Is your body corporate manager actually doing a good job?

Investing in a strata involves dealing with a whole bunch of other people—from engineers and architects to lot owners—but as in the case of most investment ventures, building a good team can help an investor navigate his way through with more ease.

However, because all firms are created differently, how does one know exactly if a body corporate manager is working in the best interest of the owners?


ClarkeKann Lawyers' James Nickless and Ian McKnight says that "the devil is really in the details".

"There's companies out there that try and provide a bit of a financial examination of what the different managers may look like but, generally, there's the agreed services fee, which is holding your annual general meeting and dealing with correspondence and a few (other) things that they can... anticipate," James explained.

"Then there's the schedule B fees, which are just reactive. 'So this has happened and now we're going to have spend time on it.' In one way, it's impossible to know exactly what it's going to cost. So I think people need to then start thinking about it in terms of value.

"If all they're getting is a mail handling and meeting scheduling service, then I'd say they're probably with the wrong company because there will be a lot of issues that come up that they just simply won't be earmarked for the proper advice."


Having the "value mindset" can help investors save money in different areas and ultimately make the most out of their investment, according to James. In most cases in business, the cheapest is not always the best, whether it's a property, a lot, or even an advice.

"If they've got that value mindset, it may well be that their strata manager is costing them a lot of money but they may be saving the money in other areas," James said.

"These schemes have to operate bank accounts. They have to engage contractors to do things like painting. That can cost millions of dollars.

"I've got a matter that I was involved in over the last couple of years, where about a million dollars’ worth of windows went into a scheme that was right on the ocean. It was residential grade, and when I say residential, I mean detached single-dwelling residential grade glass that went in and it was completely useless — they had to rip those out and put a million dollars’ worth of windows in."

James said it happened because there was a lack of communication, with cost cutting take priority, as a result, they "didn't think about value and lost the entire value of that contract".

As for a good body corporate managers, James described them as mediators — handling owners' concerns, as well as meetings, and gathering all necessary information of the scheme to provide an easy but effective and efficient process.

"In terms of the value to look out for, [look at] the way in which their individual manager handles meetings, [and] handles people," he said.

"There's almost a mediator-type of role that the body corporate manager will play.

"There might be a lot of stuff going on in the background that they don't see ... but they're actually insulating the rest of the scheme from the cost and the effort of dealing with that individual. If they're not on top of the basic paperwork of just dealing with the statutory requirements, then they need to be replaced straight away."

"The idea is... in business, we all know cash is king. Well, in strata, the golden rule is 'Knowledge is king'," Ian added.

"If owners can have their manager maybe get quotations, [and] get reports. They get reports themselves, [and thus] informed decisions are going to be able to be made... They shouldn't have to have special levies, extra levies through the year, if they've done their job very thoroughly. Unless of course, something unexpected comes up."

As a last advice, Ian and James agree that investors involved in such arrangement must practice being proactive in choosing the best body corporate management company for their strata. After all, while risk is ever-present in investment, it can be minimized if you're surrounded by the right people at the right time giving you just the right advice.

"Schemes should also be more proactive in having that value conversation and saying to their strata manager, 'Look, we just don't feel like we're getting the value out of you,'" James said.

"Some of these bigger companies have multiple portfolios, different mangers that they can swap you around [with] and if people just take it as a given... well, then that's the service that they'll get."

"I think if they're more proactive in seeking out the service they want, then they're more likely to get it."

Tune in to Ian McKnight and James Nickless' episode in The Smart Property Investment Show to know more about the rules behind strata, the politics involved with the owners' corporation, as well as their tips and tricks to ensuring buyers receive the right advice at the right time.


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