Sydney council aggro a reminder of why strata brawls are so fierce

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There seems to be an inverse correlation developing between the powers of government and the emotions of voters.

Last weekend’s Sydney city local government elections serves the point. The independent Clover Moore and her team belted the Liberals to win a record fourth term for her as Mayor. The main reason seems to have been a backlash at attempts by the Liberal state government to interfere in local politics. In the lead up to the election there were very acrimonious fights about the amalgamation of various councils and the right of businesses to vote in the elections, a move thought to favour the Liberals. In the end it did exactly the opposite.

The powers of local government are relatively insignificant compared to the powers of the state and federal government yet when messed with locals react angrily. There were fist fights last weekend at polling booths.

It must be something to do with territory. The closer the decisions are to home, the greater the emotional response is to the perceived violation of property rights.

When this theory is applied to the so-called ‘fourth tier’ of government, an owners corporation, it explains much about the often challenging behaviour strata committees and managers must deal with day-to-day.

With this in mind, changes to strata laws will likely achieve little in terms of reducing communal living conflict. Turf wars have been going on since the beginning of time and this is not about to change with the stroke of the Parliament’s pen.

The case for reintroducing ostracism rather than secret ballots

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The ancient Greeks used secret ballots for the purpose of ostracism, a procedure by which you could be voted out of Athens for 10 years.

It remains for us to see what use owners corporations will put secret ballots to when they are permitted under the new strata laws, beginning in NSW on 30 November 2016, but many in quarrelsome buildings would argue for the power to be used in exactly the same way. Banishing the persistent visitor car-space hog out of town for 10 years is a much better idea than issuing a by-law breach notice.

In modern times, the secret voting method has become the accepted way to elect governments to counter corruption and remain hidden from people seeking favours.

These historical vignettes tell us something about the serious matters that secrecy has addressed over the years. They also tell us something about the sad point at which our strata communities have arrived.

We have introduced secret voting not to fight crime and corruption but to opt out of direct talk on interpersonal matters and decisions about the way we share space and property.

Those responsible should be ostracised.

Discounts and other magic tricks to get levies paid on time and on budget

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ten-percent-off-1424810_1280Among the many differences between Queensland and the rest of the country is the enthusiastic use of levy discounts north of the border.

It’s a simple concept – work out your strata budget, add 10% and then offer that much as a discount for payment by the due date.

It is effectively a legal form of penalty – late payers have to pay 10% more than others and still get charged interest and costs for recovery action. The owners corporation still has the money it needs, even if in the best case scenario everyone pays on time.

We’ve had this power in NSW for decades but the concept has never really taken off here.

The power to do this has been retained in the new strata laws beginning 30 November 2016, and perhaps there is a new imperative for it to be considered in the armory of collection tactics.

The new laws are soft on levy collection. They introduce the concept of an overdue levy repayment plan and, while given at the discretion of the owners corporation, the very existence of such a thing will encourage the professional late payers to ask for the accommodation.

The main objection seems to be from strata managers who are left to explain to people why they can’t have their discounts even though they missed the due date. In this new strata world order, it might be easier for managers to take a bit of heat on discounts rather than working in other ways to collect money from late payers.

In parts where there has been oversupply of apartments, levy collections will get harder, particularly where developers get caught with unsold apartments, so the humble discount may yet have its day.

 

PS – Fun fact: when you try this, market the benefit to your owners as ‘Get $ off’ rather than ‘Save $’ – the behavioural economists say people respond better to a gain (Get $ off) than avoiding a loss (Save $). Apparently the carrot is indeed mightier than the stick.

You can get into a lot of trouble in 300 words

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As new rules about strata meetings drag us inevitably to less personal contact; we will soon have a provision for motions to be supported by explanatory notes which are not to exceed 300 words.

This is the print equivalent of speaking to a motion. It gives voice to an idea proposed as a motion for those who will vote by post, telephone or electronic means; all of which are new to strata meetings in NSW.

But there are some important differences. While a speech is fleeting, the written word lasts forever. A speech has context, and a note has none. A speech has nuance and a speech can be stopped or altered mid-course if it’s off track.

The lessons from north of the border, where this practice has prevailed for many years, is that inevitably some explanatory notes will descend into a rant. Some will inflame and incite and, most damaging of all, some will provoke a written response that entrenches opposing positions.

In fact the Australian Financial Review notes that investors are on the lookout for signs of disorder in meeting papers and minutes. It could be that eager sellers might find themselves losing a sale because of some passive-aggressive sniping in their explanatory notes.

Explanatory notes will throw up special challenges to strata managers; they’ll be dammed if they publish and dammed if they don’t. Publishing defamatory material can make you guilty of the defamation as if you made the statement yourself.

Everything comes at a price. The price of more ways to participate in meetings is the explanatory note. Let’s see if it’s worth it.

P.S. This post is a safe 299 words, counting the title, in case my more mischievous readers are looking for a laugh.

Why we will need to manage tenants carefully

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The time for complaining about the new laws is over and the time for implementation is upon us. So let me resist the temptation to slam the new laws about tenant participation, other than to say they will offend tenants and create more work for owners and managers for little or no return.

It would be a shame if these laws, that allow tenants to have a representative and then exclude them from just about every decision that matters, were to sour relations between tenants and owners. Informed and engaged tenants are important for good strata management.

When it comes to safety, animals, parking, and noise you want to know as much about tenants as you can, including their names and the property manager.

The new tenant laws will discourage owners and managers from recording these details. The need to hold expensive meetings will not be triggered if less than 50% of lots are let and tenancy notices are not recorded with the strata manager.

Bad laws encourage bad practice and we will have to work hard to rise above this when it comes to dealings with tenants.

Was you father authoritarian? – It might be the reason you’re not ready for the new Act

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I’m a procrastinator. I’m such a procrastinator I read articles about procrastination rather than doing things. My to do list might not be as short as I’d like but at least I’ve learnt about my condition.

One fifth of all adults and one half of all student are procrastinators (Rozental, 2014). I’m surprised the figure’s that low for adults and not higher for students.

My favourite theory about procrastination is the link between women procrastinators and their authoritarian fathers that valued obedience and weren’t particularly warm (Timothy Pyshl PhD).

Whatever the cause of procrastination, as I have moved about the offices of strata managers in the last two weeks discussing new laws that begin 30 November 2016, I’ve seen a fair bit of it in relation to the New Act.

Procrastinators are experts at finding reasons to justify inactivity. There are a few discernible themes floating around the strata industry at present.

Some managers are saying it’s not certain when the Act will begin. I get the cynicism, given the delays, but make no mistake – 30 November 2016 is kick off.

Some are saying that industry bodies will have their back. I don’t think that’s right, nor is it the role of industry bodies to spoon feed you on your internal business practices and systems.

Some managers are saying it’s too early to get ready because the regulations aren’t finalised. It would be good if they were finalised but the drafts have long been published and there’s plenty to do that’s not dependent on this fine detail.

There are, by my calculations, 43 new forms and precedents strata managers will need to do their job in three and a half months.

My suggestion is this – break it down and take baby steps, but take them soon.

Strata managers’ lurks and perks to be disclosed

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If knowledge is power, then strata committees in their dealings with their strata managers are about to get powerful, or at least empowered.

New strata laws for NSW, beginning 30 November 2016, force strata managers to give more information to strata committees and owners than ever before about their work as managers, but there are just three things that count:

  1. The strata manager must notify the strata committee three months before the end of their agreement. This will stop the infamous ‘roll over’ where strata managers continue their service without anyone really noticing the agreed term has expired. Unsatisfied committees will shop around.
  2. The estimated amount or value of the strata manager’s insurance commission must be disclosed at each general meeting. In large buildings the insurance commission can equal the management fee and many owners will not know this. Owners will get that this keeps overall management costs down but they won’t like being surprised by the amount.
  3. Gifts and training services must be disclosed annually.

Let’s be clear, gifts and training disclosure is not targeting the odd bottle of scotch or tickets to the football. What the government’s trying to flush out are large cash payments, some of which add up to $20,000 or more, from banks, software companies and lawyers to strata managers for their ‘annual conference’ or the year’s ‘staff training program’ in return for directing owners corporation business their way. Pharmaceutical companies had to stop this with doctors decades ago and the game’s up for strata managers and their most generous providers.

Armed with this new knowledge it will be interesting to see what owners do. One prediction I’m prepared to make – strata managers will have to get better at articulating their total value proposition.

Why strata schemes need to learn the black magic of delegation

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The introduction of new strata laws is a time of renewal in which we should review old and new practices alike.

The use of delegated powers is in this category, but it’s also in the category of the dark arts. Those powers are regarded as good to have but dangerous to use.

The truth is that delegated powers are just as dangerous when they’re not used.

To paraphrase Nelson Mandela:

‘…with freedom comes responsibility’

When they’re free of the burden of calling meetings to make decisions, those with the powers delegated to them do things such as pay for repairs or censure by-law breaches.

But if they exercise those powers they’ll be dammed by owners who think they can do, but won’t do, better. You can’t have it both ways.

If this much was not clear to us under old laws, it must be under new laws that require functions to be exercised for the benefit, so far as practicable, of the owners corporation, and with due care and diligence.

These words, more than any others in the new laws, will change our working lives. Not so much because of the liability they will visit upon us but because of the scope for argument they will bring whenever powers are used against the will of another.

It’s time to master the dark art of delegation.

Maintenance schedules will be strata managers’ burdens to bear

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Show Me the Money

When it comes to settlement of a new block the developers focus could not be more narrow: to borrow from Jerry Maguire, “Show me the money!”.

At this time when the developers construction loan facility is fully drawn and every days’ delay is equal to the yearly cost of educating a child at a Sydney private school, tempers fray and attention to detail is wanting.

This is precisely when the strata manager starts asking pesky detailed questions about what is it that the owners corporation owns and manages. Like a millennial avoiding commitment, a developer will deflect these requests. All too often the strata manager gives up and the owners corporation never gets the key information it will need in the months and years ahead to maintain and repair its buildings.

Our law makers have twigged to this and have created a thing called an initial maintenance schedule. Developers will need to list the competent parts of the building in great detail, attach warranties, service manuals, and the names, addresses, and contact details of manufacturers and installers. Developers must provide a schedule for the inspection of the 24 items listed in the legislation, down to details about the asphalt and guttering.

With the possible exception of one or two big brand name developers who take handovers seriously, the task of compiling the initial maintenance schedule will come down to the strata manager, or it won’t get done. That’s just the way these things work.

Buildings now under construction and to be completed after 30 November 2016 will require an initial maintenance schedule. My tip – there will never be a better time to get working on this than now.

‘Thanks for your email, we’ll get back to you in 3 – 4 days’, said no successful strata manager ever!

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Overworked

The point’s been made loud and clear before today: there’s an urgent need for change in strata management practice and it’s not because the government has finally set the commencement date for new strata laws in NSW. It’s because of the automatic replies I got to my email announcing that my new strata management agreement was ready for sale.

First came, ‘Thanks for your email, we’ll be back to you within 3 – 4 days.’ Next I got, ‘We try to answer our emails within 24 hours but some strata managers get up to 150 emails a day so that’s just not always possible’.

I’m not having a go at strata managers. I’ve walked in your shoes. Indeed, on one level I applaud the honesty of these statements, but let’s be clear – this is no way to build a business today. I’d go so far as to say the reason clients aren’t leaving these firms in droves is simply that they don’t know how and they suspect they will get this everywhere they go. They might be right about that.

There’s nothing new about any of this. Managers and their advisors have been wrestling with this problem for at least a decade. What’s new is that on Friday we learnt that there’s just 20 weeks left until new laws start that will massively compound this problem. There are 39 new provisions about strata management alone to be digested.

Coincidently, on the same day we also learnt the market leader for strata management in the country has signed a 10-year deal to ditch their in-house software for the only true cloud-based strata software company in the market. I’ve used that software and it’s good. The client portal is particularly good, and guess what? It reduces email and telephone traffic because it’s a really easy to use portal where people can get what they want, when they want it, and share information.

And there’s more. As it happens the new strata laws put an end to ‘rollover’ contracts by 31 May 2017; strata management agreements for new building can’t go longer than 1 year and the disputes tribunal has the power to terminate and rewrite strata management agreements.

Let’s join the dots then… strata managers are over worked already, there’s once-in-a-generation reform coming, the market leader is changing to software with a superior client interface, and law reform will lead to provider churn like never before.

Times are truly changing.

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