Licensing of strata managers needed to offer greater protections to owners

REIWA has previously proposed that strata managers be incorporated into the real estate industry’s existing licensing regimes, consistent with the requirements that apply to real estate agents.

Currently, many specialist strata firms operate outside the licensing framework, despite performing similar functions to real estate agents and managing substantial funds on behalf of lot owners. Unlike real estate professionals, they are not subject to mandatory trust account audits.

Licensing strata managers would require adherence to a statutory code of conduct and completion of Continuing Professional Development (CPD). It would also bring the industry under the oversight of the Department of Local Government, Industry Regulation and Safety (LGIRS).

We believe this would improve professionalism, accountability and consumer protections, particularly in relation to the management of strata property owner’s funds.

For example, should a strata manager who is a licensed real estate agent embezzle the funds they hold on behalf of lot owners, those owners may be able to seek compensation through the Fidelity Guarantee Account. The account helps provide financial reimbursement to people who suffer loss of trust money or trust property through the criminal or fraudulent actions of a licensed real estate agent or their employees in the course of a real estate transaction.

However, if an unlicensed strata manager embezzles funds, owners would be unable to make a claim through this account and their strata scheme may suffer significant financial loss. It is also unlikely that insurance would cover this loss.

A recent incident also highlights the additional protections licensing could provide to lot owners.

Earlier this year, the director and licensee of a real estate company unexpectedly passed away. The company provided residential sales, property management and strata management services.

The person was the sole director of the business and the only licensed real estate agent authorised to operate the agency's trust account. This meant that no payments, such as a scheme’s insurance premiums, could be made from the trust account.

In situations like this, where a strata manager is a licensed real estate agent, they come under the oversight of Consumer Protection, allowing Consumer Protection to appoint a statutory supervisor to oversee the business. 

The statutory supervisor will:

• take control of the business and the administration of its trust accounts
• undertake a forensic review of the trust accounts. If fraud is identified, owners may be able to make a claim against the Fidelity Guarantee Account 
• determine the funds held in trust and identify those entitled to receive them 
• oversee the orderly wind-up of the business and distribution of trust monies. 

This will ensure essential payments can be made and lot owners have the opportunity to end the business relationship and find another strata manager.

If this had been a strata management company with an unlicensed owner, lot owners would be left in limbo. 

We appreciate licensing would be a significant change for the strata industry. However, WA has a growing population and the number of strata title schemes is expected to increase as we seek to deliver more affordable medium and high-density housing options. The industry needs clear and consistent professional standards and strata property owners need adequate protections.