Switching from Being a Self-Managed Strata Scheme: First-Hand Experience

Currently, there is no legal requirement for a strata scheme in NSW to engage the services of a professional strata management company.

As a result, many small buildings choose to be self-managed, where all management is done directly by the owners. And with strata records inspections being one of our core services, we come across such schemes quite regularly.

While in many cases self-managed plans are doing quite well, we have also seen cases where basic obligations and compliance requirements have not been met. And arranging a strata inspection can be a daunting task too, as often record holders have a full-time job, etc.

The above made us wonder why some owners choose to go self-managed when there is an opportunity to engage a professional strata management company for a relatively small fee who will do all the stressful work for them?

Turns out one of our colleagues, Sue, owns an apartment in a complex in Ramsgate in which owners have recently switched from being self-managed for more than 12 years to a professional strata management company. They have been professionally managed for over a year now and she shared some of her insights.

Strata Committee:

The main drive behind switching from being self-managed in Sue’s building was the fact that when the time came, no one wanted to be the Secretary or the Treasurer of the Owners Corporation. To put it simply, managing the strata scheme was too time-consuming and nobody wanted to have this responsibility. As a result, management of the building was always left to the same people who did it reluctantly.

Sue further notes that there were cases where the Secretary made decisions without the knowledge of the Owners Corporation, making management less about communal good and more about what is in one person’s interests.

Strata Levies:

While being self-managed, Sue used to be able to pay her levies monthly, making financial planning easier. With the new strata management company, she pays her levies quarterly, which is a lot less convenient for her. And when she approached the strata company, she was advised that quarterly payments is the only option.

We know that some strata management companies have flexible payment plans for their clients, so if you are looking to switch from being self-managed and this is a “biggie”, make sure to include this item on your criteria list.

One thing that caused issues for Sue and other owners when they were self-managed was chasing late Strata Fees. Now, this is the Strata Manager’s problem.

Management of Issues:

What Sue and the rest of the owners really liked about being self-managed is being able to go straight to the Secretary of the Owners Corporation if a problem arose. Decisions were made straight away if needed, resulting in a faster resolution of the problem.

However, Sue also notes that the Secretary wasn’t always available when problems happened and both the Secretary and the Treasurer didn’t appreciate people knocking on their doors all the time.

Industry Knowledge:

One of the big issues for self-managed plans, including Sue’s building, is that there are a lot of regulations to be aware of. Neither the Secretary nor the Treasurer were industry professionals so they didn’t have a good understanding of the legislation. While more generic items such as Insurance and Fire Safety Compliance have been arranged, some other decisions have been made without knowing if they were legislatively correct, exposing the Owners Corporation to more risk.

The Strata Manager is now able to provide Sue and other owners with necessary advice where required and organise all necessary compliance documents on behalf of the owners.

Record Keeping:

Management of a strata scheme is very time consuming. In Sue’s building, the Secretary and the Treasurer had to set up their own templates, type up minutes after meetings, do accounts and so on. Combined with the lack of time, this has resulted in inadequate record keeping making it hard to keep track of what has been happening in the building.

And from our experience, poor records and compliance issues may also make it harder to sell a property or result in a lower price because of the uncertainty about the current circumstances in the building.

Meetings:

When being self-managed, Sue says it was easier to arrange meetings at a day and time that suited everyone. Being managed by a strata management company, all meetings need to take place prior to 5:30 or else the Owners Corporation must pay extra and, of course, this is not something owners in Sue’s building are happy with.

So, is it better to be self-managed or managed by a strata management company?

If you have time and knowledge to pull-off being self-managed, you can certainly enjoy some benefits such as reduced cost, more flexibility and faster decision-making process. But there are a lot of cons too and removing all this unnecessary stress for a small fee by being managed by a company may be worth it.

Ultimately, it’s your call.

Want to get more helpful tips and insights?

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Best Regards,
The EYEON Property Inspections Team

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