Strata manager myths exploded … well, kind of

A couple of weeks ago, Bobby Lehane, Managing Director and Group CEO of strata and building management giants the PICA Group sent out a press release saying he wanted to address some of the more common myths about strata managers.

While we at Flat Chat agreed that some of his “myths” were indeed major misconceptions, we thought there were other issues that were more important or, at least, more common.

So we sent Mr Lehane a set of questions which he has answered and we present here unedited and unadulterated and we appreciate him taking the time to do this.

Now, some of the responses are, let’s say, predictable and I can’t blame him for defending his business, his staff and their profession.

However, there’s one thing that irks me and that’s the role of the strata manager at the first AGMs of new buildings. There, a bunch of people who don’t know each other and the majority of whom will never have lived in strata before, are going to be asked – maybe even urged – to sign contracts that they probably don’t understand and which, especially in the case of embedded networks, will see them being ripped off for years to come.

Now, my question was, who should warn owners that some of these contracts may not be the best deal they can get?  Not the strata manager, says Mr Lehane – it’s not his or her job. Okay, if not them, who?

You can see his answer below, but let’s start with the four strata manager “myths” with which he initiated this exercise.

Myth 1: Strata managers have complete control.

Jimmy: Isn’t this a little “cute” given the practise of some strata managers to persuade their owners corps to sign over delegated authority and then use it to their own advantage – or at least to nudge the scheme towards using their preferred contractors and service providers?

BOBBY: Our strata teams prioritise transparency, accountability, and ethical decision-making. Our delegation matrix is included with our management agreement to provide clarity on what duties we can perform on behalf of a scheme.

Our standard delegation simply allows us to perform the administrative functions documented within our agreed services, including chairing meetings where requested, issuing agendas, minutes, levies and work orders for emergency works.

Most functions are completed under the owners corporation’s or appointed committee’s instruction. We agree on ways of working with each scheme, obtaining multiple quotes where required and using scheme-preferred contractors where identified.

Myth 2: Levies directly benefit strata managers.

Jimmy: Isn’t time that strata managers agreed on set fees, related to scheme sizes, to halt the race to the bottom on fees and make it crystal clear what proportion of levies goes on SM fees?

BOBBY: We welcome the idea of setting an industry-wide minimum fee. Such a standard would help support the viability of the strata industry and demonstrate the relatively small percentage that actually goes to the strata managing agent.

JIMMY: Should strata schemes and their strata managers be obliged to publish an easily understandable summary of where the money has been spent, including savings and unexpected expenses?

BOBBY: At the AGM, the treasurer or strata manager should explain the annual financials to owners, outlining any surplus or deficit to budget and discussing solutions to address them in the following financial year.

It is best practice for a committee to review the financials regularly. To support this, we provide simple monthly reports complementing the quarterly and annual financial reports required by legislation.

Our portal empowers committees with 24/7 access to financial data and the ability to approve invoices online at their convenience, streamlining financial oversight and decision-making.

Myth 3: Self-managing is always more cost-effective.

JIMMY: Define cost-effective. Would a block of 8 units paying about $3000 pa not be better sorting things out as a community and spending the money on repairs etc?

BOBBY: Cost-effectiveness involves achieving the best results with the invested resources. Considering the intricate complexities of navigating the hundreds of regulations in strata management, this task is challenging for most. 

In an eight-lot, $3000 per annum scenario, the expertise of our strata teams is that they would manage all related aspects for $7.21 weekly, per lot (about half the cost of a weekly Spotify subscription). Considering the value for time, this example is cost-effective.

Myth 4: By-laws are unchangeable.

JIMMY: Are strata managers pro-active enough in persuading their owners to consider changing or updating their by-laws? 

BOBBY: Our strata managers are proactive and recommend adjustments in by-laws tailored to the scheme when required.

JIMMY: Should there be more “off the peg” by-laws available for strata schemes to adopt?

BOBBY: This already exists – every scheme adopts the standard by-laws. We support increased by-law standardisation; some law firms offer this service.

Okay, that’s Bobby Lehane’s four “myths” of strata management dealt with.  Now let’s get down to the nitty-gritty – some of the issues that we here at Flat Chat feel are all too common in strata management.

JIMMY: Is it not a myth that strata managers are primarily concerned with the well-being of the strata owners when their first allegiance is to their company and then, all too often, to the scheme’s developers? If the latter is not the case, why is the Government bringing in laws to deal with it?

BOBBY: We are committed to providing quality service to strata owners. Our success hinges on client satisfaction. Early collaboration with developers facilitates smooth strata transitions, while our focus remains on the owners.

New laws introduced by the Government aim for transparency, accountability, and fairness, enhancing protections and rights for strata owners—a move we fully support.

JIMMY: Is it not incumbent on strata managers to warn owners at their first AGM that some of the contracts they have been offered are not to their advantage, and they could do better and should refuse to sign them? 

BOBBY: Strata managers are concerned with the administration of the strata scheme. Offering advice on contracts is beyond our scope, and the owners corporation should seek legal expertise to ensure their interests are fully protected.

The Strata Schemes Management Act deals with the first AGM, including a list of maintenance that may exist.

JIMMY: If it’s not the strata managers’ job to do this, whose is it?

BOBBY: The owners corporation should seek legal advice.

(These owners have never met so unless some of them bring their own lawyers at their own expense then they are on their own – JT)

JIMMY: How can a strata manager who has been employed by a developer to set up a strata scheme then be expected to suddenly be working in the best interests of the strata owners? Should this obvious conflict of interest be outlawed?

BOBBY: The role of a strata manager, regardless of the original employer, is to manage the strata scheme effectively and in the owners’ best interests. They adhere to professional guidelines and the Strata Schemes Management Act, ensuring their focus is unbiased and dedicated to the scheme.

Transparency and open communication can address any potential conflict of interest.

JIMMY:  Isn’t it time that large strata schemes employed professional strata committee chairs who were knowledgeable, experienced and only had the best interests of their schemes at heart.

BOBBY: In most scenarios, we assume the role of chairperson under our delegated authority, with instructions from the owners at the beginning of each meeting. This approach allows us to act impartially and in the best interests of all owners, without additional fees for an independent chair. Our team is highly skilled in chairing meetings and navigating the legislative frameworks associated with strata schemes.

Committee training is beneficial, particularly if the owners corporation or strata committee wish to hold meetings without us or prefers to exercise their right to chair meetings. While we typically discourage this practice for large and complex schemes, we remain committed to ensuring that meeting protocols are followed. In such instances, our strata managers would still be present to guide the chairperson.

Our focus is on providing good service while minimising additional costs, acting impartially, and prioritising the interests of all owners.

About Bobby: Bobby Lehane has held senior roles at organisations including Zurich, Multiplex and Commonwealth Bank of Australia, working in Ireland, the UK, Japan and Africa before settling in Australia. Prior to joining PICA Group, Bobby was Chief Executive Officer of CHU Underwriting Agencies.