The Relationship Between Developers and Strata Managers – Is the Strata Industry Doing Enough to Protect Owners?

Managing an Owners Corporation from registration requires skill and patience, as owners often move into a building which doesn’t always live up to the picture painted in their sales brochure, leading them to scrutinise every aspect of their new home. Typically, most owners are fearful that the Strata Manager which has been appointed by the developer will take care of the needs of the developer instead of the owners. With building defects becoming commonplace within the industry, increasing national media attention, along with a shocking lack of consumer protection in this area, this is fast becoming one of the most pivotal topics within the Strata Management sector, as these defect ridden buildings can cost Owners Corporations hundreds of thousands and sometimes millions of dollars to remediate as well as a huge emotional toll on unsuspecting owners.

Currently within the ACT, there is no legislative framework that guides developers on how to appoint a strata management firm to take care of defect rectification projects, and with Canberra often being described as a large country town it is near impossible to provide owners with assurance that any strata management firm has a solely professional relationship with a developer, leading to further doubt as to whether a strata manager will prioritise the interests of owners over a long term, profitable relationship with a developer.

The issue of competing priorities and the affect this can have on Owners Corporation could be mostly eliminated by the ACT Government passing legislation which would hold developers accountable for defect rectification within the communities they build. With this topic and its possible solutions being hotly debated over recent years with little action taken, it may be time for the strata industry itself to take action and begin to self-regulate, forcing the industry to a new, higher standard and providing enhanced peace of mind to those that need it most.

The Strata Community Association (SCA) represents thousands of strata management organisations across Australia and New Zealand, providing ongoing training to managers and most importantly, a strict Code of Conduct which members must always abide by. By having a membership with the SCA, strata management firms can assure their clients that should they breach professional standards, the Owners Corporation has an extra avenue of recourse. A strata management firm receiving any penalty from the SCA would certainly cause irreparable damage to the reputation of the manager and the stigma would be near impossible to remove. Although some cynics, namely strata management firms not associated with the SCA, are ready to cast doubt on the SCA Code of Conduct and how complaints are handled, they do not put themselves in a position to possibly be ethically examined under the Code of Conduct which is particularly pertinent when so many of these companies are vying for work from developers.

The Strata Community Association, its members and developers could work together to create a solution, one that would afford owners peace of mind that the strata manager appointed at the initial term upon registration of the Owners Corporation would work under best endeavours to achieve positive outcomes for owners. The proposed solution is relatively simple, especially in a marketplace as small as the ACT, the Strata Community Association could be charged with appointing strata management firms to developments, weighing up the specific skills of each

organisation, the knowledge of their staff, their proven track record with building defects and their ongoing commitment to professional development and ethics.

This could be an ongoing process, with Executive Committees central to the decision of the Strata Community Association, providing feedback as to the performance of their manager. Negative feedback, depending on the severity, could result in the firm being excluded from shortlists for a period of time, or completely excluded should there be any unconscionable conduct. This process would undoubtedly result in a higher level of transparency to owners on defects throughout their building, and defect reports from highly skilled professionals would likely become the norm within the first two years of a building’s completion.

Of course, this process would require developers to relinquish control on the process and this may at first be a challenge, especially when it is already easy to draw connections between developers, sales agents and strata management firms simply by reviewing their online staff lists. Bringing attention to this process would provide full transparency to the strata sector, and any knowledge of a developer’s unwillingness to participate in a transparent engagement process might be enough to slow the sales of off-plan units. Perhaps the slow in revenue and the delay this could cause to their next planned trip to the Rolls Royce or Ferrari dealership may force developers to be part of the program, committing them to work towards a greater solution. Even forced transparency is better than no transparency at all.

This newly formed process would also almost certainly attract an increased number of strata management firms to join the Strata Community Association, even if the intention may be purely to gain new business. Regardless of their motivation, the result would be beneficial to the owners within the communities they manage. The continuous need for strata managers and their firms to prove themselves under this program could only result in increased level of service delivery throughout the industry and in turn leading to Owners Corporations being provided the best of quality and professional standards, rather than mediocrity in an otherwise largely unregulated sector of the real estate industry.

As the Canberra landscape continues to surge towards scatterings of residential towers, it is hard to picture where we will be placed in another five years if more is not done to build a framework for a better solution for our clients. It is becoming increasingly hard to ignore the voices of owners requesting more from the industry, harder to feign surprise when told of the lack of service from their strata managers and harder to maintain a professional stance that conceals outrage from the voices seeking change for a better future.