More than 200,000 unit owners have been slugged with compulsory ‘compliance fees’ potentially totalling millions of dollars, that critics have branded ‘gouging’.
And the NSW Government Minister in charge of strata has advised apartment owners to “shop around” if they aren’t happy with the fees.
The charges have been imposed on buildings managed by PICA companies, the largest strata management group in NSW, which includes BCS, Dynamic and GK Strata Management, among others, in its portfolio.
PICA claims they are necessary to bring its systems into line with the new strata laws that came into force late last year. According to its website, more than 220,000 strata lots across more than 11,000 buildings are managed by its subsidiaries.
But Innovation and Better Regulation Minister Matt Kean has joined a chorus of disapproval from the strata community, saying he thinks the charges are unwarranted.
“I would think dealing with changes in the law was a normal part of business for strata managers and I encourage owners’ corporations to shop around for the best deal,” he told Domain.
“Like other consumers, they can take their business elsewhere if they are not happy with the service or price.”
The charges, permitted under catch-all clauses in PICA agreements, will see individual owners slugged anything from $130 per unit to less than $5, depending on the size of their scheme.
Rough estimates put the potential income at upwards of $2 million but this was vehemently denied by Peter Byrne, PICA’s Executive General Manager, Business Development and Marketing.
“Even if that was the case, it wouldn’t cover the additional cost to us,” he said, adding that the charges were to “partly recoup the cost of work done for our clients to ensure they are in compliance with the new legislation.”
But other strata managers have branded the charges as opportunist, saying that compliance with law changes is just a normal cost of running a business that doesn’t need to be passed on to consumers.
And Yasmine Catley, Shadow Minister for Innovation and Better Regulation, says anyone living in an apartment should check to see whether a ‘NSW Government legislation compliance fee’ was being charged by their strata managers.
“Any professional body needs to deal with legislation from time to time – and not expect residents to pick up the tab,” she said.
“The Minister needs to intervene and ensure that those who live in apartments know about this attempt to gouge fees from the recent changes in strata laws.”
The PICA Group charges are based on the size of the strata schemes and the hours of work they say are needed to ensure compliance with the new laws. Two to 15-lot schemes have been charged $260 (based on 1.5 hours work), 16-50 lots are being charged $510 (2.5 hours), and schemes over 50 lots are being charged $690 (3.5 hours).
Strata Committees have received letters telling them that the charges were imposed last month and will be included in their annual statements at their next AGM.
“As you know this is the first significant change to the legislation in 20 years,” said Mr Byrne. “We strongly believe this to be fair and reasonable given the large cost of the work done for our clients.
“We did make a conscious decision to call out the charge as a one off against the scheme (not per lot) in an attempt to be transparent as opposed to picking it up in fee changes into the future to recoup the cost of work done for our clients.
“Charges would have been a lot higher if they had been charged on an hourly basis per change across every scheme.”
However, other major strata managers have reacted with surprise at the charges and the way they were imposed.
“Keeping up to date with legislation changes is all part of running a business,” said Daniel Linders, group managing director of Strata Choice and Senior Vice President of Strata Community Australia, the strata managers’ professional body.
“I have just sent out an email to all our strata managers telling them to reassure our schemes that under no circumstances will we be charging extra for compliance.”
Another independent strata manager who asked not to be named said the charges were legal, within the terms of the standard PICA group contracts, but unwarranted.
“It’s not like they are starting from a blank page every time they bring their templates up to date,” she told Fairfax Media. “That’s why they are called templates.”
Peter Byrne denies suggestions that PICA is trying to offset the cost of building Urbanise, a multi-milllion dollar cloud-based management system covering all its various subsidiaries, that it launched last year.
“Other strata managers will have to cover their costs of compliance too,” he said. “Most of them will absorb the costs into other charges so the clients won’t even notice. We made the decision to be open and transparent about it.”
However, leading strata lawyer Amanda Farmer of Your Strata Property questioned the validity of the compliance fees.
“These are not expenses incurred providing additional services to a particular building,” she said. “They are the expenses of the strata management business.
“As a specialist strata lawyer, I too have incurred expense bringing my template documents up to date and educating myself and my team on the ins and outs of the new law. I would be hauled over the coals if I attempted to on-charge those expenses to any particular client or group of clients.”
The compliance fees do not cover the compulsory review of by-laws that all strata schemes have to undertake by the end of this year.
“Requirements for conducting a by-law review will differ per scheme, so the costs will differ depending on the nature and needs of the scheme,” says Peter Byrne.
You can find reader posts about the compliance charge HERE.