Amanda Farmer On Whether Your Strata Manager Is Doing Enough

In this episode, we're talking with Amanda Farmer from your Strata property and lawyers chambers, and we're going to explore what's happening in the world of Strata management following some pretty damning media attention in recent months. Now, how can you tell if your Strata manager is doing the right thing?

And if they're not, how do you go about finding a better one? Welcome to the elephant in the room. This is the podcast where we love to talk about the big things in property that never usually get talked about.

I'm Veronica Morgan, real estate agent, buyer's agent and buyer's agent mentor, co-host of Foxtel's Location, Location, Location Australia, author of Auction Ready and co-host of Your First Home Buyer Guide.

And I'm Chris Bates, mortgage broker, recently ranked number five in Australia out of over 18,000 brokers in the annual MPA Top 100 Mortgage Broker Awards. Before we get started, I need to let you know that nothing we say here can be taken as personal advice.

We always recommend you engage the services of an appropriate and experienced professional. Our guest today is Amanda Farmer, the owner of Lawyers Chambers, the strata-focused legal practice in Sydney.

She's also the host of the long-running podcast, Your Strata Property, a podcast dedicated to explaining the legal complexities of strata title properties, one of which we are a fan. With over 20 years experience in the Strata legal sector, Amanda is both a fellow and council member of the Australian College of Strata Lawyers.

She is also the founder of Women in Strata, a networking group for women working in Strata management. Now, we've had Amanda on the podcast a number of times previously. It's always been a valuable discussion. She's been educating Strata and property managers, agents, owners, and residents for many years through roundtable workshops, webinars, seminars,

and keynote presentations. And today we're really looking forward to hearing her thoughts on the current state of the industry. Welcome back, Amanda. Pleasure to be here. Thank you, Veronica and Chris.

Amanda, you just mentioned before I press record that maybe you're a little bit ranty at the moment. What's floating your boat, I guess?

What's got me hot under the collar about Strata? Yeah, well, thanks for revealing that to everyone, Chris.

Look, as Veronica said in her intro, there's been a lot of media attention this year on strata managers. And look, rightly so. It is time to start having a closer look at what's really going on. We've got two and a half million Australians living in strata.

We're hearing that half of us will be living in strata properties in the years to come. That's a significant proportion of the country. And we need to be understanding that.

How it works, what's going on, and particularly these professionals, strata managers, who help buildings to understand their legal obligations, to keep everything on track and under control. How are they operating? What are they charging? Are these fees fair? Are they transparent?

That's what all the media attention has been on in the last few months. And I'm ranty because coming out of all of that media attention, and I've got to say the best way to get law reform is to have the ABC do a Four Corners expose.

The law reform comes thick and fast once that happens. We do in New South Wales have some new legislation just announced last week that it will start in February 2025.

And it's all about our strata managers making more disclosures, giving owners more information about their practices, about their charging practices, about whether they're getting commissions, whether they're getting fees and how much those commissions and fees are.

And I'm ready because that just puts the obligation on the shoulders of owners to understand what's going on, to read more documents. And it kind of sends the message that you can do what you want. Strata managers, you can get a 40% commission on an insurance premium. As long as you disclose it.

As long as you tell your client about it. That's okay. So a done deal's all right as long as we're told about it. That is not good enough.

Yeah. Okay. I'll join you on the rant then. I think that that's absolutely, you know, well, you've got every right to be mad about that. And rushed legislation isn't necessarily the best legislation, but it's politically, you know, it looks good, doesn't it? It looks like you've done something. Yeah.

Now, obviously this is just in New South Wales, but we have a national, we've got strata buildings across the country, they might be called different things. The term strata isn't used widespread.

How widespread would you say the practices and those sort of practices that were highlighted in Four Corners where a lot of it was this non-disclosed commission and vertically integrated businesses that basically referred and kickbacks going all the way up and down the ladder. And it was pretty horrible, actually, to be honest.

As a viewer, I looked at it and went, oh, God, that's just, that's a cesspit, right? And any, I guess, area, and I know that in New South Wales it's more tightly regulated than it is in other states, but any, I guess, industry that

potentially should be regulated, that isn't regulated, particularly when you're dealing with trust accounts and that sort of stuff. So it's potentially an enormous mess. And so I guess how widespread would you say these practices are across the country?

Look, I'd say exactly that. The practices are across the country. Victoria certainly made an appearance in the Four Corners reporting, which I was really happy to see because I'm constantly contacted by owners of Victoria saying, Amanda, please help us.

There is no licensing, as you point out, of strata managers in some other states, Western Australia, Victoria. We're certainly hearing through the Australian College of Strata Lawyers. I'm hearing through my practice about these poor practices, bad behavior right across the country. Queensland sometimes pops its head up and says, oh.

that doesn't really happen here. Not what I'm hearing on the ground. And I think ultimately the legislation that New South Wales comes out with, the response that New South Wales has, it's going to be mirrored. There's going to be a copy of that across the nation.

So that's why it's so important that we get it right.

And obviously the New South Wales government has responded with these measures. And, you know, you've already said some things that you think about that. But do you think they're going to have any effect other than basic?

Because, again, this is going to burden the industry again with more compliance as well instead of actually saying, well, actually, can we have you fee for service alone and actually ban commissions? You know, that would be much more drastic, wouldn't it? But beyond that, what else has been changed?

Yeah, look, just addressing your point there, Veronica, because you've hit the nail on the head. And this is certainly the position of the Australian College of Strata Lawyers. Commissions, third party payments should be banned. And you're right, that is the only solution.

loading up our strata managers with more disclosure obligations, loading up our owners with more information just doesn't cure the problem. We need to have that ban. I want to acknowledge that I think this reform is a first step.

It was an urgent step by government that needed to be seen to be taking a step. There are more discussions that are going on. There's some confidential roundtables that are happening that I can't say too much about, but there will be more reform.

And certainly I am one of the people who is advocating for that complete ban. I think that's where it needs to end up. But at the moment it's in a state, it's in a situation where the strata manager

has to disclose any commissions that they're receiving, any third-party payments, and they have to, there's this really funny wording in the legislation that says they have to give details about why they say that their receipt of that commission or that payment is in the owner's best interest.

Now, I think we can guess what managers are going to say. They're going to say, well, if I'm receiving a commission, then your management fee is lower. This subsidizes your management fees.

That may well be the case, but that doesn't make it okay because when a strata manager receives a commission or a payment from a third party who is then serving an owner's corporation, there is an immediate conflict of interest.

And we see these conflicts play out when strata managers are in the pockets of developers and they don't pursue building defects claims, for example. That's always my number one example.

If there's a problem with a contractor, if they don't perform a service properly, if you're the manager and that's your mate or it's your subsidiary company or you're getting 20% on the invoice, how are you going to deal with that? in a professional, ethical, impartial, disinterested way.

As a lawyer, we recognise these things and say that's not possible when you've got these arrangements in place.

Not only that, the higher the insurance levy premium, then the more kickback they get. So there's a disincentive there to actually negotiate harder on your fees or shop around for more favourable premiums.

So you can sort of see that there. Okay. Well, that's disappointing.

There's an opportunity there to really take the bull by the horns here and do something really, really remarkable, but instead we've got, oh, okay, it's all right as long as you disclose it.

Quite rightly so. I mean, I've heard a lot of people anecdotally sort of saying, well, how do I, you know, I'm now asking my strata manager, do you take kickbacks and how does it work and all the rest of it? But even then it's not apples and apples, is it?

You've got, you've got, there's my management fee and it's subsidized by all these other things.

And how do I then compare if I'm just looking at fees and I know that's not a good way to compare any service, but if you're just looking at fees, how do you then compare one strata manager's fees against another? when there's so many sort of rubbery elements to it?

Yeah, it's really hard is the answer. It is really hard. And the contracts that buildings are signed up to, they are incredibly complicated. And they are template agreements that almost every strata management company uses. They have three or four different schedules attached to the back of them.

And you really do need to have some legal training to understand what those schedules mean. There will often be an agreed fee, a fixed fee that's charged annually for part of the management service. And then there are additional fees for extras that fall outside of those normal day-to-day management services.

There's hourly rates for those. There's a long list in these schedules of the different ways that a strata manager can charge you. And then on top of that, there's the commissions and there's the other cuts of the action, let's say, that a strata manager might be getting.

It's a big problem and it's very hard for owners to understand what they're being charged and whether it's fair.

What's your thoughts on this, the overall health of the strata management industry, though, like in the competition within it? Like, A consumer's getting a good deal genuinely though, because there's good competition and, or do you feel like that, you know, the price of it's, you know, a little bit expensive.

You know, if you wanted to switch strata manager, would you have lots of people willing to take you on? Like, is there a supply issue or a demand issue? Like what's the overall health?

Look, I think there's good competition out there. When I'm talking to owners who are wanting to switch strata managers, they don't seem to have too much trouble getting quotes.

And, you know, I want to acknowledge I'm not a strata manager and it might seem an odd conversation to be having with a strata lawyer, but I do sit in that unique position where the owners are coming to me when it's all fallen apart or they're coming to me complaining about the poor practices and what they're unhappy about.

And I'm not afraid to share them with you guys. I don't have a dog in that fight.

So, yeah, I think there's good competition out there. I think there are a few really clever businesses that are recognizing this as a moment of opportunity. I saw on LinkedIn the other day, there was a strata management company up in the Hunter region, I think it was.

and they have sent a letter out to all of their contractors to say, don't send us a gift at Christmas, don't take us out to lunch, don't buy us dinner and don't be offended when we say no to that because accepting these gifts and these nice things you do for us can be misinterpreted.

And we would rather just, if you like our service, say thank you. If you're happy to work with us, say thank you. Give us a Google review if you like, but otherwise we're no longer engaging in those practices. They sent that out to all their clients.

They posted that to all their service providers, posted on LinkedIn, and I just gave them a round of applause and went, how easy does that make your disclosure obligations when you just don't accept any of those things?

Things like that, if you're smart, if you're the type of player who really understands the power of this moment, I think you can make some good decisions. not taking commissions, not accepting third-party payments, and explaining that to clients and potential future clients.

Hey, our fees might be a bit higher, but at least we're transparent and we have no conflicts of interest. We are here solely for your benefit and in your interest.

It's really a statement, isn't it, to come out with that.

We interviewed Michael Tease a couple of months back, I think it was just around the time the second Four Corners episode was on, and he did point to a lack of leadership in the space because he was, I think, despairing of, well, who's leading the charge here? Would you agree with that statement?

Yeah, I think that's probably right. We've had, look, I'm closest to New South Wales because that's where I practice. And we have had a new board elected to the Strata Managers representative body. That's Strata Community Association, SCA. So they've got a brand new board.

We're hopeful here that maybe that means something, that we're going to see some change there. That's a matter of wait and see.

But we certainly, I agree with Michael, we certainly didn't see that strong response coming out immediately after the ABC's reporting, which was the 7.30 report in March, it was Four Corners in September.

And a number of Strata managers themselves were despairing about that. I heard from a number of managers who said, I'm not renewing my membership with the professional body because I just don't see what they're doing for us. They seem a little bit lost.

I've kind of been sitting back and waiting to see who might set up a new regime, a new representative group. I haven't seen that yet.

And I'm a little bit surprised about that. I'm surprised you didn't do it, Amanda.

No, as I said, this is not my fight. I'll throw some projectiles from the sidelines, but it has to be something that's led by strata managers, definitely.

And within that industry, I would imagine, and some of the people I've spoken to as well, you know, there's a palpable frustration within the industry from those practitioners who do aspire to really providing a high degree of service, but not just service, advice. I mean, they're running...

very expensive buildings, you know, and as technology, you know, is increased as well, often these are becoming high tech buildings. Um, you've got, you've got lots of, lots of, um, individual owners and they're often their entire wealth is tied up with whatever asset that they own in these buildings.

And there's often, they're often multi, um, what's the term, the multi-use dwellings where you've got, you know, you've got commercial, you've got, um, All sorts of communal facilities you've got. They're complicated buildings, basically, to run.

And so to stand up and really be and add a huge amount of value to your owners' corporations, those types of buildings, you need to be quite a high-caliber professional, right? Yep. And then you're swimming in the murky waters with a whole bunch of sharks.

I mean, I'm mixing up all my metaphors here, but... I know in the buyer's agent space, it's a little bit the same. There's just a lot of garbage out there and there's a few really, really keen, interested and committed practitioners who really seek to raise the bar.

What's in it for them? Are any of them leaving the industry? Are they disillusioned to the point that they give up? Or do you see that potentially there's a future where those people will step into some of those leadership roles and actually provide a direction for the industry?

Yeah, this is a multi-billion dollar industry, right? And if we look at the insured value of the buildings, we're talking about trillions of dollars. And some of these buildings, as you say, are operating with multi-million dollar budgets. And they do need these highly skilled professional advisors.

And this discussion about education, qualification, professionalism is a really important one in Strata. And sadly, it's one we've been having for about 25 years.

And lawyers have been part of that discussion because we come from that background of having to do degrees, often a couple of degrees, being quite highly trained, learning about ethics and conflicts of interest and what it is to be a professional. None of that exists in strata management, despite that.

Yes, there are a few great players out there who understand the complexities of these buildings, provide a fantastic service, and are, as they rightly should be, charging the right amount for the value service that they provide. And they've got plenty of clients. They've got waiting lists of clients.

I think those players are essentially business as usual. And if they've got their clever marketing hats on, are riding the wave of this, as I was saying earlier, this opportunity to point that out to their clients, then I don't really see any of those giving up and leaving.

I've seen some smaller players and maybe some more old-fashioned players. I've actually heard from them. They're in my inbox saying, Amanda, if commissions get banned, I won't be able to afford to run my practice. I'm getting out now. I can see writing on the wall. I think this is where it's going.

I call them maybe the more old-fashioned, the more traditional businesses, and I think they will be phased out as commissions hopefully get phased out. But absolutely, we need more of those highly skilled, experienced professionals as our buildings definitely get more complicated.

The compliance that they have to deal with, the laws that they have to understand are getting increasingly complicated as our societies do, as our culture does, as we have more people living in strata.

Interesting point there about some of the older style strata managers saying, oh, look, you know, I'm going to leave if commissions get banned. And Chris can probably talk to what happened in the financial planning industry here. I wonder whether it's pressure from that sort of...

part of the industry that has led the New South Wales government at the very least to not come in so hard. They don't want to precipitate a whole mass exodus of strata managers.

Could that be behind it? I think that's absolutely, absolutely behind it. And there have been some bigger players who've been quite vocal about that, that they are lobbying government to make sure that there is, let's put it this way, a considered and careful approach to solving this problem.

We want to maintain our mediocrity. Yeah, a bit like that.

And that's why I do think, you know, if the consultation that's sort of happening behind closed doors at the moment, if that does end up in a place where commissions are going to be phased out, it will be a longer term process so that managers can catch up so that they can arrange their business models around more of a fee for service approach.

model. And that's, you know, Michael T says this, that is a fabulous opportunity for those businesses to have a close look at those business models and work out, are they actually profitable? How might they be able to change things so they can be more profitable? And that's what every business should be doing.

I mean, there's been a lot of tech innovation in the property management space. Is that happening in the strata management space as well to make their jobs more efficient or is it like very low down the ideas of someone building tech? Let's do some tech for strata managers.

There's a bit. It's not as much as you would think. And there are some key players there in terms of software and software provision where there's not a lot of competition. Because if... Everyone's using the same software. It's compatible with all the other software.

The accounting software is compatible with the document management software, and there's not a lot of incentive for people to change. So it's quite hard to break into. Having said that, there's a bit of talk around at the moment in terms of AI, as there is with lots of other industries.

Strata is ripe for assistance in that area. Yeah.

What I think strata managers struggle with the most, and I hear this from any sort of new service provider that's coming in, they'll often come to me and say, Amanda, I've got a new thing. Can I come on your podcast and talk about it?

And they'll say to me, it's really hard to get the attention of strata managers. They are so busy. They're so swamped with the everyday craziness of what's going on in the buildings that they're managing.

to get them to have a look at the service I'm providing and understand the small way I might be able to help them and improve their process and efficiency. They're just not interested.

They're just swamped and kind of continuing to do things the way they've always done them without really questioning how that might be improved.

Yeah, it's sort of quicker to just do it the old way rather than have to stop, step out of it, have a look at the whole thing. It's interesting because I've just set up a property management business this year and we've been looking at tech. And honestly, I entered it thinking, yay.

I can't wait to get my hands on all this tech because, you know, we're coming greenfields. We're going to be fresh. We're going to have the best stuff.

We've already changed some of our technology already after a few months because we've realized that all the promises that are made aren't necessarily, you know, come to fruition. But also what we've noticed is that there's lots of individual solutions to individual pain points. but nothing is complete.

And so you're trying to work out the best amalgamation of things that talk to each other. And I would imagine it's a bit the same in the strata management space as well. So it's like no one comes to you with something that's going to solve every problem.

It's like, well, yeah, aren't you going to save that? Honestly, I just don't have time to think about just that problem. I've got all these other problems, you know, so I can sort of get it. It's a shame, though, because my love – I love automation. I love ways to make things efficient.

So Amanda, slight change of direction here. How does somebody become a strata manager?

You can do a course that's about five days if you're quick. Yep, an RCO. Pretty easy. Yeah. So there's no requirement for a degree course.

Yes, you go to a training organization, you come in at a certificate level, you do your 12 months of on the job experience, and then you can upgrade that qualification, become that class one, class two agent, proceed to be a licensing in charge, work your way up the ranks, very similar to real estate.

So that's in New South Wales where you do need a license.

Oh, yeah.

And that's probably the most onerous conditions.

Yeah. So in Victoria, for example, where there's no licensing, how does someone become a strata manager?

I imagine they wake up in the morning and say, I'd really like to be a strata manager. There you go. I'm trying to remember who it was. Julie McLean, maybe, who was the past president of SCA Victoria. She said, you got a heartbeat, you can be a strata manager in Victoria.

So multi-million dollar budgets, by the way, that we're managing here, trillion dollar assets. How do they get PI insurance? Yeah, well, I guess they do. It's a good question.

Good question. Whereas insurers are happy to take the risk.

So how can, what are the, I guess, the indicators for an individual owner or for an owner's corporation to start to work out whether the strata manager that they have is good, bad or middle of the road? Yeah.

Yeah, look, I think one of the best things that's come out of this year's media reporting has been this discussion and owners understanding that they probably should start asking this question.

We find, as you know, so many owners in Strata are just disengaged. They don't turn up to meetings. They're really apathetic. And it's so easy for any service provider, if they're so inclined, to take advantage of that.

They're contracting with this magical, mystical entity, which is the body corporate or the owners corporation. And you can forget that there are real people behind that entity. So I think what this media reporting has done is brought this issue to the attention of real people who should be paying attention.

At the end of the day, they are the ones paying the levies that are funding these fees, which might be unfair, they need to be asking questions. And that's what I think this reporting has empowered them to do and help them to understand the questions that they should be asking.

And it's questions like, do you receive commissions? Do you receive payments from third parties? Do you take a fee both from the insurer and from the broker? What are those fees?

to be asking for a copy of your contract and actually having a look at those schedules in the back of the contract to see how you're charged.

to be asking these questions to start a conversation.

Because when you get an answer back that says, yes, we receive a commission and it's a 40% commission, which is what some of the media was reporting earlier this year, I would like to think that once you're on with that information, you might have a few more questions to be asking and may then be able to go and talk to some other agencies as well if your contract's

coming up for a renewal and start comparing.

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Have you seen a rise of people DIYing it as well though, like Stratasteam self-managing without management companies or is that... you know, a very, very small portion. I mean, there was a bit of a rise of that in the property management space.

I think you do it once and then you realize that was probably not worth the stress. But, you know, what's the situation in Strata? I imagine it's even less.

Yeah, well, I've seen a rise in people wanting to do it and people asking about doing it. And we've got a couple of members in my online community who do do that, manage their own communities, generally smaller buildings. You know, you've got 150 lots, mixed-use building.

You probably don't want to be self-managing that. But those who are are tapping into some of the tech that's out there, some of the support online that's out there. And they're doing it quite well. The difficulty with self-managing for most people is the time that it takes.

And those who I do see doing it well are actually invoicing their body corporate, their owner's corporation for their time. And they've got an engagement contract in place. They're not a licensed strata manager, but they are being compensated. And I think that helps to keep everybody happy.

Yeah, that's an interesting one. I mean, I know we don't get excited when we look at, you know, purchasing a property and then discover it's self-managed. We think, oh, here we go. It's going to be all the paperwork in a shoebox.

It's certainly not widespread, but, you know, in three-lot stratas, you know, buildings, it's not uncommon for something as small as that.

And also, I mean, it's a totally different topic of conversation with the two lots, but that's something I learned from listening to one of your podcasts was that the challenges involved with two lot strata, you know, if the other equal, is there one got more voting rights than the other and all that sort of stuff.

So that's another topic. Another channel there. So what are the options if somebody's unhappy with their strata manager? You know, they might be jumping from the frying pan into the fire. You know, they might be thinking, okay, we want to change.

But like if they don't actually fully understand, I guess, how to recognize a good one. And I would hazard as well that there's more to it than just disclosing whether or not they're taking kickbacks. I mean, we want to know, are these people up to date with legislation?

Are they actually going to educate and advise their owners' corporation? Because quite often they don't stand up against a room full of bolshie owners.

I would imagine there's a lot of other things that you want to be looking for in a strata manager, well and truly over and above how they actually structure their fees.

Yep, definitely. The most important thing I say that a strata manager should be doing, what good strata managers do, is that they are responsive. They are good communicators. I have owners coming to me all the time saying, Amanda, my strata manager just doesn't answer emails, doesn't return my calls.

And the particularly dangerous strata managers are the ones who make decisions. without getting any instructions. They're the ones who have taken the keys to the kingdom and run off with them.

And I have owners who come to me and say, oh, Amanda, we don't know what our strata manager's doing, but all these decisions have been made and this work is happening on the property or this owner has just had something approved or our insurance has been placed and we've got this huge premium and we didn't even know about it.

And, you know, that's another example of what gets me ranty because I say, oh, these agents forget that they are agents. They are not the principal. And when you are an agent, you act on instructions. And the simple way that I put it is to strata managers, you advise, the owners decide.

That is it. And you put yourself in a really scary position when you're an agent who's going off making all these decisions without instructions.

The complicating factor in strata, which owners are just coming to realize, is that sometimes there are contracts where the owners have given, signed away, full delegated authority. It's called these full delegated authority contracts. They've given all their authority over to the strata manager.

So the strata manager is saying, yeah, I am making all these decisions. I'm not consulting with you because I don't have to, because you signed this contract that gave me full delegated authority.

And that came to the fore in one of the articles coming out of the ABC News report where it was discovered this very high profile firm that's been at the forefront of all this media reporting, they had these full delegated authority contracts.

And that's what led to these 40% commissions on insurance policies without owners even knowing about it. But it's all legal.

Do you think buyers are getting more smart? I reckon a lot of people entering the property market are more aware of the risks of buying new than they were, say, a decade ago.

Oh, yeah, definitely.

Do you think buyers are still very early in their understanding of strata? And do you see that, you know, increasing much over the past few years? Are they hopeful? Or do you think that, you know, it's a lot for buyers to get their head around is strata. And it's really...

They don't really want to delve because they know how much they've got to sort of learn and it stops them really doing the due diligence they need to.

Yeah. I do think that owners are becoming more savvy is a word that I'm often using. They have better access to better quality information now and there are people like me out there in the space putting that information out there, a lot of it for free.

But there is still this group of owners and it's still a large group. And, you know, I think I'll say it's still the majority who just want to buy their apartment as a lock up and leave. They bought the dream of low maintenance, low costs.

They assume that buying an apartment is just like buying a little house. It is nothing like that. They don't understand they're buying into a democracy. And it is only when the proverbial hits the fan that they look into it a bit closer and go, oh, God, what is going on here?

There's no money or we have to contribute to this bill or I can't get my renovation approved. Then they start paying attention. And of course, by then it's too late. They're stuck in a building that perhaps if they had a better education at the point of sale, they never would have bought into.

So I'm seeing a little bit of a mixed bag. Part of me is positive and it's absolutely what drives me with the education that I do to try and reach as many people as possible with this information about Strata because...

Our governments are changing the planning controls so that we can build more apartments. We've got to start getting this right and having people understand what they're buying into.

I was actually really horrified to find that strata managers weren't necessarily licensed across the country.

And I found it, particularly in the light of our sort of, you know, every politician is out there saying supply is the answer to our housing affordability crisis, both on the buying side and also the rental side.

And so therefore the, and then there's all this zoning, rezoning that's been done for, you know, high density, medium and high density living. So, Politically, it's like, yes, build more, build more apartments.

And yet we don't seem to have the system and structures in place to actually support building and living and owning these apartments as we haven't seemed to get that right. Now, property is one of the problems with the property industry. It's the same in the buyer's agent space.

We don't have any national oversight because we are governed by state and territory jurisdictions. And that lack of national oversight leaves huge holes you can drive semi-trailers through in terms of just... winging it in many ways.

Is that the case, do you think, with Strata as well? It's just this, you know, we've got massive gaps between the states. We really need some national oversight. Is it ever possible to get that?

Look, I don't think it is. I don't think that's going to happen because land has never been regulated on a national basis in this country.

We've regulated land on a state basis. I think that's going to continue. It is... It is helpful when one state or territory can look to another and see the problems that they're facing and try to preempt those same problems.

And I think simply from a density perspective, that's why it's generally New South Wales that is leading the charge and leading the downfall with a lot of these situations. So we could probably do more in terms of consultation and sharing of experiences.

And that's definitely something the Australian College of Strata Lawyers does and strives to do with professionals working in this space. But as for a national regulation, it's something that I hear often and I just don't think it's going to happen. I don't think it's going to happen.

It's a nice thing to cry about and say that we need, but yeah, I think the structure is

country appears to preclude that in your space as well as mine so that's interesting and so when you're educating people when you're dealing with strata managers that are coming to you um you know where are the gaps what do you know they get to do their five-day course they become a strata manager and then what don't they know that they need to learn um in order to do the job well

Oh, there's a long list that's now flicking through my mind, Veronica. The first thing I want to say is the legal compliance is a big deal. There's a lot of it that there shouldn't necessarily be. As you said, New South Wales is very codified and quite compliance heavy.

Other states are not necessarily like that. But the fact is we do have complex laws. And because strata managers receive very little compliance, education and training at the start of their journey as a strata manager. And then throughout, they just don't know what they don't know.

And there are some really, from my point of view, basic things that are not happening in terms of what needs to go on a meeting agenda, how approvals are processed, the rights of owners to access their own documents. That's probably at number one.

The complaints that I hear from owners these days, Amanda...

charge for bylaws as your own building.

That you didn't ask for, but don't worry. I've heard of that one. Delegated authority. They can do what they want. But owners who will try to obtain information and say, oh, the strata manager won't give it to me, or it's taken months to be able to get access to my records.

And it blows my mind because there's this misunderstanding that this is not the agent's records. These are the records of the owners. Mm-hmm. And every owner has a right to access their records. I know we've talked about that before. So that's on the law and legislation side of things.

The communication skills, you know, a degree in psychology would be helpful to understand people management. Project management, those who've been engineers and managed big projects, they're perfect for strata management, but then those who've worked in hospitality are perfect for strata management as well.

It's really a jack of all trades position, and those who are doing it well have that really broad skill set. I think it needs a degree course. A three-year degree at university that's covering all of these subjects would not go astray.

I mean, are you finding that Stratas, in terms of what they're charging, I mean, I guess the investment that, I might want to watch the terminology that you use for Strata members.

I mean, what's, in terms of the fees that are ongoing, are there some general consensus to sort of try to keep them low and not have much money in the sinking fund? Or is there a lot more education there? Do you feel that people actually understand that that money's not lost?

It goes into a pool and, you know, it's... Is that shifting a little bit? Because it's something I have to consistently do with buyers just to educate them a little bit. Because the first level thing is, oh, it's got cheap strata, so it's a great place to buy.

Yes. Yeah. And thank you for educating people that that is not what you should be looking for. It's something I've said before, whenever I'm talking to real estate agents, I'm saying, please stop selling low levies. Yeah, that's right. Positive. It is not a positive.

If I'm looking to buy a strata, I'm looking for a healthy sinking fund. I'm looking for realistic levies.

If a place has got to lift a gym and a pool, a concierge, a building manager, a strata manager, those levies are not going to be low, but we're getting all of those services in return.

And we have laws that require buildings to plan for capital works, to plan for that rainy day, to build up the sinking fund or the capital works fund. And they're just not being complied with. The 10-year plans that are being prepared, they're not being followed.

And even in my own building where I sit on a committee, we've got an AGM coming up, and I just had a committee meeting a month or so ago with committee members where they said, but Amanda, when are the levies going to go down?

And I said, okay, is the cost of anything going down right now? In what universe do your levies go down when we live in a building that is aging, when the cost of living is going up, when construction costs are going up, when we have more demands than ever on our strata manager?

Sorry, the bad news is, no, the levies are not going down. But Chris, absolutely, I see it all the time. There is this understanding just...

rarely exists do you think they're easier to sell though like do you think that strata members are going like actually they're too low where let's just increase or do you think you know because owner occupiers are getting more and more market share i guess and investors are selling or do you think that yeah because there is that attitude that investors are just i don't want to spend a single cent on i'm just going to run it into the ground um yeah do you think that's true as well

I am hoping, and I've seen this a little bit, I'm hoping there'll be a generational shift. I am hoping that as say my generation and younger start to come through buying more strata properties, we are spending a lot of money, multiple millions of dollars on our properties. We are professionals.

We are busy. We have the mindset of we want to have this balance in our life. We are not there. sorry, at the working bee on the Saturday, rolling up our sleeves and clearing out the community garden as perhaps the generations before were happy to do.

We are not available to meet contractors on site. So we want a strata manager. We want an on-site building manager. We want all of these things. And guess what? We're of a certain generation that understands you want that stuff, you got to pay for it.

So I'm starting to see in various communities, including my own or the one I was talking about earlier, that shift is coming through. And if you can get a few younger people on your committee,

I think you might benefit from that different point of view.

The Sicking Fund forecast or the Capital Works Fund forecast is an interesting one because it's my understanding that, yes, you've got to get a 10... In New South Wales, again, you've got to get a 10-year forecast and then you've got to update it every five years. Yep.

But there's no obligation under the law to actually follow the forecast. So you've got to get it. And then what, right? And we often see in strata reports, you can sort of see that they're clearly not following it. Others are. I think some...

do follow it, not through any great sort of understanding of what it contains, but it's just, well, okay, we'll just do it. So in a way that's good. Others follow it, but they're very active and they do fully understand exactly where that building is up to in terms of all its ongoing maintenance.

And then there's others that go, no, we know better and we're going to keep the levies low.

Um, and so I do see that and it's quite, it's sort of clear, actually, you can sort of see the mentality and, and, and some buildings actually have a history of just raising special levies whenever anything needs to get done. They just keep the levies low.

And so we sort of certainly educate our clients as to look at, well, which is a building I'd rather own where I'm not paying for the sins of the people before me. You know, somebody leaves today and they get off scot-free if there's something that's been brewing and there's been no accrual, uh,

And no accounting for that and no planning for that. So you talk about the planning, but that little bit of planning is legislated, but it's not really, I wouldn't call it planning in many cases. It's just ticking a box. But I am still shocked at how many buildings don't even have one.

And you look in the minutes of their meetings and they vote not to get one. Yeah. And again, the strata manager not saying to them, you have to have one people or you have to have it updated. So I'm actually quite surprised when I see things that I know are actually requirements.

And yet the strata manager themselves hasn't actually been able to, whether they knew how to, whether they were strong enough to actually stand up against the people that didn't want to spend the money. I don't know. But it is interesting reading those reports and seeing that type of behavior.

Yeah. And you're right that there are a lot of different ways for buildings to fund their expenses. They can raise a special levy when the time comes to replace the roof membrane. They can get a strata loan.

And when you're talking about a building that's got a lot of investors, the interest on that loan is tax deductible. So they... It can be, I should say, not financial advice, can be, and they might prefer that.

What I've found interesting over the years is that when I've worked with clients, high net worth clients who have bought, you know, 10 million, 15 million, perhaps, those are the communities, A, that often have the most conflict.

And B, are the ones that don't have any money in the capital works fund because these are people who say, why would I put my money there when I've got the option to put my money somewhere else where it's working harder for me?

And if the time comes, I can easily access that other money and I can pay that special levy. But you're right. If a property is then to be sold and a new owner comes in, the new owner is then paying for the sins of the former.

So arguably that's not a fair way to deal with things, but it's a way and it is legal to do things that way.

Yeah, there was a building in Darling Point that we looked at for a client some years back. And I remember that was stark, stark. They also ran it a bit like a cartel. And so they decided when things are going to be done and they just basically imposed that on everybody else.

And then the special levies got rolled out. And I went, you don't want to buy into that. You have no say, none at all. So yeah, it's interesting structure some of these buildings operate under. Yeah.

And your point about the strata manager not having the knowledge or the confidence to stand up and say, hey, this is illegal, guys, or hey, this is not in your best interest. I was looking at some of the property and stock agents legislation today because I'm delivering a CPD for agents tomorrow.

And I was reminded that in the rules of conduct for all agents, including strata managers, there are duties to act. professionally. There are fiduciary duties. There are duties to act honestly, fairly, and to act in the best interest of your client.

That means you should, by law, be putting your hand up and saying, that is not right. That is not legal. That is not fair. That is leading you down a bad path. But most, I'm going to say most, it's only the few who I've seen can do it.

Most strata managers don't have the knowledge or the confidence to stand up and say things like that.

So that's something you really want to check with your strata manager, whether they're on top of all that sort of stuff. Actually, in the show notes, there's actually a link to a checklist that Amanda has, which is, do you want to explain your checklist?

Yeah, sure.

When the news reporting was coming out throughout the year and most recently the Four Corners report, I had owners asking me exactly what you've asked me today. Amanda, what should we be finding out about our strata managers? How do we know if we've got a good strata manager?

How do we know if they're in bed with brokers who may not be acting fairly? And I put together 20 questions that you can ask your strata manager to help you understand whether or not they are engaging in practices that are to your benefit.

As conversation starters, if a strata manager ticks a box and says, yes, I do accept a broker fee or I do accept an insurance commission, then there can be a further conversation about that. But there's a checklist there of 20 questions that you can ask your strata manager.

I've actually had some managers themselves filling out these questionnaires and posting them on social media to say, hey, we've ticked the box. Amanda's 20 questions. We think we've performed all right. What do you think? That's gold. I love it.

Yeah. Yeah. That's truly gold. Do you know, some years back, just when you're talking about the insurance commissions, Nicole Johnson did some research on this, didn't she? Yeah, absolutely.

If my memory serves me right, she found that people as a whole, the actual owners corporation members preferred to pay commissions because they sought to avoid having higher fees. I mean, and that goes to our own inability to really

appropriately understand what we're doing here.

What, I mean, do you, is that fresh on your mind? I mean, what sort of, where does that not align with what people are at abroad, you know, they're outraged by this and yet at the same time we go, oh, no, no, rather pay a commission. Thanks. Yes. You know.

What this goes to, and we've come back full circle to the beginning of the conversation, this goes to the fact that disclosure doesn't cure anything because these owners are being told that they're getting a dud deal.

They're being told that your strata manager is getting, you know, the industry average we're told is about 20%, but we've heard that some strata managers get this 40%. commission on insurance premiums then they might get a broker fee and they might get other third party payments.

Owners are being told all of this they're aware of all of this but they don't understand because it's complicated it is it is nuanced they don't understand that when a strata manager receives these payments from third parties that strata manager is immediately placed in a position where they have a conflict of interest they are no longer making decisions and

consciously or unconsciously, and most strata managers won't realize this, they won't be conscious, but they're not making decisions in the best interest of their client, they are making decisions that benefit them financially. Because we go with this insurer, then we get this commission.

If we go with this service provider, we get this payment. And it's this kind of sick culture where that's all okay. And on both sides, they're saying that's all okay because it makes our management fee cheaper. Not realizing that everything is gradually getting more and more expensive, right?

The insurance premiums are getting more expensive. The contractor who's had to put 20% on top because I've got to pay that to the strata manager is suddenly charging more.

And we no longer have any idea or any insight into what is the value of anything or valuable fee for the service that we're getting. Yeah. The only way I say as a lawyer, you're going to know that is a pure fee for service model. This is what I do.

This is what I get paid for. And that's also the only way to remove any smell of conflict. I do not get remunerated by anyone except my clients.

Yeah, it's interesting stuff. Amanda, property Dumbo?

Yeah, we've been talking about Dumbos the whole time, really. Have you got an example for us? My favourite at the moment, and this is doing the rounds in our member forum, the strata manager who is using their personal credit card to pay the expenses of their client.

No, not for the client. I can see Veronica's face just going, what? What? Yep. My reaction exactly. You're getting some frequent fly points along the way. And the bizarre thing is, at some point, strata managers operate trust accounts, right? So, you know, there's a conversation here about fraud.

But anyway, the strata manager is taking money, must be taking money from the trust account to pay their credit card bill. No instructions, once again, to do this. Oh, my God. Yep. So this has been discovered by an owner.

And we've had a back and forth in the forum about, Amanda, how do I unpack this? How do I even have this conversation with the strata manager now that I've discovered this?

So I posted this one just as a snippet on our Facebook page and had owners and strata managers commenting and saying, that's nuts. And then I had someone who said, yeah, seen that one before.

It's just mine. And that just goes to a complete lack of professionalism, doesn't it? I mean, it's just...

And then it's not, let's just be clear. These are not expenses of a business, you know, you know, you might be paying your internet bill or whatever for the office or whatever, where you do your business expenses. This is someone else's.

This is the building's expenses.

The building's expense that should be paid with the, with the building's money. And the building has no agreement or instruction to pay your credit card bill.

Or maybe they should be giving the points to the, uh, the credit card points to the building, right? Go on a free holiday, a little lottery, but anyway. Yeah. Thanks so much for coming on, Amanda. Always good to chat.

You've always got your finger on the pulse and know what's going on, so appreciate the chat.

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