403. Strata Management’s Future: Reena Weighs In
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In a week during which the media continues to wage war against strata managers, Reena Van Aalst joins me to provide her point of view. We discuss:
- models of remuneration for strata managers, and what Reena says needs to change
- the role of Strata Community Association
- the murky arrangements between other strata “professionals” and service providers, overdue for investigation,
and more.
Totally agree with the sentiment that all and any commissions for insurance policies, building work and or conflicted payments be added to community funds of the strata plan paying for the work /services/ insurance policy – at least until there is legislation that abolishes the current practice of commissions / kickbacks. That way, when the SM needs to do related work, Schedule B-like fees can be charged to the relevant SP and the additional funds pay for the work. Definitely a more transparent option than current practices.
Also, regarding different models, is it time for a Poll to ask who would pay higher Strata Management Fees for an agreed Service level? Service levels could be tiered with higher service levels costing more. Almost anything is better than the situation many lot owners and committees find themselves in with non-responsive or slow-responding strata managers – because the SM doesn’t have enough time in each day to respond to urgent matters due to the size of their portfolios.
I look at the base fees our buildings pay and now as ever they aren’t realistic – they’re just too cheap – and still owners complain about paying Schedule B fees on top of (in my opinion) ridiculously low , unsustainable base fees.
Probably safe to say that everyone living in a unit wants to be paid properly for the work they provide their employers – why expect the people who help you manage your most valuable asset to work for free? It could work better for everyone to understand service level that can be expected for a particular fee amount.
The SCA contract is riddled with unfair practices. The AGM for example could be conducted much more efficiently – not stretched so it goes beyond an hour or the important bits are hurried through.
The “privacy” issues needs to be clearly articulated to owners.
The building works being done if greater than 5% going to the SM. The work done by the SM needs to be itemised.
The portal needs to be “complete” and transparent. At present very little is in these portals.
By their nature, any form of commission, profit share, additional premium volume commission or fee paid by an Insurer to an Insurance Broker, is a conflict of interest. For a Broker to argue otherwise is a nonsense.
Brokers should be remunerated only by the Body Corporate paying a fee to the Broker with all premiums net of commissions etc.
Our Body Corporate has a Broker who is actually owned by a large national Broker which, in turn owns an Underwiting Agency. This Underwriting Agency acts as Agent of our Insurer.
In other words, our Broker is also our Insurer.
Is this not a serious conflict of interest you might ask?
Our Broker has advised that they receive 20% commission, plus they charge us a fee.
We are aware that our Broker’s Owner also receives a commission from our premiums plus, probably profit share and other forms of remuneration from the Insurer.
When we asked the Broker how much remuneration their Owner earned from our premiums, we were advised they did not know because they worked ‘at arms length’.
All remuneration earned by Brokers is a direct cost to the Body Corporate for using the Broker.
Insurance policies make reference to Policy Schedules issued by the Insurer. We have asked our Broker to provide us with the Policy Schedule so we can check the insurance covers are what the Broker says they are, and we can check the premiums we are being charged by the Broker, are what the Insurer is charging. To date the Broker has not provide this document despit two requests for them to do so.
May I suggest that all Body Corporates insist on their Brokers working on a fee basis with nil commissions; plus insist on their Brokers providing Policy Schedules issued and signed by the Insurers. Any so-called Policy Schedule issued by the Broker will not suffice.
CASE STUDY
We had brokerage arrangements with a broker who charged a flat fee separate to the insurance premiums. The benefit – it was transparent and fixed. the brokerage fee did not add to the insurance premium and therefore all the percentage charges such as the ESL levy, fire levy, stamp duty etc were not calculated on top of this as well.
THEN the strata manager simply ANNOUNCED they had done a deal with a NEW Broker and moved our insurance arrangements. No disclosure of fees. Insurance went up by $10,000. Strata Manager did not even disclose the fees as required in the Notice of AGM. Then tried to cover up.
Strata Manager was a major part of the reason we applied (and secured) Compulsory Management orders from NCAT. Financial irregularities, withholding records, using their “preferred tradesmen” at vastly inflated charges, no quotes, shoddy work and the list goes on.
ACTION NEEDED
1. Regulate and require separate disclosure of all the components of the insurance costs. The premium. stamp duty. Emergency services levy. Fire Levy. Broker Fee. REGULATE that Strata Companies cannot receive broker fees. THEY are not insurance brokers. Require insurance quotes to be obtained more than 30 days PRIOR To expiry of insurance cover as the “last minute” stuff means
2. The Government needs to bring the Strata Legislation into the 2020’s – and to do so it needs to listen to the people who have lived through hell in mismanaged strata schemes riddled with conflict of interest, self dealing and dare i say it – corruption.
3. Recognise people WILL take advantage of the weaknesses in the system and look after themselves at the expense of others – and this will erode the strata model – particularly when money is being “siphoned” out of the scheme depleting owners funds. Insurance is a MAJOR issue
3. Recognise that the SCA is a peak industry body who represents the interests of Strata Companies. SCA is NOT a regulator and takes no effective action on dodgy strata companies. SCA relies on the membership fees paid by strata companies.