We Are Self-Managed. Are We Doing a Good Job?

Is your strata plan self-managed?

A strata plan is considered self-managed when there is no strata managing agency appointed to look after its affairs and all management is done by the owners. This will include things like arranging insurance, preparing budgets, organising essential repairs and maintenance and many other tasks.
Normally, self-management wouldn’t be suitable for larger apartment complexes. But it could be an attractive option for small blocks or strata townhouses, if someone is willing to take on these responsibilities.

So, how do you tell you are doing a good job managing your strata plan?

To answer this question, we’ll need to have a closer look at a few areas.

1. Do you have separate funds?

Ideally, your quarterly levies should be allocated to two different funds – an Administrative Fund and a Capital Works Fund. Money held in the Admin Fund will be spent on day-to-day running of the building, including insurances, energy costs, gardens and minor maintenance and repairs. Money held in the Capital Works will be set aside for large maintenance projects, such as painting, roof replacement, etc. By not separating the two funds, you risk overspending on routines items and have minimal money left for more expensive (and more important) projects. This leads to special levies.

2. Do you collect enough levies?

Preparing a budget for your next Annual General Meeting is key. For the Administrative Fund, thoroughly think about all possible expenditures your strata plan will face in the coming year. Apart from budgeting for obvious things like insurance premium and energy bills, make sure to make an allowance for emergency repairs, such as water leaks and clogged pipes.

The best way to prepare an annual Admin Fund budget is to use your actual costs from the last couple of years as a guide. This might also highlight areas where savings could easily be found.
When it comes to the Capital Works Fund, things get a little bit less obvious, leading to our next point.

3. Do you have a Capital Works Fund Forecast (CWFF)?

This item is often being neglected by self-managed strata plans, yet it offers tremendous value, especially if having to raise special levies all the times doesn’t sound very appealing to you. The idea of the CWFF is to help identify any predictable repairs and maintenance elements that your strata plan will likely need over the next 10-20 years. It then determines the adequate levies to be collected to your Capital Works Fund so that when a particular repair item is due – you have enough funds to afford it.

There are many companies who specialise in preparing CWFFs but please remember – you usually get what you pay for so don’t solely decide on the price when commissioning CWFF. We recommend you spend a bit more on getting a more detailed and customised forecast. Remember it’s going to cover a decade or more.

4. Are you aware of and comply with Local Council Requirements?

Fire Safety compliance is a particularly hot topic. Often, smaller or older blocks may not be required to submit Fire Safety Certificate as they simply don’t have any fire safety items on the common property. However, each Council’s requirements are different and assuming that your strata plan doesn’t need one can be a risky decision. We are inspecting records of various strata plans on daily basis and Fire Safety Orders (compulsory Fire Safety upgrade) imposed by the Local Council come up every so often.

5. Speaking of records, do you keep yours well?

When someone is looking to purchase into a strata plan, they will commission a Strata Report to understand what issues the strata plan is being affected by and how well the building is being maintained. So keeping your records in a good shape is crucial because any information gaps will leave a question mark for the prospective purchaser.
We recommend keeping invoices for large projects, any reports that have been obtained (e.g. Asbestos Report, WHS Reports), tenders or approved scope of works, important correspondence, by-laws, etc on file and prepare detailed minutes for the meetings held.

A lot of the time, the secretary of the self-managed strata plan or other appointed person will have other commitments or even a full-time job. This will make it difficult to arrange a time to see the strata records inspector, delaying preparation of the strata report for the prospective purchaser. Therefore, the best way to keep your records is electronically on a sharable cloud-based platform such as DropBox. This eliminates the need for a physical inspection of the records.

If you are selling your unit, you may also wish to consider a service like Open Access that deals with the strata records inspection process before property goes on the market, saving everyone time and stress.

6. Is your building adequately insured?

This seems to be a natural thing to do. However, what we see sometimes is that self-managed plans may not always have the right cover for their building. Depending on your building type and the area you live in, insurance requirements may be different. You may wish to engage service of an insurance broker to help you identify your needs and select the best cover. Obtaining an insurance valuation is also a good idea to make sure you don’t over- or under-insure your building. Again, like the CWFF, it’s better to get a more detailed valuation report even if it costs more. You only find out you are under-insured after an insurance event has occurred.

7. How well do you maintain your building?

A common issue for many self-managed plans is that the building maintenance is minimal. Owners either don’t have enough time or enough levies collected to afford things like freshening up the paint, wash the facade, replace carpets, etc. Sometimes, even small things like broken light bulbs get ignored. And sometimes, important issues like concrete cancer can go unnoticed for a long time leading to a small inexpensive repair becoming an expensive big problem.
Make sure to find time to walk around your complex every month or so and take a note of anything that doesn’t look right or may require repair. You will find that fixing an issue at the early stage is far more cost-efficient than allowing your building to deteriorate.

Self-managed VS. Strata managing agency.

While there are enough benefits in being a self-managed strata plan, it is a difficult job too. And while having a strata managing agent appointed means an additional cost, it will also mean less stress, more free time and, hopefully, a well-looked after building.

If you are looking to switch away from being self-managed, don’t hesitate to get in contact and we’ll connect you with someone who specialises in such transfers.

Want to get more helpful tips about living in a Strata Scheme?

We have a dedicated section on our website with more useful information.

Best Regards,
The EYEON Property Inspections Team

At EYEON Property Inspections, we help you buy and sell with more confidence.