Podcast: Struck off and probed, that has to hurt

Oh, dear. Not another swipe at strata managers, please! Yes, OK, it’s a well-trodden path but, to be fair, some of them have made themselves easy targets for the past few months.

As for the goodies, we’d say (as we often do) that they are in the majority. And how frustrating must it be to try to earn an honest buck and provide a good service to your customers, knowing that your rivals are getting ahead by playing fast and loose with the rules and regulations?

And it’s with that in mind that we venture into the strata naughty corner this week, to discuss two pieces of information, both of which we hope will encourage the many honest and decent strata managers to keep doing what they’re doing.

One topic is news that a well-known strata manager, who had been sacked several times but then promoted by NCAT into an all-powerful compulsory role, has now been struck off.

Yes, you read it right. On a total of six occasions, his contract was not renewed or he was even replaced with a statutory manager, but then appointed to exactly that role, taking over from the strata committee and owners corp in another strata scheme.

And we have unearthed the amazing, deep-dive parameters of the $300k investigation into Netstrata which looks like it’s going to leave no stone unturned.  

Now, to be scrupulously fair, the independent inquiry could discover the whole problem was little more than a misunderstanding about who was paying how much to whom for what (“what” being insurance premiums and fees to contractors). 

It’s as deep a dive into a company’s structure, business practises and culture as you will ever see, so we hope you’ll forgive us for spending a little longer in the naughty corner than usual.

That‘s all in this week’s Flat Chat Wrap.

Transcript in Full

Jimmy  00:01

We’re spending a lot of time in the naughty corner tonight. Yeah, it’s Tuesday night. Everybody’s getting ready to sit down to dinner, but we have to look at a couple of things that have been happening in the darker corners of strata management.

Sue  00:15

Oh, okay, interesting.

Jimmy  00:16

So for the first time in a long time, or depending on who you listen to a strata manager has been struck off for 10 years. The license has been canceled, and we now have details of the investigation into Netstrata.

Sue  00:31

Oh, okay, sounds really good.

Jimmy  00:33

Well, it’s not good.

Sue  00:34

It’s fascinating. Yeah, absolutely.

Jimmy  00:37

So a lot to talk about. Let’s get on with it. I’m Jimmy Thomson. I write the flat chat column for the Australian Financial Review,

Sue  00:43

and I’m Sue Williams, and I write about property for Domain, the Sydney Morning Herald, the Age and the AFR.

Jimmy  00:48

And this is the Flat Chat Wrap

Jimmy  00:50

I think we should start with now, let me get his name right. Wayne Wang. Is it?

Sue  01:09

Whitney Wang? Whitney Wang and his company PSMG

Jimmy  01:13

Which stands for Professional Strata Management Group. Isn’t it funny how these companies always call themselves after the opposite of what they really are,

Sue  01:23

And it does come back to bite you after a while.

Jimmy  01:25

Let’s hope so. Now, Whitney Wang is notorious. It has to be said in strata circles. He was the strata manager for I’m trying to think of the name of the building, the one that was collapsing and it had all the props under the the floor, the bottom floor. It turned out that the owners were very angry that there they were in the point of being evicted from their own homes because the building was unsafe. But the investor owners, a lot of whom lived overseas, were hearing that everything was fine, and it was just a bunch of agitators.

Sue  02:04

Yeah, that’s right.

Jimmy  02:05

Meanwhile, the building’s being supported by acro props, and some people weren’t allowed to go on their balconies. And it turned out that the strata manager at the heart of all this was somebody called Whitney Wang, and then it turned out that he had been sacked by other strata schemes, and on a couple of occasions, they’d taken him to the tribunal to have a compulsory strata manager imposed in his place. And then, lo and behold, the Tribunal, when somebody else came to them and said, “We need a compulsory appointment of a strata manager.” They said, “We’ve got this excellent chap called Whitney Wang here”.

Sue  02:44

That’s right,

Jimmy  02:45

“And he’ll step in.

Sue  02:46

Oh, my God, biggest belief, doesn’t it, really?

Jimmy  02:49

So the upshot of all this is that Mr. Wang has been asked to pack up his cardboard box and leave the industry for at least 10 years, which is quite a remarkable achievement, but it’s taken four years of complaints to the Tribunal and to Fair Trading and ultimately to the strata commissioner to get something done about this chap. But it’s interesting what the owners corporation network are saying, because they’ve been involved in this and supporting the owners all along, then they’ve been saying that there are some things that need to happen in the industry. Have you got any thoughts on that, Sue?

Sue  03:30

Yeah, I think the OCN has been sort of saying that NCAT need to implement internal processes for appointment review and reporting of compulsory managers.

Jimmy  03:40

Right? What does that mean?

Sue  03:41

Well, currently, if you want a compulsory strata manager because you’re unhappy with your own strata manager, and your own building is in a mess, the only criteria that NCAT will agree to when they agree to put in another strata manager is that that manager agrees to be appointed, nothing to do with checking out their credentials, or you know, whether they’re they’re suitable for that kind of role, because that’s a big role.

Jimmy  04:04

It’s huge, because they’ve got total power.

Sue  04:06

That’s right when, when you have a strata, when you have a compulsory strata manager in, the owners have no say whatsoever, and because, basically the strata manager does everything for them,

Jimmy  04:06

Right

Sue  04:10

And for a year or two years,

Jimmy  04:19

Usually two years, they get one year, and usually they say, “We need another year to sort things out properly.”

Sue  04:25

I think OCN also want a process where if a strata manager before has been removed from a strata scheme, then they can’t become a compulsory strata manager for someone else, which to me, sounds perfectly reasonable.

Jimmy  04:41

Yep. I mean, it’s not a case of two strikes or three strikes or whatever. If you’ve been shown not to be responsible or reliable in your previous appointments, there’s no way you should be handed the keys that allow you to be actually the total dictator of a strata scheme. Should you so desire? So Mr. Wang was taken to, eventually to the strata commissioner and and this was ultimately following six complaints against him.

Sue  05:11

Yeah, I think it was from a number of buildings as well.

Jimmy  05:14

Oh, yeah, that’s what I mean, six different buildings so had been building up.

Sue  05:18

Yeah, okay, yeah,

Jimmy  05:19

Which is, first of all, makes you think, how many times does somebody get to screw up

Sue  05:25

Absolutely. Because I went to one of the hearings, NCAT hearings, for one of the buildings that was where he was being appointed as a compulsory manager,

Sue  05:33

And they were horrified. And I went to that, that hearing, and it was quite astonishing, really. I mean, he was, you know, he was actually there, and he was quite blase about it. He had a lawyer there, and he’s obviously very litigious character as well. We must add that he’s possibly going to appeal this decision,

Jimmy  05:33

Really.

Jimmy  05:53

Right.

Sue  05:55

But, yeah, it was, it was a very bad-tempered kind of hearing, because the owners were ranged on one side, very angry that they were being subject to this guy coming in, and he was on the other side, really full of righteous anger. And he had a number of people supporting him as well. I think most of them were family members,

Jimmy  06:14

Right

Sue  06:14

And yeah, and basically outraged any allegations that were leveled towards him, really,

Jimmy  06:21

Hmm. But now the strata Commissioner, or who is it that’s fair trading, Fair Trading. have said 10 years he cannot work as a strata manager, he cannot work as a real estate agent, and he can’t conduct auctions, real estate auctions. So basically, they’ve said, Go and find another job.

Sue  06:42

Yeah,absolutely, he’s been reprimanded, canceled and disqualified.

Jimmy  06:46

And the funny thing is, the odd thing is that you look at the record, the timeline, four years ago, he had restrictions on what he could do, and you know, conditions applied to his continuing to work, and they were all lifted four years ago, and then here we are today, six strata schemes later, he’s being told, you know, don’t come on Monday, you’re finished.

Sue  07:09

Yeah, absolutely appalling. That’s it’s taken so long, isn’t it? Really?

Jimmy  07:13

Oh, it’s ridiculous. It’s something that we lose

Sue  07:15

Lives that are really being

Sue  07:16

Affected terribly

Jimmy  07:16

That’s the thing.

Jimmy  07:17

You know, it’s not just one bloke who’s got a business who, apparently he’s not the best person at that job. It’s all the lives of all the people in all the buildings that he has been allegedly mismanaging,

Sue  07:32

And all the money. I mean, it’s an awful lot of money that it comes under the care of strata managers as well.

Jimmy  07:39

I’ve never heard any suggestion that was any impropriety in the financial side is that

Sue  07:45

There have been allegations that he obviously was involved in lots of legal action with NCAT, yeah, and that there, there may have been the use of an owner’s Corporation money for those struggles,

Jimmy  07:58

Right? He was using their money to defend themselves.

Sue  08:01

And he was quite entitled to and We’re not saying that that’s, I mean, obviously it’s wrong, but it’s not illegal. I mean, it was kind of is within the rules that he can do that,

Jimmy  08:11

Yeah. Because, I mean, people are thinking, well, how can this happen? And the the way this can happen is if a strata manager, any strata manager, has an extreme level of influence over the committee, and he lets the committee do what they want, and the committee think, well, we want to keep him on, because he lets us do what we want. And therefore it becomes a kind of cycle of power, really, and misuse of power, where the committee is defending the strata manager against all accusations, the strata manager is defending the Committee against all accusations, and the owners can’t get close to it, because the way that strata is set up is that if you get elected to the committee, then you act on behalf of the Owners Corporation, and especially in buildings where there are a lot of absentee investors who don’t know and maybe don’t care what’s going on in their building, until they they’re watching the seven o’clock news and they see all their neighbors being hustled out of the building with their belongings, sure, because it’s about to fall down,

Sue  09:14

Yeah. And it’s also difficult when there are people with different ethnicities involved in a building, yeah, and maybe a strata manager is able to communicate with some people with certain ethnicities but not to others,

Jimmy  09:27

Yes,

Sue  09:27

And then tries to range one cultural group against another cultural group. And that’s when it becomes really, quite insidious, really

Jimmy  09:35

Well, it is because as soon as you raise that issue, then the specter of racism raises its very ugly head, but it’s true that people from different ethnicities tend to gather together for mutual support, and if somebody is there to exploit that, and if somebody is telling them things that are not true, then they can be misled into making bad decisions, which the other groups are looking at and thinking, probably thinking it’s a big conspiracy, when it isn’t, it’s just down to one or two people who are misusing their influence over a certain social group. That’s right, yeah, all right, when we come back, we are going to delve into the investigation into Netstrata that’s after this.

Jimmy  10:30

Well, here we are in July and almost at the end of July, but I have in front of me a document that was signed in May this year, which details the extent of the investigation into Netstrata. Now, you know, probably should, for those people who are not aware, the ABC television and the online news service did an investigation into the strata management company Netstrata, and accused them of basically hiding insurance commissions. The law in New South Wales says if a strata manager takes commissions for getting insurance, they have to declare them to their owners, the owners of the buildings that they manage. Netstrata was telling owners that they don’t get commissions. And I know we know this for a fact, because Netstrata are the strata managers of our investment property, and they told us, “No, we don’t take commissions”. But what it turned out was Netstrata was organizing the insurance commissions through a third party company that they owned, called Strata Insurance Services, and then they were charging the commission as a fee for service, and saying it’s not a commission, it’s a fee for service.

Sue  11:43

Wow, that is so sneaky.

Jimmy  11:45

So a lot of people will say, What difference does it make if we are getting charged more for insurance than we would if that payment wasn’t there? You don’t, don’t matter what you call it, call it, call it duck feathers, if you want it’s it’s an extra payment.

Sue  12:01

Duck feathers?

Jimmy  12:03

The, I think he’s general manager of Netstrata. Was interviewed on ABC Television and looked shocked. It was hard to tell whether he was shocked by finding out this was going on in his company, or shocked by being accused of what was going on in his company. But he just happened to be president of Strata Community Association, which is the professional body for strata managers. He stepped down from that and from the board and Netstrata agreed to help an independent investigation into their business to which they have agreed to contribute up to $300,000 just to be investigated.

Sue  12:48

Really?

Jimmy  12:48

Yep,

Sue  12:49

It’s a bit odd, isn’t it?

Jimmy  12:50

I don’t think they’ve got a lot of choice. You know, they’ve, they’re been back to the edge of the precipice, and they’re about to be pushed over. And they’re a big, big company, and they if they don’t, at least appear to be facilitating willingly, you know, helping with the investigation, then it just looks like another cover up, doesn’t it?

Sue  13:10

It’s kind of weird, though, isn’t it fund helping fund your own prosecution?

Jimmy  13:13

That’s what their document says. I’ve got the document here. I’ve got then the signatures on it, and include Mr. Stephen Brell, who’s the aforementioned General Manager. So this is what the scope of the review is. I can’t go into everything, but it’s the business of Netstrata and its related entities, including all parent and subsidiary entities and keep and key personnel, interesting processes, policies, procedures, practices. Somebody’s been hitting the P button a lot here, including, but not limited to compliance with disclosure obligations and conflicts of interest. That’s the general overview. Then it goes into detail, strata, Insurance Services, SIS, what’s the relationship between sis and net strata? They’re going to find out, what are the arrangements in place between SIS and netstrata for brokering insurance, strata insurance? How is the strata insurance brokered? What is the process that Netstrata follows when arranging strata insurance for an owner’s corporation that it manages? What are the total insurance costs? What’s the disclosure of the total insurance costs, and whether the total insurance costs generally reflect market costs for the services provided. So at the very least, they’re going to say, well, it might not be transparent, but is it costing owners more than they would normally pay? We had this with our people, the Netstrata branch that’s managing our building. And somebody raised this with them, and they said, “Look, you guys, you’re paying the fee for service, and it only represents 16% of the insurance premium.” And they went on to say, you’re lucky, because the average is 28% so yeah, oh. Um, they then go on to say they’re going to look at third party contractors and suppliers engaged by Netstrata. And this was something going back to Whitney Wang. One of the things he was accused of was favoring certain contractors who were putting in inflated invoices and things like that were the terms of engagement or other contractual arrangements between Netstrata and the third party contractors and other suppliers where third party contractors and suppliers were engaged. Did Netstrata disclose this to the strata owners? Did Netstrata receive any payments, including, but not limited to fees, charges, discounts and rebates, commissions or gifts from third party contractors or suppliers. Were any such payments notified to strata owners? That’s an interesting one. The saturation rate of engagement of strata contractors and suppliers for Netstrata’s clients, I think that means in all the contracts that they set out that they gave to contractors and suppliers,  how many of them were focused on certain companies? Who was getting the lion’s share of this stuff, not necessarily their own companies, but favored entities, and were the rates charged, generally reflecting market costs? And then it goes on, it’s about looking into Netstrata staff benefiting for from promoting certain third party contractors. It asks, Does Netstrata have in place sufficient systems, processes, procedures to ensure statutory compliance? I mean, it goes on and on and on. It’s like two and a half pages.

Sue  16:39

So when is this investigation going to be?

Jimmy  16:41

Happening now

Sue  16:41

It’s happening. So how long is it going to go on for? Do you have any idea?

Jimmy  16:45

That’s the I don’t know. Yeah, nobody’s saying and

Sue  16:48

I guess the thing is, what’s going to happen in the end, if they discover that a lot of these things were there and were wrong? I wonder what they’re going to do to Netstrata. I mean, they might clear Netstrata. Of course

Jimmy  17:00

They could.

Sue  17:00

But if they find any any fault, with Netstrata? Will they punish them? Will they fine them? Will they ban them?

Jimmy  17:07

They could change the whole strata industry. They could say all of this is a bit cozy. All this, what do they call vertical integration, is all a bit cozy and all too easily corrupted to benefit the strata management company. It’s interesting at the end, it notes that the third party contractors and suppliers, as used in this letter, is defined to include Strata Insurance Services, Wind Fire, resolute Maintenance Group, PG Martin, plumbing and other third party contractors. Now all of those names of companies, I’m very familiar with them, because in our AGM, our first AGM agenda, it says, “Here are some of the great companies that we use to help manage your building.” So it’s pretty ugly. Somebody’s in trouble. It’s hard to tell what’s going to happen. But it’s worth noting that the strata commissioner has already, you could say, jumped the gun on this, and said it’s not just Netstrata, it’s the whole of the the strata management industry needs to be looked at. And they brought in proposed legislation that about transparency and accountability, so that some of these things just won’t be able to continue.

Sue  18:25

Fantastic, because, you know, we’ve had developers kind of pushed into

Jimmy  18:30

Behaving themselves.

Sue  18:31

Yes, exactly. And so, no, it’s great that this is now happening to strata managers. Well, strata the bad strata managers. Obviously, there’s lots of good ones out there.

Jimmy  18:38

Well, this is something that you’re not going to hear a lot of complaints from the strata management industry as a whole, because there are a lot of small and medium sized strata management companies who are looking at this and going, “Hey, we don’t have the opportunity to have that vertical integration, and we might not want to do it anyway, but it would be nice to work In an even playing field where we’re not competing against people who are extracting money from strata owners, left, right and centre” It’s short and sweet, and it’s not sweet at all. It’s short and dark, but it’s there’s a lot in that extracted that letter from a Fair Trading website. Beyond the I’ll put a link on the website, so it’ll be interesting to see what comes out of it. But it’s also interesting to note that the new legislation is being discussed with Fair Trading, with consumer was it called Customer Services, with Strata Community Association, (the SCA) and the Owners Corporation Network. Oh, good. So it shouldn’t be diluted too much by the time it gets to Parliament later this year.

Sue  19:52

Fantastic.

Jimmy  19:52

All right, Sue. You’ve got to go off and do stuff.

Jimmy  19:55

I’ve got to try and edit this down into a sensible delivery and get it out there. And maybe next week we can talk about happy stuff in strata,

Sue  19:55

Okay,

Sue  20:06

Absolutely, because there’s lots of happy stuff as well.

Jimmy  20:09

Yeah,

Sue  20:09

We all choose, most of us, to live in apartments, and we, most of us, really enjoy it.

Jimmy  20:14

And our thing that we mentioned last week about strata managers taking the frequent flyer points when they use the credit card has had a bit of a stir on the Forum, so people can catch up with that there.

Sue  20:30

Fantastic.

Jimmy  20:31

All right, thank you all for listening, and we’ll talk to you again soon.

Sue  20:34

Bye,

Jimmy  20:35

Bye.

Jimmy  20:37

Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website, flatchat.com.au, and if you haven’t already done so, you can subscribe to this podcast completely free on Apple podcasts, Google podcasts, Spotify, or your favorite pod catcher. Just search for Flat Chat Wrap with a W. Click on subscribe, and you’ll get this podcast every week without even trying. Thanks again. Talk to you again next week.