One in four Australians live within a form of community title. New orgs are sprouting up overnight as strata management alternatives.
They say that one in four Australians do live within a form of community title, whether that is in a strata scheme or community association. This has led to fast growth within the strata management industry. New organisations are emerging quickly as there is money to be made. A strata management business, known as a strata roll, is valued between three and five times annual management fees.
To build businesses, these new strata businesses are building their portfolio from assisting disgruntled Owners Corporations to change camps. In other words, to terminate the services of the current strata manager and appointing a new strata manager.
Let’s deal first with the current strata managing agency agreement; it is normally a validly executed contract. Hence, if an Owners Corporation wishes to terminate a strata managing agency agreement (“SMAA”) the current agent is entitled to the management fees payable under the Contract. If you are therefore advising an Owners Corporation who wish to jump camp, you should as a strata manager make certain they are advised that they may need to pay all management fees until the end of the agency agreement.
There are some strata managers who indicate that they should be paid for the lost insurance commission. This in my opinion is totally unenforceable and is challengeable.
Leverage has had a lot to deal with these movements. As noted above, the place to start is the payment of all management fees irrespective of what is said below. Nonetheless, we have utilized some strategies to assist the new agent:-
1. Strata Managing Agency Agreements must comply with Section 55 of the Property and Stock Agents Act 2002. Agents who fail to comply with this legislation provide an opportunity to cancel SMAA without penalty.
2. The agency agreement must be executed by and on behalf of the principal. Far too many SMAA’s have not been executed by the Owners Corporation.
3. In one case, the Strata Managing Agency Agreement was not served on the Owners Corporation. There is a requirement under Section 55(1)(c) that an SMAA must be served on the Owners Corporation within 48 hours of them executing it. A Strata Manager giving themselves a copy does not comply with this provision.
All the above, indicates that the Strata Managing Agent may lose their commission. Section 55 starts with the preamble “an agent is not entitled to any commission or fees”. This means that, if the agent does not comply with the regulations, they are not only are not entitled to collect commission and they must return what has already been paid. This little bit of pressure usually assists in pressurising the current agent to hand everything over.
In most cases, we have promised a management fee but if they don’t want to hand over the strata records, we indicate that we will pursue them for the money currently paid. Please note that, if your strata managing agency agreement is not executed properly, you are not entitled to your commission. Taking the money when you’re not entitled to your management fee leaves you open to a defalcation under Section 85 of the Act.
There are two lessons here:-
1. When you sign your own agency agreement, be careful that you comply; and
2. Compliance can often be used as your pressure point to get the records handed over.