The first of July is always a significant date for law reform proposals to become effective. How many more first July’s will pass before the strata management industry wakes to find itself under a new regime for fee disclosure?
Look at any set of accounts for a strata scheme and you have to go to 5 or 6 line items at least to work out how much is actually being charged for strata management services; administration, archiving, extra charges, software fees, petty’s, postage and stationary and insurance commission (which actually doesn’t appear on the accounts – you have to know how to do the calculation to work out how much the manager is being paid for this service).
Usually the administration fee, which most lot owners would think is the whole fee for strata management, is merely between 40 and 50% of the total fees actually paid to the strata manager.
Government doesn’t like practices like this that tend to mislead consumers. Consider the plight of financial planners who will have their world turned upside down next first of July with soft dollar payments over $300 banned and the year after that when a ban on commissions on risk products inside superannuation takes effect.
On the basis of this precedent alone, you would have to bet that strata managers would lose their right to claim insurance commission, even if it is disclosed. Similarly commissions (and internal conference sponsorships) from banks and other suppliers will one day go as well.
And then, point of purchase regulation will come that will force total disclosure of all fees in a standard format table so lot owners don’t have to go hunting for the facts to work out what they are likely to pay over the course of a year.
There is a benefit off all this for strata managers.
When strata management fees must be disclosed in a compulsory table form with standard questions and answers, and worked examples of how particular fees apply, fees will become less of a purchasing consideration for owners corporations and other issues like quality and value added services will be the determining factors in the selection process. Now that will be a first of July worth celebrating.