It’s been the worst kept secret in strata management history. Four Corners, the flagship ABC investigative program, will run a story on Monday night lifting the lid on conflicts of interest and related party transactions by strata managers.
Next Tuesday will be an important day for strata management practices. Names will be named, and heads will roll. The sky won’t fall (on everyone), but it’s likely there will be some hard conversations between managers and their clients in the days and weeks ahead. So, what can you do to be ready?
This is not the time for debate about the rights and wrongs of insurance commissions, related party transactions, and other. here’s been plenty of that, and no doubt there will be more to come. This article is about what to say and do when under fire. The objective is to hold on to your hard-won clients and experienced staff and win back their trust, if that has been lost.
1. Anticipate the hard questions
Be prepared to answer two questions – How do you charge us for insurance commissions? Do you take kickbacks or other benefits from any related parties that provide us with goods and services?
Do:
- Tell the truth.
- Tell them why – if you don’t do these things, then say so categorically. If you do, then put your best foot forward- say why you do these things and how you think this benefits them.
- Tell them how you have made disclosures in their agreements and at meetings.
- Tell them you are an open book and happy to provide whatever details they would like if they would like more information.
- Tell them if they would like to change any of these arrangements, you are open to charging for your services differently.
Do not:
- Dodge the call.
- Get defensive or apologetic.
- Try to justify your practices by reference to ‘standard practice’, ‘best practice’, ‘industry standards’, ‘common practice’ – these words communicate that you are working to the lowest common denominator.
2. Brief your team and support them
Chances are the first line of attack will be your team, who have day to day dealings with strata owners. It would be a good idea to discuss these matters with them first thing on Monday morning, so they are not caught by surprise when the phones start ringing, and they open their emails. You should decide who is going to field the hard questions. The person with the strongest relationship is probably best but you might want to consider how your team are coping with the pressure and media attention about strata at present.
3. Be media savvy
It’s probably more likely Big Strata will be named in the story and most strata management practices will not be bothered by the press. But sometimes when big stories like this break, smaller media outlets will want to pick up the story and run a local angle.
If you are called by the media, the worst thing you can do is ignore them or refuse to comment. The best thing to do is to take their details and say you will send them a statement in a few minutes. Journos work on very tight timeframes, so be quick. You don’t have to say much but say something direct and positive – see the list above of things to do and not do.
4. Be inspection ready
Although this is a national issue, the NSW Government will be under pressure to be seen to take some regulatory enforcement action. Usually, regulators with limited resources (like DFT NSW) will target some high-profile people and firms and name and shame them as a signal to the rest of the sector. It’s crude but effective. However, you never know when an inspector may come knocking, particularly if you been the subject of a complaint by a disgruntled owner or committee. Get your compliance records up to date. For strata mangers in NSW, supervision guidelines are an easy target for the regulators. Buying a proforma practice manual and not making it part of your everyday operations risks your license.
5. Be brave and ask the question
It’s the silent ones you must watch the closest. Clients and staff that are engaged with you in conversations about controversial issues are at least manageable. You have a better than even chance of keeping them. It’s the ones that quietly quit that are the risk. Don’t confuse silence with acceptance. Initiate conversations about your services and charges. Fortune favours the brave in troubled times.
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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