Strata charges – a question of cheques and balances

How much can you – or should you – trust the professionals who are contracted by your owners corporation?

Bearing in mind the major factors at play here – owners’ apathy and ignorance – you’d be forgiven for thinking this is an area wide open for abuse.  However, that doesn’t mean all strata managers and building managers are ripping off their client strata schemes.

Most don’t but  some do.  On my latest Flat Chat spot on ABC Radio (click on the podcast on the left, if you want to hear it) a woman phoned up on behalf of her son whose building’s management company was charging excessive and multiple fees for the by-law (or rule) he needed for renovations he wanted for his apartment.

Now, on the face of it, this is a rort, although there has to be a binding agreement that, at the very least, transfers responsibility for common property to the renovator and whoever buys their unit in the future.

And it’s probably perfectly legal thanks to special clauses written into the building management contract.

It’s akin to the Schedule B shenanigans where a strata management firm signs you up on ridiculously low base fees then hammers you with charges for every phone call, email or paper clip.

One of the biggest strata and building management firms in the country recently slugged all its clients with additional fees for adjusting to the new strata laws in NSW. Most other strata manager didn’t – writing off any costs as an essential part of their services

So why would any strata owners corporation (body corporate) sign an agreement that has the option for undefined charges?  See “apathy and ignorance” above.

This kind of thing is especially likely in schemes that have fallen for the old “one-stop shop” nonsense, whereby your strata manager and building manager are, conveniently,  part of the same company.

Anyone who can’t see the potential flaws in having the people best placed to provide checks and balances on each other working for the same company, shouldn’t be allowed to play with Lego, let alone own property.

Admittedly, a close relationship between the strata and building managers is the norm in Victoria and it’s hard to tell how good or bad that is. Let’s just say there are plenty of honest operators and a few bad apples, just like anywhere else.

So what can you do? Before any management contract comes up for renewal, ask your strata committee to conduct a forensic check on all the clauses, what they have cost in the past and what they might include in the future.

Crank up those under-used spreadsheet skills to model whether or not you are better off on a low fee, high schedule charge contract, or one with an all-inclusive cost.

And contact voluntary groups like the Owners Corporation Network (OCN.org.au) to find out what other strata schemes have done.

This column first appeared in the Australian Financial Review.

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