Question: We changed our strata management company and received the books and funds in December 2023. Since then, we received some charges. Can they invoice extra charges after the transfer of books has taken place?
We changed our strata management company in December 2023. This was the date the books and the owners corporation funds were transferred. After receiving the last statement two months later, we noticed unusually high charges collected by the previous strata manager before the transfer of the books.
We sent an e-mail to the previous strata manager disputing the charges. Weeks later, they responded, saying the charges were discounted and they were preparing a tax invoice for other uncharged services.
As their Agency Agreement ended in December 2023, can they invoice extra charges after transferring the books? Does this mean that the financial statements in the AGM agenda for the February 2023 meeting would not be a true reflection of the owners corporation’s financial position?
Answer: The management agreement should state what agreed service and additional service charges the agent is entitled to charge and the period they are entitled to charge them.
Read the management agreement between the owners corporation and the previous managing agent thoroughly. This should state what agreed service and additional service charges the agent is entitled to charge and the period they are entitled to charge them.
It’s important to note that the managing agent is only permitted to carry out the functions of the owners corporation and charge fees whilst a valid agreement is in place. You should check that you haven’t been charged for any work performed after the agreement’s expiry date.
You’ve mentioned the charges before the handover were unusually high. A significant amount of work is required to “offboard” an owners corporation (closing bank accounts, updating StrataHub, finalising accounting, collating electronic records, preparing physical documents, etc.). I expect some additional charges relating to that. The amount would depend on whether a specific charge is specified in your management agreement or how much time was required for the offboarding.
Assuming the charges you are referring to were for work carried out when the agency agreement was in place, I don’t see any issue with an outgoing managing agent issuing an invoice after the agreement has expired. As with any invoice, your owners corporation can dispute it if you feel it is unjustified.
Regarding the financial statements, most owners corporations use a hybrid of cash accounting and accrual accounting. It’s quite normal that the financial statements received at the AGM did not include some future expenses that are likely payable but which have not been entered into the accounting system as a liability because an invoice has not been received.
Please note, this is only general advice. Depending on the particulars of this matter, your strata committee might want to seek advice from a lawyer experienced with strata matters.
This post appears in the June 2024 edition of The NSW Strata Magazine.
Edward Baker
Responsive Strata
E: edward.baker@responsivestrata.com.au
P: 0493 970 875
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