Brell quits top SCA roles as Netstrata saga rolls on

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.