How to fix the deep flaws in strata management

The exposure of dubious (but not necessarily illegal) tactics by strata management giant Netstrata has pulled an unwelcome but totally necessary focus on how strata managers operate in NSW and, to be fair, across Australia.

It has also exposed how slack the laws governing strata managers are.

Some strata managers do the right thing, but find it hard to maintain a competitive edge against those who stretch the laws, such as they are, to their limits.

Some strata managers don’t even trouble themselves to be open, honest, transparent or fair with their clients who, it has been pointed out, are the only people who put money INTO the system – everyone else takes it out.

The Problems

What do we mean by lack of fairness and transparency? How about standard contracts that say the strata manager can’t be held responsible for any errors they make unless they have deliberately and knowingly broken the law? Is there any other so-called profession that protects itself so profoundly against its own incompetence?

How about denying owners access to the contact details of their fellow owners on dubious grounds of “privacy”, even though the law clearly says that owners must be given access to the owners corporation documents.

The law also says those documents must include an up-to-date strata roll of the names and email addresses of all owners and residents (including tenants). You’d think the strata managers didn’t want owners talking to each other.

And then there are the strata managers who knowingly and cynically help the developers of new blocks to set up embedded network schemes that transfer the costs of building infrastructure to the owners via inflated fees.

Strata managers setting up strata schemes for developers and then switching mid-AGM to supposedly represent the owners is a farce that has been running for too long.

No protection

It’s like buying a car and being told that you have to pay for a new set of tyres from a specific dealer every year for the life of the car, at inflated costs and qulaity over which you have no choice and are passed on to whoever buys the car from you.

People who move into new strata blocks expect their drains, lifts and electricity meters to have been paid for by the developer, not to have to pay for them themselves through inflated service charges and long-term contracts.

Also, it’s all very well to say that contracts agreed before the first AGM have to be approved by the owner at that meeting or they are not valid. That is no protection unless the strata managers who compiled the agenda – the people with the expert knowledge – warn the owners that there’s a chance they are being ripped off and they could do better.

Expecting strata owners – the majority of whom may be first-timers – to understand and absorb complicated, folder-thick contracts before the first AGM and then vote on them is another piece of arrant nonsense.

Also, strata managers with cosy relationships with legal firms can make quite a killing if they push indebted owners to the forced sale of their homes or even bankruptcy. This is, by the way, all done with the blessing of the other owners who discover they can have their overdue levies paid up at no cost to them.

And then there are Schedule B fees, charges for minutiae of strata mamnagement – writing letters and emails, making phone calls etc – which soon mount up if every “message received” text or email is counted.

Strata management firms advertise for new recruits promising added income from Schedule B fee bonuses. No wonder the hidden charges soon mount up.

The Solutions

There are sensible, logical and therefore quite radical solutions that would fix a lot of these problems in a very short time.

• The law should be changed so that the same SMs who set up a strata scheme can’t be the company that runs it.
• There should be two-stage AGMs, where the owners elect a committee that then goes off for, say, six weeks to examine the contracts and decide which to approve and which to reject or negotiate.
• Meanwhile, new owners should not agree to ANY contracts at the initial AGM. Elect the committee, move on. Come back in six weeks with decisions on contracts or better alternatives.
• Strata managers must give full disclosure of the implications and costs of any embedded networks at the initial AGM.
• Strata managers have to stop making debt collections, channelled through favoured or subsidiary lawyers, a major source of income for either entity.
• There has to be a limit placed on hidden Schedule B fees that allow strata managers to rack up extraordinary profits by charging for every little thing they do for a scheme.
• Bonuses and commissions for Schedule B fees need to be outlawed – they distort the efficient management of strata schemes.
• SCA-NSW needs to stop telling the world that it represents strata owners. It doesn’t. It represents, protects and defends strata managers and the two aims are often mutually exclusive.
• The Professional Standards body needs to look at SCA-NSW and establish what it needs to do to maintain its much-vaunted professional status.
• The SCA-NSW needs to look at its code of conduct and ascertain how far it has strayed from those ideals.

Make even half of these changes and strata owners can start having confidence in the strata management industry, It will be interesting to see if SCA-NSW retreats to siege mentality, as it usually does when challenged, or actually addresses the issues that it can change and influence for everyone’s benefit.

There are many competent, diligent and honest strata managers in NSW. Sadly their professional organisation has been too busy defending and promoting its culture which, it turns out, has a serious character flaw.