Who’s minding your block’s big-bucks budgets?

As rising costs of living and mortgage interest rates both bite at our heels, it seems levy (or fee) payments are often among the first financial commitments to suffer when household budgets are recalculated.

You can understand why. Defaulting on your levies may not carry the same dread that accompanies non-payment of mortgages, rents or taxes. 

The resulting withdrawal of voting rights from owners who rarely if ever vote – and that often is the majority – is hardly punitive. 

The mandatory 10 per cent penalty interest on unpaid levies is also a slap on the financial wrist compared to the 20 per cent or more slugged on to credit card debts.

The Flat Chat Forum has received posts from schemes where 50 per cent of owners are routinely, if temporarily behind with their levies, meaning strata budgets have to be dialled down to the bare bones just to keep the blocks’ finances ticking over.

And all of this has put renewed focus on the people in strata who are devising and managing the budgets that are the basis on which levies are calculated.

How is it, you might ask, that people with no particular financial skills or even sophisticated knowledge of strata law can suddenly be given control of annual budgets of $1 million, or more.

Obviously, larger schemes probably, but not necessarily, have a strata manager who can advise their committees. 

But the strata committee and treasurer face elections every year and they may be reluctant to promote levies rises, for instance, or arrange strata loans, even when the buildings desperately need the money.

They may also be reluctant to pursue defaulters when these people who are already struggling financially are neighbours whom they see every day.

It’s all very well to let unpaid levies accumulate until the defaulting unit is sold – but what happens to the building’s budget for services, repairs and maintenance in the interim?

It is often suggested that strata committee members, or at least office-bearers, should be required to undergo some sort of training.  That could be allied to payment for the time and work done; i.e. only trained committee members would be paid for their efforts.

Another suggestion is that all strata schemes over a certain size should be required to employ a professional strata manager – a system that prevails in Victoria – but that’s hardly a silver bullet.

Julie Mclean, president of the Victorian Strata Community Association (SCA) – the professional body for strata managers – bemoans the fact that in her state tall you need to become a strata managing agent is “a steady heartbeat and a mobile phone”.

Over the past few years in NSW, the SCA there has raised its professional training and licensing processes to an impressive level. 

However, there is no requirement for large schemes to employ a strata manager and there is no necessity for those managers have acquired the level of skills and experience to match the size and complexity of the building.

Large companies may be able to meet the challenges of running a massive building with complex multi-strata structures and demanding owners. But apartment owners can easily employ smaller (and cheaper) firms if they so desire.

One observer has likened qualifying as a strata manager as akin to getting a licence for a motor scooter then being handed the keys of a Double-B truck and trailer.

When it comes to finances, as in so many other aspects of apartment living, one size definitely doesn’t fit all.

This column originally appeared in the Australian Financial Review.