware of, variations that have been made. The result is that changes to approved design occur frequently, at the discretion of the builder, project manager and/or contractors and without independent certification.

The Shergold Weir Report commissioned by the NSW Government found that inaccurate designs mean that certifiers can never fully ensure compliance because they then must rely on inspections and some of the most important safety elements are hidden from view and a point-in-time inspection cannot properly assess essential construction processes.

Changes Implemented

The NSW Government has supported the vast majority of the Report’s recommendations and has (or is) implementing the following major reforms across the construction industry:

  1. Appointment of an expert Building Commissioner to act as the consolidated building regulator in NSW;
  2. Putting in place new laws that require building practitioners involved in designing buildings to submit building plans to the Commissioner (so that they may be audited), declare that the plans are BCA compliant and meet other relevant requirements and provide reports explaining why that is the case for performance solutions. Builders will also have to declare that their buildings are constructed in accordance with these plans. It will be an offence to knowingly or recklessly declare non-compliant plans or fail to lodge the documents on time. Disciplinary action will be able to be taken against practitioners who improperly make these declarations. The Building Commissioner will not need to sign off on building plans;
  3. The Building Commissioner will register the building practitioners who can lawfully make a declaration that plans are compliant or make a declaration that plans accurately reflect a building’s as-constructed design. These practitioners will have to maintain the necessary skills and insurance to meet the registration requirements and will be subject to disciplinary action for professional misconduct;
  4. Ensuring that building practitioners owe a duty of care to Owners Corporations and subsequent titleholders of residential developments, as well as unsophisticated construction clients who are small businesses. This means that homeowners will have a right to pursue compensation when they suffer damage because of a building practitioner’s negligence.

From 1 July 2021, most of these changes took effect for Class 2 buildings. These are typically multi-unit, multi-storey residential buildings where people live above and below each other.

The NSW Government see Class 2 as the highest priority right now, but the NSW Government will expand the reforms to other classes of construction in the future.

Also, previous changes to the Strata Schemes Management Act relating to residential strata properties that are four or more storeys now require that:

  • Developers must lodge a building bond equal to 2% of the building contract price, before an application is made for an occupation certificate;
  • Developers must give documents to the building inspector that help with their inspection;
  • There is a means for the developer and owners to agree on the amount of the building bond to be released for repairs, if they can’t agree;
  • A debt recovery mechanism has been put in place that enables the recovery of unpaid or insufficient bonds from a developer

Conclusion

Strata building defects have resulted in enormous extra workloads for Strata Committees and Building Managers – not to mention the emotional and financial hardship caused to unit owners. David Chandler was appointed the NSW Building Commissioner in 2019 after an impressive forty year career in the Australian construction industry.

Hopefully, he is the right man to clean up all of this shoddy construction, workmanship and design in strata buildings.

Article Written by Col Myers (July 2021)

 

Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

 

 

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Termination of Residential Tenancies in NSW after the COVID-19 Moratorium

TERMINATION OF RESIDENTIAL TENANCIES IN NSW AFTER THE COVID-19 MORATORIUM

 

The temporary tenancy moratorium introduced by the NSW Government to restrict when landlords could evict residential tenants due to rental arrears as a result of COVID-19 ended on 26 March 2021.

From 27 March 2021, a six-month transitional period has begun.

NSW Fair Trading has introduced a flowchart to assist landlords and tenants to understand how the transitional measures may affect a tenancy agreement.

Step 1 – Establish if the tenant was COVID-Impacted during the moratorium period?

During the moratorium period, between April 2020-26 March 2021,

  1. Did one or more rent-paying members of the household:
    • lose their employment, income or work hours due to COVID-19, OR
    • have to stop working or substantially reduce work hours due to illness with COVID-19, another member of the household’s illness with COVID-19 or to care for a household or family member with COVID-19? AND
    • did this result in a reduction in the weekly household income (including government assistance) of at least 25%?

If so, the tenant was an ‘impacted tenant’.

  1. Did the ‘impacted tenant’ fail to pay rent or charges under their lease during the moratorium period that:
    • were payable, and
    • were not paid (either with or without the agreement of the landlord), and
    • are still owing?

If so, these are ‘arrears’.

If the above applies, the transitional measures apply.

Step 2 – Have the parties negotiated a repayment plan between themselves?

Step 2B – Use NSW Fair Trading Dispute Resolution (formal arrears repayment negotiation process)

  1. A landlord or a tenant can apply to NSW Fair Trading for assistance.
  2. NSW Fair Trading will request evidence to help parties negotiate the repayment plan.

Step 2C – Have the parties been able to agree to a repayment plan?

  1. If yes, the repayment plan documented should include:
    • total amount payable;
    • payment frequency and amount.
  2. If no, the landlord may issue a termination notice or apply to Tribunal for a termination order to end the tenancy.

A landlord cannot issue a termination notice unless:

  1. if no repayment plan is in place, they have participated in the formal arrears repayment negotiation process in good faith; OR
  2. if a repayment plan is in place, the tenant has missed more than two consecutive repayments; AND
  3. it is fair and reasonable to do so.

In deciding whether it would be fair and reasonable, the Tribunal will consider:

    • the steps taken by the landlord and tenant to negotiate a repayment plan;
    • any payments made by the tenant towards the arrears;
    • the general financial position of, and any financial hardship experienced by, the landlord or tenant;
    • the availability and affordability of reasonable alternative accommodation for the tenant; and
    • any special vulnerability of the impacted tenant.

Decision and orders are then made by NCAT and, if appropriate, the tenancy will end.

 

Article Written by Col Myers (May 2021)
Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

GET IN TOUCH

Tel:          +61 7 5552 6666

Fax:         +61 7 5528 0955

Office:      Level 2, 17 Welch Street, Southport Qld 4215

Postal:      PO Box 1876, Southport QLD 4215

 

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Changes to NSW Strata Laws

CHANGES TO NSW STRATA LAWS

 

There are now 81,717 strata schemes registered in NSW and every year this number grows by more than 1,000 across both Sydney and regional NSW. 

Minister for Better Regulation, Kevin Anderson, has stated that, with the continued surge in popularity of apartment living, the NSW Government expects over half the population of Greater Sydney to be living in strata titled apartment towers, townhouses and blocks of flats by 2040. 

The following changes to the Strata Schemes Management Act 2015 commenced on 24 February 2021: 

  1. Owners of multiple lots can appoint a single proxy – a person who owns more than one lot in a scheme may appoint a single proxy to vote on behalf of all their lots (to prevent the limitation on the number of proxies a person can hold stopping this from occurring);
  2. Proxies are still valid for adjourned meetings – a proxy that is appointed for a meeting that is adjourned is still valid for the reconvened meeting;
  3. Secret ballots – must not be disclosed as part of an inspection of a strata scheme’s records, unless ordered by the NSW Civil and Administrative Tribunal (NCAT) or a Court;
  4. Providing the by-laws to tenants – strata laws are now consistent with residential tenancies laws to clarify that a landlord must provide the strata scheme’s by-laws to a tenant before entering into a lease. 

There is a further amendment Bill before Parliament that is expected to become law in mid-2021 which will introduce the following changes:

  1. An owners corporation will be able to authorise, by way of an ordinary resolution, the installation of sustainability infrastructure on common property, such as: 
    • the installation of solar panels,
    • increasing the recovery of recycling of material,
    • reducing the consumption of water,
    • preventing pollution and greenhouse gas emissions, and (e) facilitating the use of sustainable forms of transport.

2. Any by-law or a decision by an owners corporation that would unreasonably prohibit the keeping of an animal on a lot will have no force or effect. However, the regulations may specify circumstances in which the keeping of an animal may unreasonably interfere with another occupant’s use and enjoyment of the occupant’s lot or common property (e.g. a dangerous dog). 

3. An owners corporation will need to serve a copy of any NCAT application it receives on each owner, instead of just placing a copy of the application on the noticeboard. 

4.NCAT will have the power to require a person to pay a penalty of up to $5,500.00 for breaching an order made by NCAT. 

    Article Written by Col Myers (January 2021)

     

    Liability limited by a scheme approved under Professional Standards Legislation
    Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

     

     

    GET IN TOUCH

    Tel:          +61 7 5552 6666

    Fax:         +61 7 5528 0955

    Office:      Level 2, 17 Welch Street, Southport Qld 4215

    Postal:      PO Box 1876, Southport QLD 4215

     

    OFFICE HOURS

    Open:        8:30am – 5:00pm Monday to Friday

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    Categories