by Robert Van Aalst of Lawyers Central
Part 1 of 3
“SOMETHING IS ROTTEN IN THE STATE OF DENMARK.” (ACT 1, SCENE 4, HAMLET). STOP PROCRASTINATING; HARD DECISIONS NEED TO BE MADE.
The ABC disclosure on 21 March 2024 about Netstrata was, or should have been, a wake-up call to everyone involved in the strata industry, particularly strata managers.
“Something is rotten in the state of Denmark.” Hard decisions need to be made.
Netstrata is not the only player whose practices require scrutiny and change.
I think part of the problem confronted by strata managers is that community living, or strata living, and the laws associated with it have grown exponentially.
MEDIA FOCUS
The media focus has been on conflicts of interest and undisclosed financial benefits. These are symptoms of the problem, not the cause.
COMMISSIONS ARE A SYMPTOM, NOT THE PROBLEM.
Commissions are a symptom, not the problem. The problem is the lack of proper education of strata managers that has not kept pace with the legislative changes.
In this paper, I try to explain why I have come to this conclusion and suggest a remedy that will result in:
- Highly educated and ethical strata managers.
- Strata managers gaining the respect they deserve.
- Strata management being a standalone profession and not part of an industry.
PROFESSION, NOT AN INDUSTRY
Strata needs to be a standalone profession and not part of an industry, as is the current situation.
AN INDUSTRY
An industry consists of a group of diverse interests working in a similar area. This fits the description given by the Strata Community Association (SCA), which consists of a diverse membership with conflicting needs that I believe has outlived its usefulness.
A PROFESSION
A profession refers to a qualified group of people who have unique skills of practice. Examples of professions include lawyers, accountants, dentists, pharmacists, architects, etc. The only way strata management can gain acceptance is if it stands alone as a professionally qualified group having unique skills of practice.
LOW ENTRY LEVEL
Currently, the entry level to become a licensed strata manager is low. The entry level should be the completion of a degree course of possibly four years followed by a period, say two years of on-the-job practical training before one is eligible to obtain a license to practice.
THE PEAK BODY
It’s time for strata managers to have their own peak professional body where membership would be restricted to qualified licensed strata managers and not include service providers and owners.
ENTRENCHED CULTURE
I suggest there is an entrenched culture in the SCA that limits change.
The needs of strata managers are different from suppliers, and there has been, for a long time, quiet but strong resistance to change.
Past changes to culture and practice have, in the main, been reactive, not proactive.
REACTIVE AND PROACTIVE CHANGE
There needs to be substantive proactive change, not reactive band-aid solutions.
Substantive change would include separate legislation governing the practice of strata management, like the Legal Profession Act that governs the practice of the legal profession, for example, a Strata Profession Act.
Mandatory continuing education should continue to reinforce high professional and ethical standards.
There should be an additional course that qualifies strata managers to become accredited strata experts. Before undertaking this course, strata managers should be fully licensed for a minimum of five years.
There should be an overarching independent strata statutory body that deals with complaints and, if necessary, has the power to recommend punitive action, for example, if professional misconduct is proved, licenses to practice should be removed. The type of statutory body I am thinking of would be like the Legal Services Commissioner.
A new NSW Strata and Property Services Commissioner has been appointed to oversee and regulate property services in New South Wales in relation to Regulation and Compliance, Consumer Protection, Education and Training and Industry Engagement and Improvement but it appears has not been funded adequately to manage all these facets.
HISTORICAL BACKGROUND
To understand the problems of today requires a brief overview and understanding of the history of strata management.
Strata was first legislated 63 years ago by the Conveyancing (Strata Titles) Act 1961.
Company Title was a way people could and can live communally. It was and remains governed by the terms of its Memorandum and Articles of Association (Constitution), and Companies Act (Corporations Act).
The politics behind the strata legislation was to help developers provide another mode of communal living ownership separate from company title apartment blocks.
Strata Title allowed people to have a proprietary interest in their apartments like having title in real property such as one’s home on its plot of land.
Lot owners, in addition to having a direct proprietary interest in their apartments, also have an equitable interest in the common property, which has a separate title vested int the owners corporation.
Lenders either avoided lending to shareholders in company title buildings or if they did would lend at a lower rate. The reason being their security were shares not real estate, so they required greater equity. It was and remains easier to use strata title as security for a loan because it legislatively an interest in land.
STRATA MANAGEMENT THE POOR COUSIN
Back in the 60s, strata management was the poor cousin to the real estate game. It was the province of real estate agents whose primary focus was selling and letting. The increase in construction of strata blocks generated more sales and lettings for real estate agents. Rent roles were an asset, and strata portfolios also became assets. Real estate agents were not keen to let go.
LICENSING OF STRATA MANAGERS
Licensing of Strata Managers fell under the provisions of the Property, Stock and Business Agents legislation, while the Strata Schemes Management legislation set out the functions of the strata managers.
Over the years, there have been amendments to both the strata legislation and Property, Stock and Business Agents legislation. It should have been recognized what was required was one piece of legislation governing strata management.
With the growing complexity associated with strata living and its management, the legislation needs revision and consolidation.
In NSW, there are currently 3,000 licensed strata managers although the number of practising managers is not fully known.