Brell quits top SCA roles as Netstrata saga rolls on

Brell-and-block.jpg

Netstrata CEO and now former SCA-NSW president Stephen Brell

The allegations in an ABC News article, about strata managers Netstrata have seen its CEO Stephen Brell, step down as Strata Community Association (SCA-NSW) President and resign from its board.

In an initial announcement on late last Thursday, the chief executive of SCA-NSW, Craig Meagher, emailed members to tell them that Brell had announced that he would voluntarily step aside from his role as SCA’s NSW president.

Abundantly self-assured to the end, Mr Brell then said that his move from the position was not permanent. “I have not stepped down,” he said according to a follow-up ABC story. “I have temporarily stepped aside to concentrate on Netstrata. I have not left the board nor have I been asked to step down or resign.”

He might have been wise to have added the word “yet” to that statement. On Friday, the body’s CEO Craig Meagher issued this statement to SCA-NSW members :

“I want to follow up on our initial communication yesterday afternoon regarding Stephen Brell and Netstrata. I am writing to inform you that earlier today Stephen tendered his resignation as both SCA NSW President and Board Member. Tony Irvine, current Senior Vice President, will assume the role of acting NSW President.”

I and my strata-minded colleagues had been taking bets all day on whether or not he would resign. I said “not” – his pride would not allow him. So did he jump or was he pushed?

Seriously, the whole saga must have been deeply concerning for the other members of the organisation of which he was the chosen leader and which, ridiculously, purports to represent owners (as well as strata managers and service providers), while some members are apparently milking them for every cent they can get.

If nothing else, Brell was a staunch defender of his membership. In my own dealings with him, he has always taken the position that negative reporting of strata managers was more often a problem with the
reporter (i.e. me) not the industry. 

He once wrote to me that he understood that I was more interested in “clicks” than facts, presumably not even realising that might be insulting, considering he was inviting me out for a “clear the air” lunch. I politely declined.

On reflection, this whole nasty business is less a question of legality than of transparency.  However, even if they are informed of commissions and extra charges is it truly transparent if owners can’t read the really, really small print or don’t understand the information that they have been given.

We saw how that works in vivid detail when we took possession of our investment property on the South Coast and discovered that Netstrata was the appointed strata manager.

I very reluctantly became chair of the strata committee for the simple reason that I was the only person on the committee who had much idea about how strata works.

The First AGM

At our first AGM the pleasant young man from the local Netstrata office explained that normally they ran things on behalf of the committee and would consult with them a couple of times a year. Apparently that’s how it works in the regions.

Having had it pointed out that there were elements in the contracts to which we should not be agreeing, there was no way that the newly founded strata committee wanted to hand over total control of the block to the company that had compiled the initial AGM agenda.

The main concern was in regard to potential embedded networks.  Generally speaking – and this is not specific to this scheme – these are where a developer gets infrastructure installed for free, or at a substantial discount, provided they can get the strata scheme to agree to inflated maintenance contracts that would also cover the cost of the installation.

Having been hired by the developer to set up the strata scheme’s administration, strata managers are effectively enabling or even promoting these dubious practices.

There are legal precedents for strata schemes recovering the “saved” money from the developers but it would require an expensive legal challenge, not to mention being aware of the issue in the first place.

SCA-NSW knows about this relatively widespread practice, and has done so for years, but has no clear policy on it except to say that they are in discussions with NSW Customer Services about the issue.

In my somewhat biased opinion, SCA-NSW could stop it with one email asking their members not to do it. Instead Strata Commissioner John Minns is talking about bringing strata law into line with other consumer laws, where unfair contracts can be challenged and even penalised.

We shall see but even then it would put the onus back on owners to challenge the contracts rather than developers and strata managers not to collude on them in the first place..

Small print

Back to our investment property. There were several contracts published or accessible via QR codes, in a professional looking booklet compiled and provided by Netstrata. This booklet redefined the term “small print” with type so tiny and in some cases faint, the majority of owners would have struggled to read it let alone understand its implications.

And to be clear, any contracts agreed in advance with service providers end at the first AGM and must be agreed by the apartment owners for them to proceed. After that they are locked in.

With that critical, once and final opportunity to agree or disagree, and bearing in mind that many if not most owners would be new to strata, you might think it would be incumbent on the strata managers – who have compiled and presented the contracts – to explain their implications.

I’m guessing SCA-NSW and Netstrata would disagree or they would be doing it.

Dubious Contract 1

Forensically close examination revealed that we were expected to sign a 15-year stormwater drain contract which had an option for the service provider to raise the fee by 10 per cent every year, more than doubling the cost of the contract over its life, at their sole discretion.

The contractor said at the meeting that they wouldn’t invoke that clause.  We said ‘take it out, then’.

It’s worth noting that I was first alerted to embedded networks years ago by another senior strata manager who was concerned that his employees were being pressured by developers into promoting or at least enabling embedded networks. The case he cited was in relation to stormwater drains.

Dubious Contract 2

The contracts for the supply of electricity by Origin Energy were only accessible by QR codes – there go the oldies again. When we did read them we discovered that we didn’t own the electrical system, including the meters in our flats, so we wouldn’t be able to change providers until we had paid off the installation costs.

Not only that, the minimal solar panels on our roof – just enough for the developer to get DA approval for the whole scheme – were still owned by Origin and they had the option to charge us the going rate for providing our solar-generated electricity to our common areas.

Dubious contract 3

This is less clear-cut but at the initial AGM some lift engineers were paraded to explain why there had been breakdowns in newly installed lifts. I asked if the lifts were under warranty.

They said yes, so I then asked why there was $64,000 set aside in the budget for lift maintenance.  That, they could not explain although the Netstrata manager said you still have to service a new car. We responded that most new cars have at least a year’s free service.

Having refused to agree to some of the clauses in the Netstrata agenda booklet, things went from bad to worse with the local Netstrata managers. They declined to provide the strata secretary with the strata roll (which is required by strata law).

Their reasons were that it was not their usual practice (in that local office), it would be a breach of privacy (which is nonsense) and, under our contract with them, they were in fact acting as strata secretary so the law that requires the roll to be handed over to the secretary was not being breached.

When I copied Brell in on the email, pointing out that they were in breach of the Act, rather than calling up his people and telling them to pull their heads in, he launched a vicious email assault on me.

When I pointed out that his managers were probably in breach of the Act, in the hope that he would pull them into line, Brell defaulted to his “shoot the messenger” tactic and embarked on a series of increasingly aggressive emails directed at me, culminating in one demanding my resignation, which I ignored.

I since have resigned because I honestly believe that strata committee office-bearers should live in the building and we don’t. Six months in, the other committee members are better aware of their rights and responsibilities and have elected a resident who actually wants the role.

Anyway, as of today, with the ABC reports bouncing around the stratasphere like a beach ball at a cricket match, Mr Brell, now President emeritus of SCA-NSW, and Netstrata have bigger fish to fry than little old me.

For a start, calls for a public inquiry into the strata management industry are growing too loud for the government and Strata Commissioner to ignore. 

The NSW government needs people to be comfortable with buying into strata schemes for its housing targets to be met. Allowing the kind of practices detailed in the ABC report – legal or otherwise – does nothing to boost public confidence.

But if the SCA-NSW is serious about investigating possible breaches of their code of conduct, I have some emails that make entertaining reading, if nothing else.

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  • This topic has 10 replies, 7 voices, and was last updated 1 month ago by .
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  • #73326
    Jimmy-T
    Keymaster

      The allegations in an ABC News article, about strata managers Netstrata have seen its CEO Stephen Brell, step down as Strata Community Association (SC
      [See the full post at: Brell quits top SCA roles as Netstrata saga rolls on]

      The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
    Viewing 11 replies - 1 through 11 (of 11 total)
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    • #73344
      Level_one
      Flatchatter

        I would suggest that the SCA may be incapable of cleaning up its act so the need for an independent review of the sector has never been more important than now.  A necessary outcome would be the development of a balanced Strata Management Contract perhaps with annual reporting of KPI’s.  The number of Strata that individual Managers are required to manage by the larger corporates guarantees that a reasonable level of service is most likely impossible.

        The Consolidation of the industry appears to be driven by maximising the returns to shareholders rather than servicing the client (Even in meeting the terms of the SCA contract ,which is not a high bar for the providers)

        Consideration could also be given to a model where the Strata owns the licence for a management platform and so retains all its records for a seamless transfer to another management agency.   At this time the lack of portability in changing Strata Managers is used as an anchor to retain clients.  The Building Management sector now has the option for Strata to own the licence and delegate to the contracted building manager.  Perhaps the time has come that all the reasons as to why this cannot be done for Strata Management need to be solved rather than being used as an excuse.

        I expect any independent review will need to employ more staff than anticipated to deal with all the submissions from Flat Chat, Owners Corporation Network and the many Strata that have been disadvantaged by the SCA model over many years.

        Perhaps the time has come for the Government to fund the Owners Corporation Network via the Strata Commission? so it is not dependent on funding from commercial organisations with vested interest.  The Tenants Union receives funding from the Government so it can be done for a not for profit organisation.

        Regards Stephen.

         

        • This reply was modified 1 month ago by .
        #73345
        StrataChair
        Flatchatter

          Thanks Jimmy. Yet another story of strata managers not acting in the interests of their clients. And they want to be accorded ‘professional’ status.

          SCA (NSW) amended its constitution in 2021 so strata owners can no longer be members and are no longer represented on the board.

          When I noted these items on the SCA AGM agenda for that year, I emailed the then-president to ask how this was consistent with the national SCA’s assertion of itself as:

          “… the peak body for Industry Managers Lot Owners, Tenants and Stakeholders living in or affected by Strata Title, Body Corporate, Community Title and Owners Corporations.”
          And “SCA proudly fulfils the dual roles of a professional institute and consumer advocate“. My emphasis.
          I received no reply. The constitution change went through.
          They’ve now changed the first part I quoted above to describe themselves as “the peak industry body for Strata and Community Title Management in New South Wales.” But they haven’t changed the second one.
          I guess they have a different definition of ‘consumer advocate’ from me.

          • This reply was modified 1 month ago by .
          #73351
          Jimmy-T
          Keymaster
          Chat-starter

            And they want to be accorded ‘professional’ status.

            They have, and very proud of it they are too.  I believe they are in some sort of probation period to see if they can abide by the code of conduct.  If so, they will need to clean up their act.

            I guess they have a different definition of ‘consumer advocate’ from me.

            And me.  As I have said many times, SCA-NSW represents strata owners no more than the Qantas Frequent Flyer program represent airline passengers.

            The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
            #73365
            tina
            Flatchatter

              The conflicts are so outrageous that no one even talks about this part of the ABC report:

              “Netstrata is the naming rights sponsor of Jubilee Stadium, home of the St George Illawarra Dragons, and its managing director is Stephen Brell, the NSW president of the Strata Community Association (SCA).

              The SCA has awarded Netstrata “strata management company of the year” for four of the past five consecutive years.”

              #73368
              Jimmy-T
              Keymaster
              Chat-starter

                The SCA has awarded Netstrata “strata management company of the year” for four of the past five consecutive years.”

                I think you will find they were name “business” of the year. A subtle difference but, in the light of recent revelations, a significant one.  It’s all about the money.

                The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
                #73384
                Jimmy-T
                Keymaster
                Chat-starter

                  Further to my comments in the article that Brell was a bit premature in his assertion that he was stepping aside but not out of the role as President of SCA-NSW, and that his members who have suddenly found themselves the focus of intense and unwelcome scrutiny might have something to say about that, the body’s CEO Craig Meagher issued this statement to members yesterday:

                  I want to follow up on our initial communication yesterday afternoon regarding Stephen Brell and Netstrata. I am writing to inform you that earlier today Stephen tendered his resignation as both SCA NSW President and Board Member. Tony Irvine, current Senior Vice President, will assume the role of acting NSW President.

                  It had to happen. If the culture is wrong, the culture carrier has to go before it can be fixed and be seen to be fixed.

                  The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
                  #73386
                  Columbo
                  Flatchatter

                    I would like to understand this…

                    According to the ACCC website:

                    • When businesses communicate and cooperate, they risk damaging competition and breaking the law.
                    • Businesses that want to join together to negotiate with a supplier or customer through collective bargaining first need permission. This is known as an exemption.
                    • It’s not illegal to have market power. However, businesses must not misuse this power to stop other businesses competing on their merits.
                    • When the misuse of market power substantially lessens competition, it is illegal.
                    • A business risks breaching competition law when it engages in exclusive dealing by restricting how its customers or suppliers do business.

                    In the case of Netstrata and the building I live in, which you are familiar with, Jimmy,  it seems that there is certainly communication and cooperation between them and the developer, and possibly with the supplier of the Embedded Energy system. The question is whether that leads to a misuse of market power.

                    However, when I think back to the FAGM and the way that the motions were put to the owners, most of us being newbies to strata, my recollection is that there was no critical comment from the newly appointed strata managers as to the alternatives, if any. If that had been a presentation to potential uninformed investors into a public company, there would have had to be a risk disclosure to ensure that investors were suitably educated, I believe.

                    The question that follows this is, given that embedded network agreements provide benefits to developers while committing the downstream owners to paying for the equipment that is provided to the developer in order for the building to meet BASIX requirements and/or to be certified, shouldn’t the strata manager – Netstrata – inform the unit owners of this.

                    After all, minutes before at the FAGM, the owners voted to appoint Netstrata as the strata manager, and in doing so, Netstrata took on the role of a fiduciary with the relevant duty of care.

                    Interested to hear some views on this. It seems to me that it is the FAGM that is the nexus point for behaviours that put owners at a disadvantage. What do other strata management companies do in these circumstances? What is best practice?

                    #73388
                    Jimmy-T
                    Keymaster
                    Chat-starter

                      Not sure about this but I don’t think strata schemes come under consumer law, something the strata commissioner says he is looking to fix.  At least he won’t now have the SCA looking in one direction and making all the appropriate noises but pulling in the other.

                      My advice to all owners at their First AGM is now to tell the strata managers you are only there to elect a committee, the committee will look at the contracts, including the strata managers’ and come back in six weeks and approve them or otherwise. If any of the potential contractors aren’t happy with that – strata managers included – they can bugger off and they’ll find someone else to do the job.

                      In your specific case, Netstrata colluded with or at the very least enabled the developers, the contractors and service providers to stitch the owners up and it’s only regretful that your owners didn’t spot all the dubious deals before the seal was applied to some of the contracts. Even then Netstrata seem to have done their best to avoid the owners being informed about what had occurred (and their CEO was 100 per cent behind them).

                      The NSW government has been led by the nose by SCA-NSW who must surely now have their “professional” status closely examined.  Attendees at meetings hosted by John Minns when he was merely Property Services Commissioner, relate that he would sit at the head of the tale with now resigned SCA-NSW President Brell on one side and his predecessor and now National SCA President Chris Duggan on the other.

                      The code of conduct attached to that has several clauses about acting openly, honestly and in the best interests of the customers.  It’s now clear that to some prominent members of the SCA, all that meant was a badge of honour that allowed them to continue their dodgy dealings without serious scrutiny.

                      By the way, I briefly hooked into Amanda Farmer’s online chat on Friday where both I and strata law academic Cathy Sherry said the same thing – the strata managers who set up a scheme for the developers should not be the same company that then manages the scheme.

                      The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
                      • This reply was modified 4 weeks, 1 day ago by .
                      #73390
                      Doncha
                      Flatchatter

                        Further to Colombo’s post

                        When we moved into our new building 12 years ago, (residential and commercial) the conditions of a BMC – Building Management Committee were not fully explained by Netstrata.  In spite of a meeting with Steven Brell and 3 lot owners to seek an explanation of a management fee hidden under the title of community funds in the BMC financial report.

                        We later learned that the management contract proposed by Netstrata at the first AGM did not reveal the contractual agreement that Netstrata had signed with the developer for 5 years in respect of the BMC. Being “innocents” the ramifications of this situation was not apparent until much later.

                        At that stage Netstrata’s action was considered lawful as the formation of a BMC in a multiple strata scheme required that a strata manager must be appointed.

                        In spite of the lengthy review of the strata act 2015/17 this aspect of the BMC has never been addressed and I have a friend who lives in a building that has a BMC with management rights contracted to Netstrata for 7 years as well as embedded contracts for electricity and communications.

                        Is anyone aware of any action on the part of the government to address this situation?

                        #73391
                        chesswood
                        Flatchatter

                          Positions as senior as Strata Commissioner are supposed to be widely advertised as part of a careful process to secure the best appointee. But that didn’t happen in John Minns’ appointment. Fine man though Minns no doubt is, the hazards of ministerial parachuting are on show today.

                          #73491
                          Nono
                          Flatchatter

                            Watch out for their senior managers too.  The rot doesn’t stop at Brell.  Especially the ones like [name redacted] who feign innocence and jump ship to  [another strata company].

                            This post has been edited because it named an individual and the company to which they moved, both of which are against our policies. The general point, however, is valid.  Brell can be named in this contexbecause  he is a public figure and what he has said and done is a matter of public record. – JT

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