It's been almost a year since the ABC highlighted issues in strata management. Still, leaders of big strata firms have been silent. Until Bobby Lehane spoke last month.
Bobby Lehane is the CEO of PICA, Australia’s largest strata management company. It manages over 500,000 lots, which is more than 15% of the Australian strata market. His is a voice worth listening to.
Lehane told the press about the ongoing financial troubles facing strata management businesses. His warning was clear. If not addressed, strata will need government support.
While his warning was clear, his call for action was confusing. He wants government action on educating strata owners. The connection between lower profits and owner education is curious.
By his own admission, Bobby’s been sharing PICAs financials with NSW politicians. Politicians often lack discretion. In political circles, it's rumoured that Lehane has 31 million reasons to worry. Apparently, PICA will likely lose that amount of revenue each year if the proposed ban on strata insurance commission goes ahead.
So, faced with the prospect of a massive hit to their bottom line, the market leader thinks educating owners is the solution. Lehane might be saying that if owners learn about the value of insurance commissions, it could lower strata levies. That would make more sense from PICAs perspective, but will the government agree? If it does, will it stem the tide of contemporary thinking against commissions? Time will tell.
Government intervention in industry has mixed results. This is especially true when it focuses on keeping things the same instead of promoting innovation. The automotive, steel, and textile industries prove the point.
Where is the innovation in educating owners about a failing business model? There is none. Lehane’s call is more of the same. Since the 1980s, PICA's CEOs have often called for owner education. Seemingly, they want owners to better understand the role of strata managers and how they should be compensated. Full marks for persistency, zero for imagination.
If innovation doesn’t come from the market leaders with big budgets and much to lose, where does it come from? Outsiders? Government? AI? Maybe, but history suggests reform comes from the challengers. The new breed. The fearless. The ones with nothing to lose.
New market entrants, peeling out of the big strata providers, are driving innovation right now. They have new pricing models, different service offerings, and modern service delivery methods. A few are achieving revenue of up to $1,000 per lot, more than double the Macquarie Bank benchmark of the high achievers. And they are doing so without taking commissions and engaging in related party transactions.
In a new world order, anyone can create their own operating software without a big budget. You can work anywhere, anytime. You don't need a large footprint. The revolution has begun.
Long live the revolution.
Michael Teys advises strata management businesses on improving profitability through professionalisation and streamlined operating systems.
He has more than 30 years’ experience as a strata lawyer and academic and has owned 11 strata management agencies throughout Australia. He has a Master of Philosophy (Built Environment) and Bachelor of Laws. He lectures and writes widely about strata management issues in Australia and internationally.
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