The latest headline: ‘Half of Canberra’s bankruptcy filings last year were from strata managers chasing fees inquiry hears’ – ABC News.
Two initial comments. First, it’s not the managers doing the chasing; it’s the other owners who want their fellow strata owners to pay their share of the common expenses because they are not a charity. Second, don’t make it sound like the strata managers are bankrupting people because the strata managers haven’t been paid.
The real story here is that some strata managers and some strata lawyers have charged too much, and done too little too late, to collect levies in a timely way. As a result, some strata schemes have been left without enough money to pay their bills, and some owners in unfortunate financial circumstances have been left with large legal bills for recovery costs that, as the article correctly points out, can be disproportionate to the levies outstanding.
It’s not a problem confined to the national capital. It’s just that they are amid an enquiry into strata now. It doesn’t help that people in the ACT political bubble are highly attuned to any bad news related to the cost of living and housing. When this issue was raised in NSW about a year ago, similar press ran, and the NSW government too pricked up its ears. As a result, the Strata Stakeholders Working Group was formed and a new project launched, the Strata Debt Recovery and Bankruptcy Risk Project. Your humble blogger is a member of this group.
The project has been hard work. We’ve dealt with quite confronting issues, with members of the group coming from very different perspectives. On the one hand, the plight of the vulnerable and financially challenged. On the other, the right of collective owners of property to have their fellow owners pay their share of the costs of keeping the lights on, and the building safe.
There has been significant input from all members. The debate has been robust but respectful. As a result, we will have new laws about collecting levies, new websites and information that must be given about repayment plans and financial hardship counselling. The costs of recovery action will shift from individual owners to the owners corporation, unless a court orders otherwise. Levies will rise as a result, but this will force owners and committees to be more diligent and prudent in the way they go about striking and collecting levies.
In the end, these were not the decisions of the group. We are merely advisors. The legislature makes the final decisions which are implemented by the public servants. Have they struck the right balance between the rights of the collective and the individual? Time will tell, but for now there is another point this exercise makes. It concerns reinventing wheels.
The issue that has arisen in Canberra is no different to that which arose in NSW a year ago. It is an issue that has or will arise everywhere else in Australia in the fullness of time. People, buildings, and strata concepts are essentially the same world over. My four decades working with government on reforms like these, including in Qld, NSW, Victoria and the ACT, suggests to me that when each state and territory comes to consider an issue like this they largely start from scratch.
Over the course of the NSW debt collection project, the number of members has varied but it’s sat at about 20 on average. We have met 8 times and still have at least 2 meetings to go. We usually meet for 1 to 2 hours but with preparation and travel, lets call each meeting 3 hours work. We are all senior bureaucrats and professionals. The professionals are unpaid and do this work for their own reasons. For present purposes, I’m going to conservatively value our time at $350 per hour each. In all, 20 professionals meeting 10 times for 3 hours at $350 an hour represents a cost of this exercise of $210,000.
What an incredible waste of time, money, and talent if this knowledge is not shared with the other 7 states and territories.
The tragedy is, we have no forum to enable this collaboration. There is no formal national body that has a mandate and is funded to see that we make the most out of this exercise. Nor countless other exercises like this that happen on all sorts of issues just in our field, all-around the country, year in year out.
This latest press is a good example of why we need a national strata task force that can tackle issues that transcend sectoral interests and affect the national good.
Is anyone out there listening?
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.
