How no-show investors profit from our efforts

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The following was originally posted as a comment to our piece on why investors should get more engaged with the apartment blocks in which they own properties.

Our sponsors Strata Answers responded with this question:  why do we allow absentee investors to freeload off the hard work and goodwill of the residents and other owners who get involved, do the work and make the building a better place to live?

Why have investors been able to reap the returns from their properties for so long whilst remaining disengaged from the planning and decision making so essential to a functioning strata building ?

In a nutshell …they have been freeloading off the efforts of a few committed owners who volunteer their time and energies to make their buildings attractive places to live and in so doing valuable investment propositions for others.

Don’t expect that we can go forward for ever relying upon the efforts of volunteers to man our Committees. The bush fire crisis reminds us we cannot expect our bush fire brigade volunteers to give up hours, days & weeks of their time without some reward.

Perhaps we also need to be reminded that there is a small band of strata owners out there serving on Committees and doing the heavy lifting for all those passive investors and owner occupiers who year after year fail to put their hands up to serve.

The volunteer strata committee model is broken. Our strata buildings now demand greater technical understanding, the acumen of a business operator and a time commitment that few could come up with. As long as a few engaged owners are expected to work unpaid for the benefit of everyone else, any pool of talent a building has will go largely untapped.

If a building is fortunate enough to have talented people amongst its owners, then it should be paying them, not through the vagaries of a golden handshake the year after next, but properly for the value they add.

It’s hard to say if any investors would step up for Committee duties, but at least they would be contributing to the costs of safeguarding their investment.

Strata Answers
http://www.strataanswers.com.au
Practical Solutions for Strata Living

6 Replies to “How no-show investors profit from our efforts”

  1. Avatar Ester69 says:

    Jimmy I agree that it is unacceptable that investors do nothing to contribute to the running of a multi-million dollar asset, and the workload falls on the shoulders of a few. As an owner occupier I want my home and surroundings to be a pleasant place to live, my motivation are not dependent on getting any thanks which is almost never forthcoming. In fact, I have in the past had some ingrates making demands of me saying that “I should do my job” thinking that I was somehow paid. Although truly pissed off at the attitude, I was pleased to be able to point out that ” I am just a volunteer”. This gives me the reprieve to undertake my duties without anyone making unreasonable demands on time, since I already have full time employment as well being the primary contact for the building. Paying monetary sums will change the nature of the contribution I make, and I fear that the expectations will need to be managed, which is just more work! As a alternative, what about a financial contribution from the non-active? A levy on non-contributors? On average I would spend at least 2 hours per week on Strata business. The dollar amount ascribed by ABS to volunteer labour is $41.72/hr. Give investors the option contribute an hour a week of your time or pay the levy. What do you think, would it fly?

  2. Avatar FDH says:

    Wow, so nice to see this article clearly expressing this conundrum and for me, crisis of conscience.
    I do indeed feel begrudging sometimes, particularly when as Ester69 says, facing any implication of being absolutely required to go beyond the call for particular demanding owners above others. Guilty.

    The conundrum and conscience are born of the very same fact that it is a voluntary role and a choice, so … suck it up.
    I spend easily 60 hrs a week, fulfilling all three executive roles as well as onsite building manager of a very large complex, and also taking up many of the Strata Manager’s trad duties. Believe it or not, while still maintaining my own usual profession (albeit in a highly reduced financial capacity) Some here will understand why this has had to come about.
    Many assume you are being paid (particularly when they often spot you down a muddy hole with a plumber trying to stop a mains geyser with your hands or similar). When you tell them different, they are enormously thankful, implore that you should be paid and get quite angry on your behalf.

    My steady pony speech is not that I’m a volunteer so it’s my choice, or that I’m not required to ‘do my job’ – but that anything else would be a huge conflict of interest. Yes I agree I should be paid, but in my position, I could be creating my own work orders and signing off on my own cheques. When that sinks in, there is usually an even greater outpouring of gratitude. But no money. Therein lies the conundrum.

    I know I’m doing this for the explicit purpose of financial rescue of the building and to provide the best services possible to owners. I have great support from the vast majority who say they trust me to give myself a job so they’d be all for it, but that’s not the point.

    I won’t always be here, and setting up a system which is open to any sort of manipulation or even corruption, could take us back to the dark ages and then I’ll have truly have wasted my time and finances.

    Truth is, if you pay invisible peanuts, you’re lucky if you don’t get do-nothing, care-less monkeys, or those who’s skills are nil and payment is self aggrandisement and power. These are not the people you want running your home or your managing your investment.

    Those who aren’t either of those, will soon tire of ingrates and sometimes even abuse and go back to being paid properly for their expertise or just plain living in peace.

    If anyone can, or already has come up with an equitable and airtight solution to this strata-wide problem, taking submissions right here thanks.

  3. Avatar Jimmy-T says:

    This is now being discussed in the Flat Chat Forum

  4. Avatar JAE in WA says:

    In my experience as a strata owner/occupier in one of the largest strata complex in WA, the investors (especially the developer and those who own commercial lots leased to tenants) literally take advantage of owner/occupiers.
    24 of our 523 lots are commercial lots.
    12 of these are in a separate building and includes a hotel with 23% UE which consumes nearly 50% of electricity and water but the expenses are routinely allocated to the building by UE. While all other lots are charged the retail rate for electricity supplied via our embedded network, the hotel is charge only the average cost price/kwh and only pays invoices after requiring the SM to justify its calculations (a process that has sometimes taken up to 15 months). In addition to being subsidised and effectively relying on the other (uninformed) owners as involuntary creditors, it causes cash flow crises that result in the strata company being charged penalties for late payment that it cannot recover.
    The employees of the tenants of commercial lots (particularly the hotel) and their lot owner and the tenants of the developer who still controls over 20% of UE, simply ignore bylaws without consequence because the affiliated owners have too much influence re council elections and the appointment of contractors.
    A property manager, who is the proxy for 80+ investor owned lots and the chair (an investor who is personally the proxy for 60+ lots) together with the corporate owners completely control the strata company. Since the non-affiliated investors need the support of the affiliated owners to be elected all members of the council have a conflict of interest and the rest of us can do nothing except litigate and suffer the consequences.

    I agree that “the volunteer strata committee model is broken” but for different reasons…too often the volunteers simply delegate their responsibilities to a strata management company that assigns an inadequately competent employee to manage the strata company without oversight.

    Commercial strata managers can operate in WA without any qualifications or experience – the industry is entirely unregulated. The long awaited reforms will require minimal qualifications to be acquired of the principals but those requirements do not apply to their employees. Consequently, my strata company (with a turnover of $3m) will likely continue to be ‘managed’ by a succession of poorly paid and overworked individuals who, having no personal knowledge of the legislation or our complex bylaws, will benefit the powerful interests to the disadvantage of those who call the place home.

  5. Jimmy-T Jimmy-T says:

    According to the WA Landgate publication “A Guide to Strata Titles” the WA state Administrative Tribunal can issue orders to “proportion strata levies on basis other than unit entitlement”. That would have to be worth a try, no?

  6. You’d think that being able to contact your fellow owners in strata was basic to the sort of cooperative living all of us in strata have bought into. But listen to Flatchat‘s podcast and you’ll learn of the lengths that Strata Managers and Committees go to prevent one owner talking to another.

    It seems there is a common belief amongst strata managers that the email addresses of strata owners do not form part of the strata records. Erroneously they fall back on Federal Privacy legislation – legislation that could only possibly apply to those few owners corporations with a turnover in excess of $3 million and in any event would not prevail over the rights in strata law of owners to have access to their OC’s records.

    We think about strata records as being what the strata manager holds, but an owners corporation’s records do not stop there. If a building is of any size, it will have a building manager. Behind that screen he sits in front of in the basement lies a treasure trove of information. Whether it’s kept on a building management software platform like Buildinglink or Mybos or on spreadsheets, the maintenance and defects history of a building is there, apartment by apartment, area by area. Pure gold. This history and a library of expert reports are a lifeline for owners wanting to save themselves and their building from the costs of inaction over building defects etc.

    The scariest thing would be if the owners corporation had allowed their building management to take ownership of their records by running software licenced to the BM on the BM’s computer. Hopefully not. This alone is a recipe for losing access to key owners corporation records.

    Fast forward to NCAT where we recently had to go to get access to Building Management records for an owner. At least the building manager was not asserting title; in this case it was just the Committee wanting to keep an enquiring owner in the dark.

    Did NCAT agree to the application ? No. NCAT required us to demonstrate that allowing an owner access to their building management records was not going to lead to any infringement of privacy ! Seems like NCAT is no better informed than strata managers, confusing an owner’s right to access records with pure speculation on what an owner might, or might not, use those records for.

    STRATA ANSWERS
    http://www.strataanswers.com.au
    Practical Solutions for Strata Living

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