The owners in a blighted apartment block in Carlingford, Sydney, didn’t quite have the perfect storm of strata woes. Okay, the block was riddled with defects, and their strata manager was deemed to be so bad that they became the first ever in NSW to be banned for life.

But at least they weren’t actually robbed of their funds, like the owners in 66 strata schemes on the NSW Mid North Coast who saw $2 million of their hard-earned dollars disappear, allegedly into their strata manager’s personal accounts.

On a less obvious method of extracting money through dubious means, strata owners have been warned about “bait pricing” where artificially low management fees are offered but they can mask poor systems, inadequate staffing or excessive “Schedule B” charges for essential work that is not specified in the contract.

When you look at these and other potential strata disasters, you’re entitled to think marketing spiels for new apartments should carry the same rider as gambling ads: “Chances are you’re about to lose.”

Take the Somerset apartment complex in Carlingford, built by collapsed developer Dyldam where owners were saddled with a litany of building defects and a non-functioning fire safety system.

Fire and Rescue NSW inspections found essential fire safety measures “were not being maintained and were not capable of operating to the standard” required by law.

Faults included the evacuation system being offline, water pump tanks partially empty and multiple detection system defects.

Owners have since spent about $800,000 rectifying fire safety issues and other defects.

According to a story in the Sydney Morning Herald, Mark Cowell, licensee in charge of Compass Strata, which now runs the building’s management committee, said he had “very rarely ever seen a building in this sort of situation” in 25 years as a strata manager.

“It only happens when builders and developers are not held accountable early enough in the process, or are able to do a runner, to escape the consequences of their misdeeds,” he said.

The building’s previous strata manager, Result Strata Management, was later permanently banned from practising in NSW (a decision they are challenging in the Supreme Court)..  

NSW Fair Trading found it had consistently failed to disclose conflicts of interest, breached rules of conduct, charged fees for services not rendered and failed to ensure properties under management complied with critical fire and safety obligations.

Cowell said record-keeping handed to the new strata body was scant – “about 12 documents when there should have been hundreds” – making it difficult to piece together how compliance failures had gone unaddressed for so long.

All of which makes it slightly less surprising that it wasn’t noticed until it was way too late that, in an entirely unrelated event, $2 million of funds were siphoned out of 66 strata schemes on the NSW Mid North Coast buy another rogue strata manager.

As reported by Claire Simmonds for ABC Coffs Coast, NSW Fair Trading Minister Anoulack Chanthivong allegesCoffs Harbour strata manager Jessica Marrie Carah conducted 398 fraudulent transactions, transferring funds from dozens of strata plans into her own accounts.

Carah’s licence has since been cancelled and she has been permanently disqualified from practising in the industry. NSW Police Strike Force Colebrook is investigating, although no criminal charges have yet been laid.

The case rattled an industry that manages the homes of more than 1.2 million people across 86,000 strata schemes in NSW.

Robert Anderson, president of the Strata Community Association, said alleged frauds were “fairly rare … but it does happen from time to time because it’s other people’s money and there’s a level of trust”.

That trust can be misplaced.

David Lin, director of Strata Business Brokers, warned owners’ corporations to beware of “bait pricing” — artificially low management fees that can mask poor systems, inadequate staffing or a reliance on charging for add-on services later.

“The consumer wants the cheapest price, and the manager obliges by giving them a cheap, base management fee,” Lin said. “The hidden dangers are that either that person isn’t great or that company is giving a low management fee quote because it is ‘bait pricing’ and you will ultimately end up paying a lot more.”

Committees, he said, should treat the appointment of a strata manager like hiring a bookkeeper for a small business — scrutinising financial controls, software systems and internal checks and balances, and regularly cross-checking bank statements against balance sheets.

Getting back to the sadly less unusual scenario at Carlingford, Sam Fayad, the co-founder of developer Dyldam, which collapsed on New Year’s Eve 2020. Co-founder is bankrupt with personal debts reported at more than $2.8 billion, believed to be the largest bankruptcy in Australian history.

The company was also responsible for the abandoned 24-storey Observatory Place tower in Parramatta, later subject to a stop-work order and rectification.

While regulators have strengthened oversight — including the launch of the NSW Fair Trading “Name and Shame” register and the allocation of $8.4 million to a Strata and Property Taskforce — industry observers caution that enforcement alone cannot substitute for active owner engagement.

The Netstrata scandal, still under investigation, is another reminder that resolving issues in the strata sector can stretch on for years and gradually fade from public consciousness.That fading memory can be dangerous.

Strata living inherently involves pooled funds, shared liability and reliance on professional managers. Owners’ corporations entrust agents with collecting levies, managing insurance, paying contractors and overseeing compliance with fire, safety and building laws.

When systems fail — or when governance is weak — the financial and safety consequences are borne by residents.

Warning signs can include unpaid contractors despite funds showing as disbursed, levies not appearing in accounts, resistance to providing full financial records, or unusually low management fees unsupported by robust reporting systems.

Experts recommend reviewing meeting minutes for recurring defect or compliance issues, examining capital works plans, checking the agent’s history on the Fair Trading register, and questioning how financial controls are structured.

The lessons from the Mid North Coast and Carlingford are not simply about individual wrongdoing. They are about systemic vulnerability when oversight weakens and when cost-cutting trumps governance because too few people know or care about how things are and how they should be.

In strata, complacency can be expensive.