Flat Chat Strata Forum The Professionals Current Page

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  • #8392
    Dudley
    Flatchatter

      It is my understanding that these funds are held in trust accounts.

      What are the requirements of the rules governing Strata Plans for information concerning these accounts to be supplied to the EC?

      The information I am curious about in particular is the interest paid on the sinking fund balance. I assume that any interest earned is in fact credited to the strata fund.

      Many thanks,

    Viewing 9 replies - 1 through 9 (of 9 total)
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    • #16557
      Whale
      Flatchatter

        Funds need to be held in a “financial institution” in the name of the Owners Corporation, however where the Plan is managed by a Strata Manager those funds must be held in trust with one of the institutions approved from time-to-time by the Office of Fair Trading (in NSW).

        Most Strata Managers seem have those trust accounts with Macquarie; never understood why given the extent of the approved institutions available (?).

        Interest is taxable, and is credited separately to the Administrative and Sinking Funds in accordance with the balance of funds held in each. 

        The NSW Strata Schemes Management Act (1996) requires that all financial records / statements must be tabled at each AGM, and at other times the Executive Committee can require the Strata Manager to make those records available to it with seven (7) days written notice. Depending upon the detail of the Agency Agreement that your Plan has with its Strata Manager, they may be able to charge the O/C for making those records available.    


        #16545
        Anonymous

          Well done Whale, a thoughtful reply. 

          At our building, ‘investments’ are conducted with maximum shadiness. About sixty g/s is invested with no agenda items, no minutes… NOTHING… except a tiny item in the AGM accounts of ‘Interest from banks’, say two and a half g/s. The Strata Manager gets twitchy and aggro whenever anyone asks a question about this. Apparently our Treasurer is the ONLY signatory.

          #16537

          This is not the first time that I have seen a member suggest that Strata Managers receive commission from banks for investing trust funds with this particular bank.

          Can anyone provide some definitive advice as to whether (a) it is permissible under the NSW Strata Schemes Management Act (b) if so, is it common practice?

          #16538
          Jimmy-T
          Keymaster

            Juan had a point and it’s a confusing issue that also relates to insurance. I recall my building had this debate years ago when we wanted to take the commissions out of the equation and save ourselves the money that was going to the strata manager. The insurers took the money off the premium but still paid the strata manager. Why? It’s got something to do with the legwork and paperwork being done at the strata manager’s end of things and the bank just has to register the the new customer so it’s easy.
            That said, I am sure there are companies out there who are milking this for all its worth and that in some cases the mutual benefit between service provider and strata manager is at the expense of the strata scheme.
            However, you don’t have to go along with these arrangements. You can tell the strata manager to change banks or insurance companies for your account. If they refuse to do so, ask why and if there is no satisfactory answer, start making plans to change your strata manager.

            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.
            #16540
            Whale
            Flatchatter

              As I started all this, I’ve done a bit of research into the possible reasons for the preference that many Strata Managers have for this particular Bank as opposed to any of the other thirty (30) approved financial institutions (in NSW).

              According to some Strata Manager mates of mine (yes I still have a few even though our Plan no longer partakes of their services) this Bank has developed a very good software package for strata management operations, including customised features for levy collections, on-line payments, late payment follow-up, contractor payments, reporting to Owners Corporations, and more.

              Clearly (or so I’m informed) this Bank’s software package links to their business banking products, and that closes the loop to that Bank’s benefit.

              As to the existence of other inducements of the types suggested by Juan, one of my mates made a definitive “no comment”, so I suspect they do exist, and that just like those commissions paid to Strata Managers by Insurance Companies they’d be noted on the Disclosure Schedule of Strata Management Agency Agreements; yes?

              #16541
              Anonymous

                I don’t want to misquote JT but I DO remember a bit in his excellent book Apartment Living which says something like ‘corruption exists at every level of society (or maybe he said business) so why not in the strata industry?’ At least that’s my memory of what he said. (JT will probably claim he was just an angry young man when he wrote that and he’s more pragmatic these days.)

                Now, I am not suggesting for one minute the taking of hidden commissions and fees by Strata Managers (and Real Estate Agents) from the Unnamed Bank is corrupt. But I AM saying, that MY mate says, unmentioned fees and commissions certainly exist and, once again, the amount of largesse in all its forms heaped upon Strata Managers an strata management companies… ummm… a little bit more than just Christmas Turkeys and bottles of scotch. It is hidden and it is endemic.

                #16532
                Anonymous

                  The main reason that strata management companies stick to certain banks, is because those banks are efficiently set up to specialise in the services needed in strata management, e.g. software and such as mentioned by Whale.  Also, if the strata management company holds all their trust funds in the one bank, they can usually negotiate good deals for their clients by way of interest rates and fees. 

                  Secret commissions are a big ‘no-no’ if a strata management company wants to keep its license.  All commissions must be declared in the Agency Agreement between the strata management company and the owners corporation!  No reputable strata management company would want to take the risk!

                  #16564
                  Anonymous

                    This forum is not what it used to be. All a bit cosy. I note recently Jimmy quietly posted something about him being a bit wrong about ECs actually being made to enforce by-laws after all and showing how it can be done. Maybe he’ll spend some time looking into the scandalous and secret methods of some of the bigger Strata Managers. I’m outta here.

                    #16576
                    Jimmy-T
                    Keymaster

                      Regulars will notice I’ve taken an axe to this thread.  I was going to cut it completely but there’s a lot of good information in here.  I apologise to anyone whose valid points were caught in the verbal hedge trimmer.

                      Why did I do it?  Because I foolishly allowed myself to rise to the bait and got engaged in a petty slanging match. 

                      It gets very tiresome for the average reader who is looking for information when they have to wade through dross where winning the argument is clearly more important than being right and scoring points is more important than making  sense. I am as guilty as anyone of this – but no more!

                      Normal service has been resumed. Oh, and by the way, Sharon Machin’s input from Strata Choice (below) puts the whole thing in perspective.

                      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.
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