The official newsletter of Unit Owners Association QLD
The Cost of Good Apartment Living in Queensland 8 November 2010. It is fair to say that there are many upsides to living in a unit or apartment where an on-site manager is on hand to keep the building and grounds well maintained and clean. The convenience of putting your garbage down the chute from level ten, watching someone else emptying the lawn mower catcher on hot days and having the pool cleaned ready for that morning or afternoon swim is well worth a few extra dollars to many. But how much do apartment owners pay building managers and do they really get value for money? Written by UOAQ 2010 main account Building managers, known as caretakers in the Body Corporate and Community Management Act 1997, are part of what is known as the management rights industry. And it is an industry. Basically, it goes like this. Property developers build large apartment complexes that require onsite management due to their size and numerous facilities. Typically, one-bedroom The enforcement of new pool safety laws will apartments start at around $400K with be delayed for six months and Queensland’s penthouses over $1M. statutory land valuations will be postponed for three months in the aftermath of the The developer enters into a caretaking floods and Cyclone Yasi. and letting agreement with a management company for up to 25 years, provided for in “The State has been through a terrible time the Act.The on-site management company and now is not the time to stick rigidly to the (the prospective building manager) pays rules.” the developer often millions of dollars for the “right” to provide caretaking and letting “This is about giving people the breathing services within the complex. They are space they need to concentrate on putting required to live on-site and usually this price their lives back together.” includes an apartment.
The building manager also has the exclusive right to let apartments within the complex. While investor owners can often use an outside agent, no-one else can set up in competition to the building manager within the complex. The building manager’s salary for larger complexes starts at $200K - $300K. Along with the rental commissions, a building manager in a newer complex of say 200 apartments with 50 per cent rentals may expect to receive in excess of $500K per year in revenue, less costs. The main cost is the cost of funds to make the initial purchase of the management rights. This Brisbane Skyline may be a few hundred thousand dollars per year on the example provided, taking into account loan interest and the opportunity cost of funds provided by the management company. There are other costs too, such as staffing. Nevertheless, it can be a very profitable business indeed for shrewd building managers who are well supported by “the industry”. the new measures could cause delays as the demand for rental properties increases in the Included in the industry are specialist law aftermath of the current crisis. firms and the peak body ARAMA (Australian Resident Accommodation Managers’ The enforcement of new pool safety laws will Association) that coach building managers be delayed for six months and Queensland’s and conduct seminars as to how they can statutory land valuations will be postponed for better control and profit from “their” complex. three months in the aftermath of the floods and Cyclone Yasi. For example, unsuspecting apartment owners are sought out by the building “The State has been through a terrible time manager to put forward motions at annual and now is not the time to stick rigidly to general meetings to extend or “top up” the rules. This is about giving people the their contract every few years out to the breathing space they need to concentrate original term, up to 25 years. These motions on putting their lives back together.” are often passed by ill-informed bodies corporate. Building managers can then Under legislation introduced on 1 December on-sell their management rights for the 2010, all dwellings with a non shared pool maximum price to another prospective must have a valid pool safety certificate bebuilding manager who is able to lay his or fore a rental agreement can be entered into. her hands on the requisite $2M – $3M or It has also been confirmed by Pool Safety more. And the cycle starts again. Queensland that the delay also applies to Shared Pools provided there are units. So why is this bad news for apartment owners?
Premier announces common sense measures in aftermath of natural disasters
Under legislation introduced on 1 December The property developer pockets the millions 2010, all dwellings with a non shared pool and then sells the apartments to the public must have a valid pool safety certificate bewith the contract locked in. Once locked fore a rental agreement can be entered into. in, it is very difficult for bodies corporate to It has also been confirmed by Pool Safety terminate the contract unless the building Queensland that the delay also applies to manager is quite negligent. Shared Pools provided there are units within the complex that are rented out (whether Even then it can be a protracted and permanent or holiday let). There are fears expensive process if they decide to appeal. Included in this agreement or contract is a salary to be paid to the building manager a Unit Buying Buying Unit byBuying the body corporate (apartment owners). a Unit Well, only prospective buildingamanagers
or Townhouse
See tips inside See Inside the Page 3 May Edition
or Townhouse
Security See tips for Costs SeePage Page 33
or Townhouse
Interest On Owners 2nd insideNo/Low See tipsUnit inside BC Working Accounts Class Citizens? Page 3 See Page 4 See Page 3
MAY 2011 MARCH 2011
who can lay their hands on a lot of money can hope to manage the larger complexes in Queensland due to the price demanded by property developers and on-selling building managers.
Premier announces common sense measures in This effectively locks outof many potential aftermath good building managers who can’t stump up natural the cash to pay fordisasters these “rights”. Also, the incumbent manager has Written by UOAQbuilding 2010 main account the option of choosing when and to whom they their management Theon-sell enforcement of new poolrights. safetyThe building manager will sell to the highest laws will be delayed for six months and bidder, irrespective of theirland competency Queensland’s statutory valuationsor experience. The body under will be postponed forcorporate three months in the the Act is not allowed to unreasonably withhold aftermath of the floods and Cyclone Yasi. its consent for this transfer (sale).
“The State has been through a terrible And of and course, salaries to the time nowthese is not high the time to stick rigbuilding manager are paid by apartment idly to the rules.” owners in their body corporate levies. The largest component of levies typically is the “This is about giving people the breathing building manager’s salary. space they need to concentrate on putting their lives back together.” So, what is the answer?
Under legislation introduced on 1 DecemWell, a goodallstart has been made by the ber 2010, dwellings with a non shared Unit Owners Association of Queensland pool must have a valid pool safety cer(UOAQ) with their recent official policy tificate before a rental agreement can be and representations to government that by entered into. It has also been confirmed management rights shouldthat be the limited toalso Pool Safety Queensland delay 3 applies years. There are a number of benefits to Shared Pools provided there are that would flow suchthat a change to the units within thefrom complex are rented out legislation. (whether permanent or holiday let). First, management rights would become less expensive to buy for prospective building managers. This would allow other probably very good and well qualified people with experience in motel management and the like the opportunity to purchase these rights. Second, the initial salary set by the developer, usually at the higher end of what one might expect, could be renegotiated at the end of three years. Other aspects of the contract could also be renegotiated. Third, the body corporate would have the option of deciding to not renew the contract of a poor performing building manager at the end of the 3-year period without having to Brisbane Skyline Continued Page 6
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Frances Asks ..
Frances Ronnfeldt, a Brisbane based Body Corporate Manager hits the pavement to see just how much the general public knows about Body Corporate.
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This week’s QUESTIONWhat is a Body Corporate?
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A body corporate is Management of Residential and Commercial buildings.
A body corporate is an entity that is created to manage the shared interests of a group of properties.
A Body Corporate is a collection of registered strata titled unit owners of a complex. Who work together in conjunction with their Body Corporate Managers for the good of their collective investment (complex).
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ANSWER - A body corporate is created when land is subdivided and registered to establish a community titles scheme. The scheme can consist of a duplex, residential unit block, a high rise accommodation building, or a commercial business park. When the Lots are purchased in a community titles scheme the Owner automatically becomes a member of the body corporate.
From the Editor
by Paul Cassels
Unit Owners Association QLD
Help for Members
Members of the UOAQ are welcome to contact committee members of the association for any help on any body corporate matter.
Disclaimer
Articles contributed to this newsletter are published as a service to members and do not necessarily reflect the opinion or policy of this Association. To contact the committee of the UOAQ for assistance with a body corporate matter please e-mail help@uoaq.org.au
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UnitNews Online
Following a strong response from the April edition of Unit News Online we are introducing new ideas into the educational area for unit owners.
The take-up of advertising is positive and growing this will ensure that the success of Unit News Online and printed editions will be on track and to budget. The new website has had some problems with the PayPal account and the overall response is very positive and rewarding for the UOAQ committee. Over the coming months there will be a large variety of articles from various size schemes from duplexes to multilayered large developments. Remember letters to the editor will be answered over time please be patient with the responses.
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Security for Costs Any Body Corporate Committee who is taken to QCAT by their Caretaker/Letting Agent would be well advised to request QCAT to order ‘security for costs’ against the Caretaker/Letting Agent’s holding company. This will ensure that at the end of the action, if costs are awarded, there will be funds available to pay (at least in part) the Body Corporate costs.
CTS Management
“The concept of ‘security for costs’ is most often applicable when a corporation is a plaintiff in civil proceedings; it is geared towards the possibility of the corporate plaintiff losing the case and therefore likely having to pay the defendant’s legal costs, but then having insufficient funds to make payment. That situation is thought to be unfair on a defendant who has successfully defeated the corporate plaintiff’s claim, but who is unable to actually get its costs paid by the corporate plaintiff who, for instance, turns out to be “impecunious” or “penniless” (eg a company that is an insolvent shell or a “two dollar” company).
Committed to providing a professional and personalised Body Corporate Management service.
Therefore a defendant, generally at the start of a case, may apply to the court for an order that the corporate plaintiff provide security for costs. If such an order is granted, the corporate plaintiff must put aside a specified sum of money or provide other security (eg bank guarantee) pending resolution of the case. The corporate plaintiff will generally be barred from prosecuting the proceeding until it abides by such an order.
- Establishment of Bodies Corporate - Prompt and efficient maintenance support - Effective dispute resolution - Mediation - Consultancy work - Body corporate administration - Customised body corporate management plans
Security for costs can be order in the court’s inherent jurisdiction, but has statutory backing against a corporate plaintiff. Security for costs is rarely, in the absence of special circumstances, required against a person.”
No/Low Interest On BC Working Accounts A matter being raised by Body Corporate committees is the very low interest rates being achieved on working accounts. Research undertaken on this matter confirms that some working accounts earn NIL interest while in other cases the average annual rate has been between 1 and 2%. The banking arrangements are often determined between the bank and the Body Corporate Manager, with the underlying body corporate generally unable to influence any improvement. This is despite market rates of between 5% and 6% freely available on the open market. The degree of foregone interest can be significant where larger bank balances are involved, with one instance recently investigated where the improved interest rates will result in approx $80,000 of additional interest being generated for the body corporate.
All areas of Body Corporate Management covered, including:
Body Corporate control is with you, the Owners and the Committee! Our services include, but are not limited to: - Conducting meetings - Formulating budgets - Accountancy work - Obtaining insurance quotations and assisting with claims - Attending to correspondence - Providing guidance regarding by-law breaches
For further information contact Coralie Mott on 3211 4445 Proud member of :
Any Body Corporate executive members interested should contact the UOAQ to further investigate whether this can be made available to them.
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Quick News Management Module The owners of the building (unit owners) are not given the opportunity to decide under which management module they want to live. The BCCM Act precludes the Body Corporate from making any profit from sale of Caretaking/Letting rights. The Management Module may be either the Standard Module (SM s119) with a maximum 10 year Contract, or, the Accommodation Module (AM s117 ) with a maximum 25 year contract.
We are hostages of the agreements allowed by the BCCM act signed by the developers
Are Unit Owners Second Class Citizens? 14 APRIL 2011 An article in the Financial Review on 7 April 2011 contained the statement: “When you buy an apartment, you’re signing on as a second class citizen.” We at the Unit Owners Association of Queensland (UOAQ) decided to test this rather alarming claim by this authoritative and respected publication. We examined the Acts that are supposed to protect citizens’ rights the Legislative Standards Act 1992 and the Body Corporate and Community Management Act 1997 (BCCM Act). That Act in part states as its objectives:
*to balance the rights of individuals with the responsibility for self management....
*to encourage the tourism potential of community titles schemes without diminishing the rights and responsibilities of owners, and intending buyers...............
*to ensure that bodies corporate for community titles schemes have control of the common property and body corporate assets.........
*to provide an appropriate level of consumer protection for owners and intending buyers........
We started by looking at one of the most complained about items the assignment of the Management Module.
The module is decided by the developer (BCCM Act s21, AM s3 & SM s3). The Accommodation Module states: “the lots included in the scheme were intended to be predominantly accommodation lots”. This clause places the legislation in the realm of a persons’ intent of mind. AM 3(2)(b)(ii). Even if a Body Corporate could prove that it has been allocated the incorrect module in its Community Management Statement which is registered with the Department of Natural Resources, any 25 year caretaking service and letting contract continues to apply to the scheme. This extraordinarily long service and letting contract with service fees set by the developer gives protection and value to the caretaker but in most instances, unreasonably high fees and conditions for the unit owners who are responsible for the payment of all costs for up to 25 years and even longer if extensions are obtained. Such lengthy contracts are not heard of in any other field of industry. BCCM Act section 35 (1) states: “Common property for a community titles scheme is owned by the owners of the lots included in the scheme,…” Why cannot the body corporate sell the Caretaking and Letting rights? Because BCCM Act s113, 114 & 115 says no! A recent NSW Supreme Court Decision Community Association DP No 270180 v Arrow Asset Management Pty. Ltd. & Ors [2007] NSWSC 527 found that: Developers must not place themselves in a position of conflict or to profit from contracts entered into between the Body Corporate and Caretakers, without proper disclosure. Must not act to the detriment of the body corporate. If they do, they breach fiduciary duty and/or common law duty. On this matter the UOAQ found that the unit owners’ interests were subordinate to the developer and caretaker - indeed second class citizens.
We will continue this story over the following issues
BRISBANE - GOLD COAST - REDCLIFFE Working with owners to create happy, healthy and harmonious communities. enquiries@capitolbca.com.au | www.capitolbca.com.au | 1300 55 10 19 4
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Quick News BODY CORPORATE CASH FLOW
CTS Management
What Value to a Body Corporate is a Good Body Corporate Management Company? Do you know that body corporate managers do not have to be licensed to operate or are not regulated in any way? This means that effectively anyone can set themselves up to operate as a body corporate manager. So, what real value is a body corporate manager to a body corporate? A body corporate manager is responsible for:- issuing accurate levy notices to all owners within the required timeframe; - receipting levy payments on a daily basis; - providing accurate financial statements, including levies in arrears, as requested; - process and pay approved creditor invoices; - calling for nominations and motions within the required timeframe for the annual general meetings; - issuing compliant meeting notices (committee and general meeting); - attending meetings and compiling accurate minutes of these; - forwarding the minutes of all meetings to the unit owners and committee members within the legislative deadlines; - attending to unit owner and committee member queries i.e. being conversant with the Body Corporate & Community Management Act (BCCMA) and the Regulations; - Assisting with insurance renewals and insurance claims. If a body corporate manager has not had any formal training or education (holds a Certificate 1V in Body Corporate Management) or has had a minimum of 5 years of ‘hands on experience’ he/she should not be considered to be engaged by the body corporate. An experienced and qualified body corporate manager should ensure that your body corporate is complying with all of the relevant pieces of legislation (eg Fire, Workplace Health & Safety, BCCMA etc) and the reports etc that are being produced by him or her are precise. His/her professional approach should also enhance the relevant relationships between the committee, the caretakers, all associated contractors and the unit owners.
Invitation
Many of our bodies corporate were finding that their cash flow was being affected due to owners not paying their levies by the due date. At one of the bodies corporate that we recently became body corporate managers for, we found that the levy arrears for were getting out of control and they had trouble paying their day to day accounts due to lack of funds. Another problem we found was that the previous body corporate managers were not actively chasing the arrears from owners. We found that there was no incentive or deterrent for the owners to pay their levies by the due date and during these tough times owners were either paying their levies late or not at all. As body corporate managers we consider it a priority to ensure that our bodies corporate spending is in line with the proposed budget and that the accounts of our bodies corporate are paid in a timely manner. At the first committee meeting after we became body corporate managers we submitted the 20% discount motion, 2.5% penalty interest per month motion and the SSKB Arrears Policy motion to the committee for discussion and approval to be sent to the owners at an extraordinary general meeting to start to bring the owners arrears into line. The result is that within 3 months of the extraordinary general meeting the owner’s arrears had reduced from $45,000 to a more manageable $7,000 with several owners being placed on payment plans which will see the owners arrears paid off within 6 months. Thankfully, the body corporate was not required to take any legal action with owners. The SSKB Arrears team monitor all of our bodies corporate arrears on a daily basis to ensure that owners are sent arrears notices so that they meet their levy responsibilities. For more information about how SSKB can implement a similar system to help your body corporate contact us today. Contact Peter Cassels E pcassels@sskb.com.au P 07 5504 2000
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The Cost of Good Apartment Living in Queensland
A monthly publication with informative UOAQ activities and lifestyle articles 6 pages of colour 12 Times per year Page-turn digital edition online 1,000 emailled copies to members Call Brian Today (07) 3310 4225 or 0416 116 213 showboats10@gmail.com
Continued from Page 1 engage in expensive legal battles. While there are some very good building managers in the industry, savvy bodies corporate are rejecting motions at AGMs for extensions to the building manager’s management rights. However, a lot of buildings are locked in for many years to come, as will soon-to-be apartment owners of buildings currently being constructed all over Queensland. The present BCCM Act is bad policy enacted in relation to these lengthy contracts. The state government should give serious consideration to reviewing this aspect of the legislation so that the cost of living is more sustainable for the increasing number of Queenslanders choosing to live in apartments. Dr Stephen Thornton is a policy commentator and has lectured in public policy at The University of Queensland. He has lived in apartments for over 20 years.
yourstratamanagement.com.au COMMUNITY LIVING SOLUTIONS Reducing Costs & Increasing Value for Unit Owners
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BCATS Australia Pty Ltd is the only Accounting Practice and Registered Tax Agent that solely specializes solely in all Body Corporate Industry. SEE BELOW - FREE BULK POWER AUDIT CALL FOR DETAILS 0419 559 733 Because there is so much State and Federal Law governing Queensland Body Corporate Bulk Electricity, BCATS is offering Committee Members an “obligation free” BULK ELECTRICITY FINANCIAL AUDIT for body corporates that are currently purchasing BULK ELECTRICITY and on-supplying this electricity to all of the lots within the building. B.Bus(Acc), PNA, MNIA, GCPA, TAA, C(Dec)
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BCATS’ services also include: • • • •
Body Corporate Income Tax Returns; Body Corporate Business Activity Statements; Auditing, and Bulk Electricity on-charging – ensuring compliance with Legislation
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How’s your Property Insurance? - - -
Is your property insurance up to date? Do you have enough coverage? Will it protect you in case of an emergency, or does it need to be reviewed?
With so many terrible natural disasters have recently occured throughout the country and around the world, many are now seriously reviewing the state and extent of their property insurance. There have been many reports of properties either not being insure, or having inadequate coverage and therefore leaving owners seriously exposed with many of them now having to find funds to cover damages and loss as a result of these natural disasters.
How can QBM Help? QBM have insurance and valuation experts who can help you navigate the mine field of insurance policies to ensure you get the right policy for your property. They will help you gain adequate insurance cover and reduce the likelihood of you paying unnecessarily high premiums. Manage your insurance coverage effectively with a cost-effective valuation program and expert advice from QBM. Contact QBM today to not only get your up to date property valuation, but get the help you need to avoid the tricks and traps when it comes to having your property safely insured. With the expert team at QBM on your side, you’ll get piece of mind without it costing you the Earth.
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Remembering everything can be tough, especially with constant changes to legislation. At QBM we make it easier to stay informed and up to date. With our friendly approach and a can-do attitude, QBM is alwasy One Step Ahead. Below is a simple checklist to help identify areas where QBM can assist. Let us think of everything and, give you peace of mind. Sinking Fund Forecast Safety Risk Assessments Insurance Valuations Australian Standard Glass Inspections Balustrade and Balcony Reports Fire Seperations Reports Asbestos Reports Asbestos Management Documents
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Herd Law Herdlaw – The Body Corporate Lawyers, have been specialising in the practice of Body Corporate Law since the Body Corporate and Community Management Act 1997 became law. Herdlaw have made the conscious decision to only represent Bodies Corporate and their lot owners in their disputes. Herdlaw do not accept instructions to act for Resident Managers. Herdlaw have made this decision so that they can fight fiercely for the rights of Bodies Corporate and their lot owners especially in disputes with onsite managers without any possibility of conflict. Herdlaw were the solicitors in the 2008 Palm Springs Residences Case, which has paved the way for Bodies Corporate to terminate their caretaking agreements in circumstances where the Managers are not performing the duties to an adequate standard or are refusing to perform specified duties. Our experience with our clients since the Palm Springs Residence Case has been that on the whole managers once taken to task for their inadequate performance will remedy the breaches to avoid termination of the agreement or where they refuse to work with the committee they will have their agreements terminated. Another common outcome in disputes with onsite managers is that the parties realise that the relationship is not workable and agree to settle their dispute with an orderly sale of the Management Rights Agreements within an agreed timeframe. Herdlaw’s role is to assist the Body Corporate achieve a result where they are ensuring the best possible result for Lot Owners in the cleaning and maintaining of the Common Property, which ensures that the highest value of their investment in the scheme is achieved.
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The Final Thought Energy Costs
By Andrew McNair andrew@energyoptionsaustralia.com.au
Energy costs for the larger apartment complexes are usually one of the more significant costs. Competent committees should review this cost line in detail at least every 3 years. This can be a major job as there are extensive nuts & bolts issues to consider. Then of course the issue is over-laid with resident preferences. As any household knows; there are those family members who like the household to be lit up like a Christmas tree & others have another perspective be it motivated by cost or a desire to lower carbon emissions. The Committee may also have to take into account those residents that have stocked up with incandescent light bulbs because they do not like the colour of the light produced by fluorescent or LED lighting. ;-) Most Body Corporates will have some opportunity to make cost savings in the energy area. Even a 5% saving - given it can be a perpetual saving can be economically valuable. Usually lots of small savings can result in something quite significant & that’s why a “forensic” approach is required. In a world of foolish thoughtlessness & gratuitous waste of resources the incremental small savings approach is often dismissed because per day per resident the savings on an individual initiative basis are seen as trivial. Nevertheless if energy costs keep rising faster than general rate of inflation this eventually will get residents attention.
Resident and Committee lethargy or indifference will often mean it will be a lone person who will be pushing to go beyond the status quo. Further Committees often have little vision about what they are trying to achieve or could achieve. This often means unless pushed they will not commit dollars to get expert advice. It is important that Committees do have a longer term view about what they might like to achieve in any particular area over the longer term. This enables any initiatives to be incremental and tailored to the financial resources of the body corporate. It may also enable a Committee to move more quickly when opportunities arise. For example various grants & subsidies come & go in the energy efficiency space - so sometimes it’s important to move fast, or at least as fast as a Body Corp can go to grab hold of these opportunities when they arise.
So where to start?
Have a look at the following issues; Forensic analysis of the components of energy use and consider where savings can be made by limiting hours-on or de-powering in low use periods.
This is a big task if examined in a comprehensive & detailed manner & for various reasons it may be best to utilise outside experts. At their purest some of the considerations can be quite technical and also in some cases Australian Standards (mandatory & non mandatory) & Health & Safety issues need to be considered.
Analysis of supply arrangements; tariff selection or bulk supply
A recent case study documented in highlighted the enormous effort by a sole resident living in the Artarmon apartment block in NSW. The unit owner “door-knocked about 60 neighbours to achieve her green dream”. This resident not only had to;
Focus on pool heating, lighting, exhaust fans
Research devolope a business case Convince her fellow residents about her proposed intuitive. Investigate and apply for local authority grants that happened to be available. No doubt this resident was quite driven & happy to undertake this task; but resident lethargy often means stakeholders are keen to “eat the cake” when the result is good but provide little if any support or aid.
Quality of supply (power factor reviews)
Consider role of heat pumps for pool heating & water heating
Lighting options especially roles of LEDS
Looking for further ideas? Have a look at the Green Stata web page: www.greenstrata.com.au
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