This article on strata managers duties has been supplied by Lisa Rutland, MyBodyCorpReport.com.au.
I’ve seen two pieces of content recently, both from respected professionals in the strata industry, both saying the same thing: The strata world is changing, and it’s changing by devolving management into the hands of the lot owners.
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For anyone who’s read anything I’ve written, you might be a bit confused. One of the key things I talk about is how the lot owners are already in charge of strata schemes and not the manager. It’s a myth that the strata manager is running things.
Sensing a flaw in my argument?
The problem is strata managers can, and do, wield a lot of influence. It can very much seem that they’re in control, notwithstanding they don’t actually make decisions.
Let’s examine the ways, direct and indirect, in which strata manager control strata schemes.
To discuss control it’s helpful to first get clear on how strata managers get paid.
How Strata Managers Make Money
Strata managers are appointed under a written agreement to undertake certain tasks on behalf of the scheme, “the services”.
To undertake the services the strata manager is paid a fee per annum, usually expressed per lot. That fee is usually kept as low as possible to be as competitive as possible. But, the fee is not the end of the remuneration story.
Along with the “services” most agreements will also include “additional services”. These are the services for which an additional fee will be charged. It includes things like running EGM’s, preparing orders, completing tax returns and so on.
But again that’s not the end of the story.
One of the most lucrative forms of income for the manager comes from referrals. It’s lucrative because there’s no investment of extra man hours such as for additional services, but there is extra income, for undertaking works they’re already being paid for.
The most common is commissions on insurance policies.
Finally the manager makes residual income from associated costs like photocopying, postage and other associated charges. They also charge and receive the legislatively mandated fee for record searches and information certificates.
It’s important to note all these forms of income are fully disclosed in the strata management agreement. It’s also important to note they vary widely across managers and schemes. Always refer to a specific agreement when discussing appointments.
How Managers Effectively Control Strata Schemes
I’ve worked as a personal assistant many times in my career and in every role the same thing has happened: I became the leader surrounding various tasks, notwithstanding my actual role was to support the director. That support included taking responsibility.
It’s exactly the same for strata managers. They’re appointed to undertake the “services” which means they become responsible for all the tasks associated with certain activities.
In a strata scheme that’s the bulk of the activities of the body corporate. For the most part the strata managers’ services will include:
- AGM’s – including nominations, agendas, ballot taking and producing minutes
- Committee Meetings – agendas, ballot taking and producing minutes
- Managing Finances – including issuing and collecting levies, preparing budgets and managing cash flows
- Respond to correspondence
- Curate the body corporate records and respond to correspondence
For the majority of owners these transactions will be the extent of their interaction with the strata scheme, which means for the majority of lot owners in every way the strata manager is in control.
And yet for all that seeming control the strata manager is not actually making any decisions. The forms that the bulk of these services take are heavily legislated. For instance general meetings have complex time frames and documentation that must be observed.
Strata managers simply follow legislative procedures. Where input is required, say for instance setting levy collection policies, direction is requested from the committee or the collective owners. Check your AGM minutes and you’ll likely find a motion regarding collection policies.
Strata managers may seem to be in control but it’s an illusion. They’re contractors hired to undertake tasks and the more professionally they accomplish that the better for the scheme.
Strata Managers duties: So how do strata managers’ influence and control strata schemes?
Knowledge is power
Strata managers are not making decisions but they are in a strong position because they have the industry knowledge. The committee and the scheme is tied to the strata manager to gain access to that knowledge.
And that’s one of the clear ways strata managers as a whole keep a firm grasp on the strata industry; there isn’t a way for strata schemes to obtain that industry advice, easily and cheaply at least, other than through hiring a strata manager.
As far as I’m aware there are no strata managers offering ‘by appointment’ advice to strata schemes, similar to what a solicitor may offer.
For a scheme wanting to self-manage and save money this is one of the key disadvantages. The tasks of a strata scheme are not difficult to do, but knowledge of the various acts is vital. It effectively keeps strata managers an integral part of the process for most schemes.
Appointment of contractors
If works need to be done around a scheme there’s a definite process that must be followed depending on the type of work and how much it costs. A minimum of two quotes are usually necessary before any decision can be made.
But whom do you ask to quote?
This is actually an area of strata schemes that’s open to exploitation from any number of directions. Committee members may have friends quote. Strata managers may have certain firms who offer incentives quote. Building managers may quote themselves under a different name.
Strata managers offer slightly more protection for strata schemes with placing contracts in that they need to disclose relationships from which they obtain a financial contribution.
And there are actually benefits from appointing regular contractors. For instance, an auditor whom a strata manager uses across all their schemes will quickly become familiar with the way the manager prepares financial records allowing quicker turnaround times.
The point here is that placing contracts, however it happens, is a position of power.
Do tell me what to do, but I may not do it
Strata managers advise. They advise on how to interpret the legislation and what the scheme can and can’t do, to the best of their knowledge.
The decision of how to proceed remains with the committee and the lot owners.
But, strata managers have strict codes of conduct. If the committee or owners decide on a solution to a situation, and that solution is not in accordance with the legislation the strata manager will likely refuse to do it.
To do otherwise opens the manager up to legal action and invalidated insurance policies.
Software and Systems
One of the key strata managers duties is to manage the financial transactions of the strata scheme. In a lot of ways they act as bookkeepers, processing transactions, raising invoices and paying bills.
Being a bookkeeper is not hard, and many small, self-managed schemes do use MYOB or Quickbooks to process the scheme transactions.
Strata managers by contrast use powerful purpose written strata programs like StrataMax or Rockend. There are numerous benefits that come from these powerful programs which manage not just the financial transactions but other important tasks as well.
Unfortunately these programs are expensive subscription based services. They’re also complicated and take time to learn and understand, and of course pre-suppose you understand the tasks the software is solving.
Costs for these programs are high, but offset across a number of schemes, they are a powerful tool that enables strata managers to undertake their services quickly and efficiently.
Notwithstanding some strata managers do on-charge some of the cost of the software subscription to their schemes for the most part a subscription will be too expensive for most schemes to manage themselves.
Gatekeepers of information
Any search agent with a lot of experience will tell you it’s common for body corporate records to change over time. Items are sometimes redacted. Documents are lost, or found for that matter. Strata managers change, the records persist but information goes missing.
Strata managers are often firms, sometimes with multiple levels of employees and many, many strata schemes under management. Further, filing, well it’s usually the job of the lowest person on the totem pole and misfiling happens regularly.
It can seem like strata records are inaccessible, which is certainly not the case. Stakeholders are allowed access to the records, the committee at any time with no charge. It’s ironic to me that with such valuable information at fingertips so few people actually access it.
Conclusion: Strata Managers Duties
Strata managers are huge players in the daily life of a body corporate. They do exert a lot of influence and in some ways control the way the scheme moves forward.
It’s important to note that in most cases this is exactly what they’re hired to do.
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