Monthly Archives: November 2015

Unprofessional managers are still sneaking money out of schemes

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Photograph: Allstar/Cinetext/UNITED ARTISTS

Photograph: Allstar/Cinetext/UNITED ARTISTS

I recall many strata management conferences over the past 30 years where delegates have bemoaned the fact that strata management should become more professional or be considered a profession. Well here’s an idea – stop misleading people about your charges.

Strong language I know but just last week I was asked to review a set of accounts for a simple 18-lot scheme and advise how the levies were really being spent. Of 17 line items in the income and expenditure statement, eight were for strata management services. The general ledger confirmed this. And this did not include the insurance commission paid directly by the insurers and not noted on the Certificate of Insurance or in the papers for the AGM.

Like prisoners of war tunneling for an escape and scattering their tailings thinly around the compound so as not to be caught out, strata managers have been disguising their taking by using a variety of nebulous descriptors for decades.

I have sympathy and respect for the POWs but not service providers in a position of trust seeking to be regarded as professionals. It’s inexcusable.

It’s not how societies for doctors, lawyers, accountants, engineers and financial planners would have their members behave and if strata management wants to be regarded as being among this company then the practice has to stop.

Strata managers’ dirty little secret is about to be revealed

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The world of strata management is mysterious enough to a lot of people, and the best kept secret of all does nothing to help owners understand their rights and responsibilities – the terms of the contract with the strata manager and when that contract expires.

Typically strata managers’ contracts are held by the managers, and only a few strata committee members have ever seen a copy let alone have one in their possession. Such is the hold that managers have over owners with these tactics that even experienced and confident business people serving on committees feel uneasy about asking for a copy – ‘What if the manager thinks we are unhappy and want to change providers?’. Which of course is precisely the point of withholding the document.

The date the contract ends is the strata manager’s dirty little secret. If they don’t tell the owners when it ends, it automatically ‘rolls over’ under  the terms of the same contract in use and even then it can only be ended on 3 months’ notice by a full meeting of the owners, the mailing list for which is held by the incumbent strata manager.

The days of this dirty little secret are numbered, for New South Wales at least. When the new strata laws take effect on 1 July 2016 strata managers must give owners notice in writing advising of the end of the contract and then again as the end of each rollover period approaches.

Just as we do when we receive notice of the expiry of our insurances and the end of our phone plans, these notices will cause strata committees to think hard about the value for money they are getting from their strata managers. When they ask the question ‘why should we renew with you?’ strata managers had better be ready with a good answer.

New strata laws are tightening the screws on developer appointments

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The screws on developers and strata managers have been tightened by new strata laws that will apply to buildings now being constructed in New South Wales.

From 1 July 2016 a ‘person connected with the developer’ can’t be appointed as strata manager until after 10 years from the registration of the plan.

It’s not uncommon for major developers to own or control strata management companies that are appointed to manage their buildings. They might do this to secure future income from strata management or, more sinisterly, to control what happens on site during the time that building defects are being resolved.

Income from strata management is to developers as significant as strata schemes are to the cosmos, so let’s be adults and conclude the driver here is control; control at a time when defects emerge, conflicts are unearthed and levy estimates are tested against commercial realities.

Connected persons includes relatives and employees. No surprises there but interestingly the definition also includes someone ‘engaged’ by the developer.

Strata managers are ‘engaged’ by developers all the time, sometimes formally, sometimes informally, sometimes for a fee and sometimes for a favour, the price for which is a contract with the owners corporation made when the developer has control of the voting.

Strata management contracts to favoured managers have traditionally been for terms up to three years, long enough for the managers to distance themselves from the developer and form trusted relations with the new owners. The sting for strata mangers who covet such positions is all first term contracts must now run for just one year.

The murky dynamics of this important relationship in the life of any new owners corporation just became a little clearer.

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