These Q&As about Owners Corporation Manager charges in Victoria have been supplied by Jane Giacobbe, Strata Reports Victoria.
Jump directly to the QUESTION you are after:
- QUESTION: Our overbearing strata manager retains control of our inexperienced chair and committee, refusing to share financials or committee contact details. What can I do?
- QUESTION: For the amount that we pay our Owners Corporation management company, what level of service should we expect? Why do management fees vary so much?
- QUESTION: As Owners Corporation Manager’s we’d like to know if we are justified in charging for two OC certificates per sale – one at the beginning & one prior to settlement.
- QUESTION: We have been charged a few fees by our Owners Corporation Manager which we feel are not lawful. What fees and charges can the Owners Corporation Manager charge?
- QUESTION: We are sick of being overcharged by our Strata manager, with additional billings of all and sundry for their strata management services. They are under a three year term, signed by the developer. What can we do?
Question: Our overbearing strata manager retains control of our inexperienced chair and committee, refusing to share financials or committee contact details. What can I do?
My complex’s strata manager illegally refuses to show me banking transaction details, job verification details and won’t provide me with remote members’ contact details. They do favours for members in return for votes.
The most inexperienced unknowledgeable meekest persons are elected as Chairperson and committee. This strata manager rules them absolutely and always maintains the ‘committee’ instructs and approves all the maintenance reports.
Now we are in indefinite lockdown. Against COVID, not DIVOC (divided OC).
What can be done about a dysfunctional strata manager and dysfunctional committee?
Answer: The simplest solution to your concern is to join the Committee.
The simplest solution to your concern is to join the Committee. The manager is employed by and working under the direction of the Owners Corporation as an entity, the Manager is not employed by an individual lot owner. As a result, no individual lot owner can give the manager an order or direction, however, the Owners Corporation can. The Manager cannot, and should not act under the direction of an individual lot owner unless that individual has been delegated those specific powers by the Owners Corporation.
Please remember, the Committee is, by extension, the Owners Corporation. The act goes so far as to say S113 “A resolution of the Committee of an Owners Corporation in respect of any matter has effect as a resolution of the Owners Corporation”. Therefore, if the Committee makes a decision, that decision is and holds the same weight as, a decision of the Owners Corporation.
As a member, you have the ability to join the Committee and help steer the ship. If your concerns are primarily around banking, financial operations/data, I would suggest when you join the committee, seek to be appointed as treasurer or financial controller. In doing so, delegating your authority to request financial statements, bank statements, and other relevant documents on behalf of the Owners Corporation. It is also worth noting you would be undertaking this task on behalf of the Owners Corporation, not yourself individually. The Owners Corporations Act 2006 has clear conduct provisions for committee members under S117.
It is also worth noting, if you don’t join the Committee but still wish to see the financial data, the committee could approve a request for the Manager to provide additional financial data, however aren’t obliged to.
If for whatever reason your foray into Committee life doesn’t work out and your concerns remain, you have the ability to lodge a formal complaint under the act. However, I would only ever suggest going down this pathway if you are sure you have exhausted all other diplomatic options. Sometimes, once internal grievances are formally escalated, it can result in a permanent breakdown of relationships between all parties which can be extremely unpleasant when instead, a direct phone call or face to face chat may have been all that was needed to diffuse or resolve a situation.
Your claim that the manager is essentially manipulating the committee is serious, not a claim I would make lightly, and if true would be grounds for termination, if not more serious legal action. The Owners Corporations Act 2006 states the manager “must act honestly and in good faith” and “must not make improper use of the manager’s position to gain, directly or indirectly” – and (an amendment to come into effect on 1st December 2021) S122 “must not exert pressure on any member of the owners corporation in order to influence the outcome of a vote or election held by the owners corporation”.
The key to harmonious relationships in a Strata Community (or any community for that matter) is based around objectivity, competency, communication, with a sprinkling trust and respect between all parties. The way in which some of your comments/assertions are couched could be taken as quite antagonistic, and it is well known you’ll catch more flies with honey than you will with vinegar. I am not saying your concerns aren’t valid, but it is possible to communicate the same concerns in an objective way that doesn’t antagonise those people that you are ultimately seeking to help you, work with you or live next door to you.
In relation to obtaining other lot owners contact details. Under S150 of the Act, all members are permitted to view the Owners Corporation Register which includes all lot owners names and mailing addresses. So obtaining this information will allow you to send a letter to the registered address of other lot owners. The register does not contain phone or email information. In saying that, it is not uncommon for a Manager to forward one lot owner’s phone/email details to another lot owner, and then it is up to the recipient if they want to contact that person back, or not. The Manager is not required to provide this additional service, but in saying that, my experience has been that the overwhelming majority will be willing to help if, as above, the interaction/request is polite and respectful.
Deryck Walker
SMTI
[email protected]
This post appears in Strata News #532.
Question: For the amount that we pay our Owners Corporation management company, what level of service should we expect? Why do management fees vary so much?
For the amount that we pay our Owners Corporation management company, what level of service should we expect?
We note that different Owners Corporation management companies prepare their quotes and charges differently. Is it important for the committee to looks at the total costs, rather than just a base fee plus disbursements?
Answer: Owners Corporation fees do differ amongst companies in Victoria
This is really ‘how long is a piece of string’ because different Owners Corporation Management companies offer different services. The fundamental services that an Owners Corporation Management company will offer is:
- administration work
- secretarial duties
- arranging meetings for the owners Corporation
- attending to the financial obligations. e.g. paying invoices and recording all the accounting transactions and producing the financial reports for the Owners Corporation.
- Dealing with insurance as well is vital, making sure that the Owners Corporation has adequate insurance for the property.
There are the fundamental services for an Owners Corporation Manager. Others will get involved in dispute resolution. Also, dealing with other maintenance works as well, getting quotes in behalf of the committee of management and preparing those quotes, providing a summary to the committee of management.
In terms of the structure of Owners Corporation fees, they do differ amongst companies in Victoria. Some companies will actually include the core services and a lot of the additional services other companies would charge extra for under the one management fee, whereas other companies will charge a low management fee for those core services. But then they’ll charge extra for every single other service that the Owners Corporation committee wishes them to carry out.
On top of that, there’s also the cost of disbursements as well. So disbursements covers things such as postage, phone calls, those types of things that the Owners Corporation manager will incur on behalf of managing the Owners Corporation.
Then on top of that, there’s one additional revenue stream, which is Insurance Commission. Insurance Commission is prevalent in the industry. Basically, the Owners Corporation manager will take a commission from the base insurance premium of the owners corporations insurance policy, and that helps to subsidise the Owners Corporation management fee. There are plenty of companies out there who will opt not to take Insurance Commission, but that will result in a management fee increasing and the Owners Corporation insurance premium decreasing slightly.
Another point to make in regards to the question, there are different disciplines. You’ve got Owners Corporation management, you’ve got building management and facility management, so especially for the larger properties, you have a dedicated building manager, and then an Owners Corporation manager as well. For a lot of the smaller properties, there won’t be a full time or even a part time building manager but you do have an Owners Corporation Manager.
A lot of owners probably believe that the Owners Corporation manager should fulfil the role and be that quasi building manager at times. It’s a very different discipline. Some companies will report to provide some of those services, but just be mindful that that’s not part of the core responsibilities of an Owners Corporation Manager. When it comes to building management services, that involves attending the property to supervise contractors, dealing with resident queries on site, those types of things.
I think it’s really important for a committee to look at the total cost of the Owners Corporation Management charges if they’re looking to appoint a new manager to understand exactly what the additional services are going to be, and what they’re going to charge for because, as I said, at times, managers will provide a low fee and then charge excessively for additional services. It’s really important to to dig deep and understand what the total cost is going to be. A lot of committees will come to us saying, ‘Can you provide an all inclusive fee?’, and we can do so minus a few additional services that we just can’t budget for (potentially attending VCAT or attending site or committee meetings). Unless they provide a good understanding as to the time for attending committee meetings, we wouldn’t know what the charge is going to be. It’s about getting as much information as possible and understanding the committee’s expectations and the Owners Corporations expectations and then costing it based on that.
Gregor Evans
The Knight
Email
P: 03 9509 3144
This post appears in Strata News #485.
Question: As Owners Corporation Manager’s we’d like to know if we are justified in charging for two OC certificates per sale – one at the beginning & one prior to settlement.
As Owners Corporation in Victoria, we charge the standard fee for an Owners Corporation certificate (per CAV) for the vendor when preparing sale documents.
Just prior to settlement, a conveyancer/lawyer contacts us for an update to the OC certificate. This is usually 2 – 3 months later. They are always upset at having to pay another fee for an OC certificate even though we have to do the work from scratch: reviewing all 16 questions, multiple attachments and financial statements. The fee is only approx. $150. Some say we should provide FREE updates for 3 months (although lawyers and other professionals would not provide their services for free) or phone updates (but which figures in particular?).
Please advise if we are justified in charging for two OC certificates per sale – one at the beginning & one prior to settlement. Please quote the appropriate legislation if possible.
Answer: This really comes down to your company office processes.
Yes, this is a common process that occurs when someone purchases into an owner’s corporations in Victoria.
A number of strata companies experience the same frustration from conveyancers and lawyers about the costs involved to obtain a second updated owners corporation (OC) certificate, which is at the same cost as the earlier one they have received.
The initial owners corporation certificate is required to be included within the section 32 of the Sale of Contract and to ensure that the purchaser is carrying out a little due diligence. Therefore, a conveyancer factors this cost into their overall purchase process but depending on how long the settlement is and the duration of time that has passed since the first oc certificate, then depends on whether they need to request an updated oc certificate. Herein lies the annoyance around the second fee for often just a slight update around the information contained within the updated owners corporation certificate.
When questioning whether you are justified in charging for two oc certificates, it really comes down to your company office processes, what is at stake due to the duration of time that has passed and how much time is required for the preparation of it.
Under section 151 of the Owners Corporation Act, a person may request an oc certificate in writing for a fee. Within the Owners Corporation Regulations 2018, a fee may be charged per oc certificate but it would come down to each owners corporation management company to determine whether they will charge the full fee for the second updated oc certificate.
Over the last couple of years purchasers have also started to carry out further due diligence and have been obtaining independent full strata reports before they purchase, as they cover a lot more information than an oc certificate.
Although this is a new process in Victoria it is the normal in other states such as NSW & QLD and has definitely seen an increase in popularity in Victoria as purchasers become more aware of the importance of due diligence before purchasing into an owners corporation.
We hope the above has been helpful but please feel free to contact us if you would like to discuss things or if we can be of further assistance.
Jane Giacobbe
Strata Reports Victoria
E: [email protected]
P: 0402 341 848
This post appears in Strata News #362
Question: We have been charged a few fees by our Owners Corporation Manager which we feel are not lawful. What fees and charges can the Owners Corporation Manager charge?
A few years ago, we were charged roughly $200 by the Owners Corporation Manager for organising a ballot.
I noticed that a ballot template can be downloaded for free from the Consumer Affairs Victoria website. Can the Owners Corporation Manager legally charge a fee for conducting a ballot?
Secondly, we were recently advised that in order for the existing Owners Corporation Manager to be terminated, they will need to charge us a fee of $484 for preparation of records.
Can the Owners Corporation Manager legally charge these fees?
I wrote a friendly note and put it on the notice board in the common area, however, this has achieved nothing. I’ve also informed the owners corporation via email but have not received any response.
We don’t smoke but we are forced to clean up other people’s cigarette butts. We also have dogs and this can pose health risks to them if they accidentally eat one of the butts.
I would welcome any suggestions on how to best deal with this issue or what legal methods I could use to solve this.
Answer: The Contract of Appointment defines the fees and charges the OC Manager will charge the owners corporation for duties and functions that they carry out under their delegated authority.
Each Owners Corporation signs a Contract of Appointment when they appoint an Owners Corporation manager to be their managing agent.
Within that Contract you will find the fees and charges listed that the OC Manager will charge the owners corporation for duties and functions that they carry out under their delegated authority.
The charges that you are questioning around the ballot and preparation of the records for termination, should be listed in the executed Contract.
In order to be confident that the Contract is valid you should confirm the dates for the term of management and ensure that it is signed by the relevant parties and stamped with the common seal.
If it is valid and has been executed correctly in line with the Owners Corporation Act 2006, then the charges within that Contract are able to be charged to the Owners Corporation.
You may also like to visit the Strata Community Australia VIC (SCAV) for a list of their recommend charges that an Owners Corporation Management Company may include in their contract, to determine whether the fees that your Owners Corporation are being charged are fair and reasonable.
Hopefully the above is helpful but I would be able to provide further information if required and can be reached via the information below.
Jane Giacobbe
Strata Reports Victoria
E: [email protected]
P: 0402 341 848
This post appears in Strata News #343.
Question: We are sick of being overcharged by our Strata manager, with additional billings of all and sundry for their strata management services. They are under a three year term, signed by the developer. What can we do?
We have quite a bit of unrest amongst our Owners Corporation committee members over the additional billings of all and sundry for management services of our strata. They want to seek an alternative. I’m interested to know a few things:
- Is it lawful for a developer to sign up the strata manager for a three year term? Why would they do that? Are commissions often involved here?
- The agreement was not signed by a witness. Could this void the agreement?
- The strata manager on a previous enquiry told us we did not have rights to the strata roll as it was a Privacy Act issue. This surely cannot be correct? Are they just preventing us from accessing owners contact details in order to block communications about this and/or other issues?
I’m sure there are other strata management companies whose billings are more in line with expectations. Are you aware of other more innovative ways of managing an Owners Corporation’s requirements that don’t involve overcharging like this strata manager?
Answer: The developer may have sold the OC management contact to the OC management company as a way of maximising their return on a project.
We can confirm that it is legal for a developer to sign a 3 year term in a contract of appointment with an Owners Corporation management company.
The developer holds that power as the original owner at the time of the First Annual General Meeting (sometimes also referred to as Inaugural Meeting in VIC) where the resolution is passed and the contract is signed and sealed. The actual term of the contract is also a decision that is made by the OC management company at the time of preparing the draft contract of appointment and relevant motions for the FAGM.
Their reasons for doing this do vary and in the best interest of full transparency for the Owners Corporation, you could present that question directly to the developer and the OC Manager.
We would like to think that the developer and OC manager have set a term of 3 years as they would like a strong long-term working relationship with the Owners Corporation to help establish things and have the building running efficiently.
However, there are sometimes other reasons that contracts of appointments are longer than 1 or 2 years and with some new developments. One reason is that the developer may have sold the OC management contact to the OC management company as a way of maximising their return on a project.
The OC management then needs to recoup the fee they have paid to the developer and one way to do that may include proposing that the term of the contract with the Owners Corporation is set for longer.
Having said all of this, we do not know that this is the case with your current OC management and it would be best to ask them directly so that you have full transparency and disclosure around the term that has been set.
If the contract has not been signed by a witness, it does not necessarily mean that it will be void.
You would need to go back and review the minutes from the First Annual General Meeting and the resolution that was made around the contract of appointment which should state how it would be signed and sealed.
If it is all correct, then my understanding is that the contract of appointment will not be made void without a witnesses signature, however, I would suggest possibly seeking legal advice if you feel strongly around that as there may be something more than what I am aware of.
Concerning the access to the strata roll, each owner does have the right to inspect the books and records of their Owners Corporation and that includes viewing the strata roll (which is known as the owners register in VIC). The owners register must include each lot owner’s name and address as a requirement under the Owners Corporation Act 2006 and as such that information is not subject to the privacy act.
The OC management may request that you complete the “Request to inspect Owners Corporation register and/or records” form which can be found on the Consumer Affairs Victoria’s website and you may need to pay a fee for any copies that you would like to take.
Should the owners corporation members feel uncomfortable in attending the OC management’s offices, you could also engage an independent company such as Strata Reports Victoria or Strata Reports NSW, to carry out an inspection of the books and records on behalf of the members within the owners corporation and obtain documents and information that you require.
We hope that our responses have been helpful and please feel free to reach out if you would like to discuss things further as we would be delighted to assist where we can.
Please note that the above is based on my knowledge and experience but if you would like to obtain actual advice it would be a good idea to seek that from a specialised Owners Corporation lawyer.
Jane Giacobbe
Strata Reports Victoria
E: [email protected]
P: 0402 341 848
This post appears in Strata News #294.
Have a question about owners corporation managers overcharging in Victoria or something to add to the article? Leave a comment below.
This article is for reference purposes only and is not intended to be a comprehensive review of the developments in the law and practice or to cover all aspect of the subject matter. It does not constitute legal or other advice and should not be relied upon this way. Readers should take legal or other advice before applying the information containing in this publication.
Read next:
- Why are Strata Managers so difficult to get along with?
- VIC: COVID-19 Impact on Residential Buildings and Essential Services
- Record keeping – owners corporations
Visit Strata Managers OR Strata Title Information Victoria.
Looking for strata information concerning your state? For state-specific strata information, take a look here.
After a free PDF of this article? Log into your existing LookUpStrata Account to download the printable file. Not a member? Simple – join for free on our Registration page.
Hi can the Strata Manager (SCA member) here in Victoria legally refuse to provide OC records and register as they claim they are not having ‘face to face’ meetings due to Covid restrictions? Thanks.
Hi Verity
This Q&A should assist: VIC: Q&A Vibrant and Connected Communities
Hi Nikki thanks for you reply.
I am not sure how VIC: Q&A Vibrant and Connected Communities can assist with this query. Can a strata manager deny an owner access to the OC records in Victoria and because of Covid restrictions? And how can owners (and inc. entitled to vew under th ‘Act’) access OC records otherwise? Thanks.
Hi Verity
As stated in the article I pointed you to: “The owners corporation must make these records available to you, but may charge a reasonable fee for a copy of any record.” Michael Darby then goes on to point to the section of the legislation that allows you, as a lot owner, access to the records. I’m unsure why COVID has been mentioned as a reason to deny access. If you are unable to visit the premises to obtain a copy, the information can be supplied to you electronically.
Hi Nikki (I see now) and thanks for your reply. I agree I wouldn’t have thought it to be an issue (considering legal obligations as per ‘Act’) and as they are a large Strata Manager : I will check with Strata Manager re provision of records electronically.
Hi Nikki
I have had a recent reply from Manager and re obtaining records: The Manager claims because of current Vic Govt. restrictions, their offices is closed – no face to face meetings are permitted and until the govt changes their directives. So the Manager has said the only way to obtain records ( and this is the Manager claiming this and not the OC, as a I am on COM), i.e. and that any copies of records must be paid for by the lot owner and as per Owners Corporation Act 2006: SECT: 146(2)(3) and that there is not any alternative solution at this time. Is this correct, can the Manager on there own volition claim this? I thought OC records were free to view and usually the OC incurs the charge for the Manager’s time and if Manager decides to charge. Is this part of SCA’s policy now if so, it seems exploitative of covid i.e. taking advantage of this apparent ‘closed corporate offices’ restrictions and as (apparently) mandated by the Vic Govt. (as according to our Strata Manager’s email) and then Manager being able to charge the lot owner directly for obtaining OC records? What are the charges? I am am up to date with all vaccinations so not sure why this is the case and then how Manager (without the say so of the OC) can charge for records from the individual lotowner? Is this correct? Any help on these strata queries would be appreciated. Thanks.
Hi Verity
As mentioned previously: “The owners corporation must make these records available to you, but may charge a reasonable fee for a copy of any record.” The charge is the cost of the lot owner requesting the information. You can also find information about this on the Vic Consumers Affairs page here: Records – owners corporations
Thanks
Hi and thanks. Yes I thought that was the case so, the (SCA) Manager is out of order for charging for inspection and access to records and register. Which is exactly what the Strata Manager (in question), is doing and irrespective of reasons.
Other (SCA) Strata Manager’s (for other property I own with an OC) do not charge and if provided electronically due to not being able to attend office – they fairly on charge the OC and for the Strata Manager’s time to collect and process records and as requested under S146 of ‘Act’. It would now seem conclusive, there is an unfair inconsistency and n this regard and that some OC’s and Strata Manager’s are (exploiting) and taking advantage of Covid restriction/s situation and by choosing to claim they are providing a copy rather than providing ‘access’ to records and register. The other OC uses a drop box arrangement to view records and register requested and do not charge lot owner for this service. SCA should ensure ALL its members address covid restrictions and by eliminating convenient excuse to view/inspect records and unlike those with seemingly more integrity and scruples by making records available (as per S146 of ‘Act’) and by Dropbox to lotowner.
Thanks all the same for your assistance.
Withdraw my last email.
So we have 10 strata units paying $11,200 annual Administration Levy for collecting levies. When it comes to upholding the By-laws and acting against unlawful acts on behalf of the Owners Corporation the Strata Manager pass the buck back on to the Committee. .We could get an Accountant for less than half the cost to do the same thing. .It’s a cash gravy train for Strata Managers. for bugger all service..
Thanks Jane, for your advice on whether OC managers are justified in charging for two OC certificates per sale. I also followed this same enquiry up with the SCA (Vic) Legal Hotline and their response was:
“You are justified in charging for each requested Owners Corporation Certificate. There is no reason to provide the same by way of a free service. That said, we refer you to section 14 of the Owners Corporation Regulations 2018, which sets out the manner in which costs can be charged for an initial certificate, and a subsequent request for a certificate.”
Reg.14(b) states for each additional certificate made by the same applicant a lesser fee is charged for the additional certificate. If we are first contacted by the vendor and secondly by the purchaser, these are considered two different applicants (according to the Legal Hotline), and the second certificate can therefore attract the full fee.
Jane, when you mention the “duration of time that has passed since the first oc certificate, then depends on whether they need to request an updated oc certificate. Herein lies the annoyance around the second fee for often just a slight update” – this is where I believe many people are unaware how the certificates work and what is actually involved in their preparation.
There are 16 questions plus up to 10 attachments. Each question needs consideration and the answer needs to be gathered from the OC records. Even in a month, levies can be issued, an AGM can be held, a budget updated, a committee meeting held, a special levy issued, major works finished or started, the insurance renewed etc.
The reports all need to be generated again as per the correct date. The OC certificate needs every figure to be correct or we are held liable. It needs the common seal and to be signed by two people. It all needs to be scanned, have a cover letter and emailed to the correct person, usually with numerous communications prior and some afterwards. All of this for $150? I think that’s good value and it’s below hourly rate.
Thanks to Look-Up Strata for opening up these type of discussions – much appreciated!
Jeanie, on the contrary, if a strata manager’s service agreement doesn’t list insurance renewals and management of insurance claims as a service they provide within their strata fee scope of work, then it is reasonable that they exclude themselves from claims administration and annual insurance quoting once the committee eliminates their insurance policy commissions or kick backs. The owner’s corporations I have led down this path (three to date) have fully understood this quid pro quo and don’t hold that against the strata manager at all. The annual quoting / renewal is done by our independent brokers at nil cost and they by definition provide at least three quotes from three insurers each year (instead of jus blindly rolling over the existing insurer with the commissions in place). When claims happen (as they have with these new arrangements), the committee does need to take more individual and prescriptive responsibility for managing the claims and settlement process (but again the broker assists and the insurer invariably appoints a loss assessor to work through the issues and negotiate the settlement deal).
I’ve had an insurance renewal situation where the strata manager (taking a commission) said they would not be prepared to deal with a different insurance broker that they didn’t appoint and if the committee went down that path then the committee would have to liaise on all matters relating to insurance claims. I found this all rather odd. Aren’t the strata managers supposed to be working for us?
From an Owners Corporation Management Companies point of view, it is not worth taking on new developments if you are only going to receive a one year Contract. For all the work that it takes to set up a new building, enter all the information into the system, manage the move in process, hold an SGM to appoint a Committee, push to get a defect report completed amongst others, by the time all of this is completed, you have hardly enough time to get your feet under the desk and have the real possibility of losing the Contract to a tender process.
Whilst there is little doubt that some Developers will seek compensation from some Owners Corporation Management Companies as a ‘sweetener’, it is foolish to tarnish all Developers and likewise all OC Management Companies with the same unethical brush.
Also, reading some of the comments from others regarding insurance commissions, it would seem there is a sincere lack of knowledge as to what is involved in the insurance process. Whilst we are advocates for this to change across the board, we propose no insurance commissions and increase the management fee so there is greater transparency within the industry. The lack of understanding of what an OC Management Company does for their commission leads to generic statements like some above.
It is also extremely difficult to incorporate an all inclusive contract cost due to the flexible nature of the industry and building make up. For example, how does an OC Management Company know how many meetings the Committee will hold throughout the year and how long they go for. Some want monthly, 2 monthly, quarterly, 6 monthly or none at all. If an all inclusive cost, the one OC could request attendance by the manager on site for hours on end. This is evidently not suitable for any business.
Disbursements vary so dramatically, how many Owners are going to receive their notices via post compared to email.
Building defects, dispute resolution, VCAT attendance, breach notices, access device requests, insurance claims, quote requests, work orders, debt collection follow up, all of this is variable. The above comment promotes all inclusive Contracts but in reality this is extremely difficult to measure without knowing all of the above, which you never do.
Thanks Scott – well said!
Strata Fair is a broker we have used that doesn’t accept insurance commission. Taxes also get reduced when no commission is taken which makes for some pretty compelling savings.
Interesting point you make about the tax return cost vs interest earned – particularly considering the meager rates at the moment. I’ll have to look into that one.
At a point in the development cycle, the developer owns all the units and hence all the votes ( this is technically called the developer control phase). Contracts made in this period should be carefully scrutinised as part of due diligence as there is an obvious scope for conflicts of interest. This is where developers may do sweetheart deals for management and caretaking with their associated firms.
Hopefully there isn’t an option to renew!
This can be a common problem in new developments in my investment experience – only surpassed by developers appointing caretakers on multi-year, gratuitous contracts that are even more outrageous than the strata manager appointments. Until purchasers get savvy enough to critically evaluate these strata mgt and care taking arrangements as an element of their purchase decision, developers will continue to get away with this somewhat dishonourable (but rarely illegal) conduct. If purchasers said to the selling agent that they weren’t interested in a unit because of these peripheral arrangements and that impacted the developer’s sales, the practice would eventually start to improve? However once you are in the mire as an owner, so to speak, you probably need to wait out the 3 years and then have a much more rigorous approach to selection and appointment of the next strata manager. We have transitioned strata management agreements for properties in NSW, QLD and the ACT to new contracts that are ethical, all-inclusive strata management agreements that eliminate all disbursements, fees, third-party charges and the like. If you would like a copy of a typical all-inclusive agreement, I can send one on request. You also need to be savvy about some of the additional costs. For example paying hundreds of dollars a year for the strata manager to supposedly lodge a tax return for the body corporate is ridiculous if the strata has minimal investment earnings from its capital works / sinking fund account. Your committee might instruct the strata manager to shift the funds into a non-interest bearing account so as to avoid this liability and sham fee? Similarly, for the dodgy practice of insurance commissions retained by strata managers, you can now find independent brokers who will not accept commissions or rebate any received to your body corporate.