Shackles applied to strata managers

The NSW government has introduced a bill into parliament that will replace the existing Strata Schemes Management Act 1996. If enacted, there will be some significant changes to NSW strata legislation.

Strata managers have been particularly targeted under the proposed legislation.

Why strata managers?

Some strata managers have been accused of acting unconscionably in relation to their agreements with owners corporations. For example, there have been agreements which are deemed automatically extended if the owners corporation does not give notice six (and sometimes 12) months prior to the expiry date. The owners corporations’ ability to terminate these agreements is often lost, long before the executive committee realise the early cut-off date.

Also, many owners corporations have complained that their strata manager has “sold” them to another strata manager without their prior knowledge and consent. Under the existing agreement, the owners corporation had no ability to say “no” to the transfer.

Proposed new legislation

  1. The term of appointment of a strata managing agent will now be limited to a maximum of 12 months for an agent appointed at the first annual general meeting or three years for any other appointment, with any re-appointment also limited to a maximum term of three years.
  2. A strata managing agent may only transfer his or her functions as agent if the transfer is approved by a resolution of the owners corporation at a general meeting.
  3. It will be an offence for a strata managing agent to request or accept a gift or other benefit for himself or herself or any other person in connection with the provision of services as an agent, other than a monetary commission included in the agent’s terms of appointment or otherwise approved by the owners corporation.
  4. A strata managing agent must report, at an annual general meeting, monetary commissions received from third parties in the previous 12 months, as well as commissions and an estimate of commissions expected in the following 12 months. The agent must also disclose to the committee of the owners corporation variations from the commissions disclosed, as soon as practical after becoming aware of the variations.

Impact on strata managers

The proposed legislation is designed to clean up the some of the perceived bad practices within the strata management industry.

Personally, I believe that the industry needs to change its model. Many years ago I attended a strata managing agents’ conference in Geelong where the well-known and respected lawyer, Gary Bugden, was the keynote speaker. Gary made the point that strata managers made too much of their income by stealth – one-third from the agreed set fee per lot per annum with the owners corporation, onethird from insurance commission trailers and the balance one-third from “add-ons” such as photocopying, additional secretarial services etc. He implored strata managers to man-up as a group and charge a proper fee for their services – something like $350 per lot per annum instead of $120 per lot per annum (at the time).

I have often looked at the work strata managers do and wondered how they can be profitable for the base fees they charge. They should be paid more.

It looks like the government has now wondered the same thing and hence devised legislation to make disclosure paramount!

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