News In Brief

Report Into NSW Strata Calls for 600 Changes

NSW fair trading minister Anthony Roberts has welcomed the release of the Global Access Partners’ Strata Laws Online Consultation Report. Hosted on the Open Forum website for 11 weeks from 15 December to 29 February, the consultation saw 1230 individual comments on four key questions and 25 blogs.

Overall, almost 600 suggestions for procedural change or law reform were put forward by participants who included strata owners, executive committee members, managing agents, tenants and other interested individuals and organisations.

The number one problem appears to be strata managing agents and some of the comments were fairly pointed.

“I don’t have a great deal of confidence in the capabilities of the strata managers I have come into contact with. Lack of knowledge of relevant provisions of the act, knowledge and forms not updated for newly changed provisions of the legislation, refusal or reluctance to follow the specific requirements of the legislation, rigid adherence to past procedures, sloppy clerical procedures, circumvention of best practice and generally poor meeting chairmanship skills come to mind,” was one comment that summed up the thread of complaints.

It was felt that strata managers have more rights over strata units than the owners corporation.

There were a litany of complaints about the competence, honesty and conduct of strata managers. Many owners raised questions of bullying, conflicts of interest and corruption in the handling of building and service contracts, and the need for greater accountability and transparency was a common theme. Others complained that managers proposed work which did not need doing, and were evasive or deceitful about quotes arranged for such work, in order to line their own pockets with kick-backs from tradespeople and contractors.

Some condemned the 15% commissions given to agents by insurance companies that can amount to many thousands of dollars and argued that such payments should be banned.

Some of the recommendations included a mandate for higher standards for strata manager qualification; all strata managers should have to hold a well accredited TAFE certificate in Basic Strata Management and should be obliged to attend and pass regular and comprehensive “refresher courses” covering mediation techniques and new legislation.

Strata managers should display their rules of conduct, the rights and responsibilities of lot owners, their services fees and any commissions they receive in their meeting rooms for the benefit of owners and tenants.

There is a recommendation to abolish the SCA in favour of a more effective body with the power to confiscate strata manager licences and impose meaningful fines.

The report suggests the appointment of a strata manager to be undertaken by the owners corporation at a general meeting, rather than the executive committee and require the declaration of any actual or perceived conflicts of interest between strata management and the owners corporation as well as require a draft strata management agreement to include a written quotation for strata management services and withhold payment if a copy of the contract is not provided with AGM agenda papers.

It also calls for compelling strata mangers to make all accounts freely available online.

Contract terms also came under scrutiny. As standard contracts drawn up by management interest groups favour their interests over those of the owners, NSW Fair Trading should introduce a standard form of strata management contract similar in principle to the residential tenancies agreement.

It also calls for managers to agree to be paid a non-negotiable flat fee for services rendered to prevent levies being increased unfairly once the contract is secured and managers should be prevented from charging fees for answering a phone or face-to-face inquiry from an owner.

No contract for a strata managing agent should be longer than two (or three) years and every contract must be explicitly, rather than automatically, renewed at the AGM. Mandate that at least two competitive quotes for management services be submitted to the AGM for discussion before a contract is entered into or renewed. Such contracts should stipulate that strata managing agents have legal liability for their actions and they should be prohibited from using owners corporation funds to pay legal or other expenses, if a case is brought against them for mismanagement.

The report also calls for set performance based service standards for strata properties managed by agents to ensure that “adequate effort is applied” and to fine strata managers if they fail to arrange work agreed with the owners corporation within one month. Alternatively, they should gain demerit points, whose accrual would eventually lead to the loss of their licence.

Strata managers should not be able to authorise any works without consulting the executive committee and should also acquire at least two quotes for any proposed work. Any major or costly work should require a meeting and majority consent of all owners and strata managers should have more power to enforce maintenance and building standards in the face of opposition from owners unwilling to pay reasonable levies.

The area of commissions and charges gained a fair amount of attention. The report recommended that strata managing agents should be allowed to receive commissions up to 5% of contracted amount, but no more than $1000 per contract and only if that commission is approved by the owners corporation at a general meeting.

Strata managers and agents should be prohibited by law from accepting any commissions from insurance companies, tradesmen and service providers to prevent conflicts of interest.

Repairs and maintenance carried out by contractors should be inspected and approved by resident owners or the management committee prior to payment to prevent strata managers charging false expenses. Sinking fund accounts should not be held or controlled by a strata manager.

The report also calls for a specialised strata manager ombudsman empowered to investigate owner complaints and accusations of incompetence and corruption. This office would have powers of entry to investigate, audit and inspect records held by strata managers without prior warning.

One strong recommendation was to empower unit owners to remove unsuitable strata managers in the face of apathetic or intransigent executive committees. A letter signed by a certain percentage of owners should be sufficient. If more than 10%-15% of owners for large scheme and 15%-20% of owners for small schemes support the removal of the existing managing agent, an application for a compulsory managing agent should be automatically handed down by an adjudicator.

All of the above was taken from the Global Access Partners’ Strata Laws Online Consultation Report and covers just one aspect of those analysed. The report, of over 120 pages, is available online at http://globalaccesspartners.org/Strata_Laws_Online_Consultation_Final_Report_Apr2012.pdf

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