Strata management vs self-managed strata: which is better?

If your owners corporation is thinking of switching to self-managed strata instead of engaging professional strata management, there are several things you need to know.

There is no legal requirement to engage professional strata management, which is why some owners corporations opt for self-managed strata — especially when it comes to smaller properties. The problem with this is, poor management may significantly devalue the property.

Did you take a look at strata records before buying into your property? These days, more and more potential buyers are educating themselves about strata properties. Many request a strata report, read it in detail and maybe even check the property’s finances, record-keeping, and cohesiveness before purchasing. In this light, a well-managed strata property is in the best interests of the current owners, which is why we recommend doing a realistic evaluation of each option if you are trying to choose between professional strata management or self-managed strata.These are the things you should spend some time researching and understanding if you need to choose between professional strata management or managing your strata property yourself:

1. How self-managing works, in comparison to professional strata management
2. The pros of self-managed strata
3. The benefits to engaging professional strata management
4. Is strata management is better suited to your property?

How self-managing works, in comparison to professional strata management

A self-managed strata property is managed by the owners of the lots— an owners corporation, or more specifically, by an elected committee of owners. Strata management, on the other hand, involves a professional strata manager taking over many of the owners corporation’s duties and being on hand for advice and assistance when required.

Strata properties are self-managed with varying degrees of success. Some are exceptionally well-run and organised. Others are not, which can have a significant impact on residents.

So what does self-managing strata involve? A small sample includes, but is not limited to, the following tasks:

• Collecting, organising and managing the strata records and making them available when requested or required
• Managing the accounting, the cash accounts, payment of invoices, production of financial reports and tax requirements, issuing levy invoices, collect levy payments and chasing overdue levies
• Running committee meetings, including nominations, agenda, collating votes and minutes
• Actioning committee decisions
• Managing all communications and deal with disputes
• Setting up a repairs and maintenance program and activity of works
• Knowing (and understanding) all legal and compliance requirements and obligation

As you can see from the above, it can be a time-consuming job, requiring diligence and hard work to get it right. If you are wondering whether to choose strata management or self-managed strata for your property, you should only choose self-managed strata if you are confident your owners corporation can complete the above tasks successfully.

2. The pros of self-managing your strata property

Lower fees: The most significant benefit is reduced costs for all owners. If you are not paying for strata management, it means fewer expenses for the owners corporation to pay.

Revenue: Most strata management providers include an additional charge for administrative tasks. In a self-managed strata property, this could provide potential income and go back to the owners corporation.

Faster resolution of issues: A common committee member complaint is how long it takes to resolve issues. A self-managed strata property’s committee may be able to resolve issues faster.

Efficient management: Self-management means you know everything about what needs to be done and are familiar with how things work. You can make quick decisions and eliminate some teps.

More control: Taking out the management layer gives ultimate control back to the committee and owners, who can then make their own decisions.

3. The benefits of engaging professional strata management

If you’re trying to decide if strata management or self-managed strata is better for your property, it’s essential to consider whether you can deal with these common self-managed strata cons without the help of professionals:

• Disputes Strata management agents are industry professionals who understand complicated legislation and regulations. If there’s a dispute, they can advise on the best course of action. If that legal advice is taken away, it could expose the owners corporation to risk.

• Administration. There’s a lot of time-consuming work in managing records and setting up legally recognised templates. There could also be questions the answer to which only someone working in the industry would know.

• Liability. The committee is liable for tasks completed incorrectly in terms of legalities. Some legislative requirements may be missed due to a lack of industry knowledge.

• Levy increases. The emphasis on keeping fees low or static can be misleading. Levies go up or down depending on current circumstances. Self-managed properties could end up with surprise levy increases, a disgruntled owners corporation and a destabilised financial position. This may be less likely with strata management.

• Lack of continuity. Owners come and go, and in a self-managed strata property, the owner could also be the strata property record keeper. A lack of consistency can cause problems further down the track.

• Committee dominance. Situations can arise where only one person is on the committee, managing all the records. Self-management could end up satisfying one person rather than existing for the communal good.

• Devaluing the property. In some cases, a poorly managed property may lead to a fall in value. Savvy buyers are increasingly aware of the importance of well-run and cohesive management. If in disarray, it could make or break a sale.

4. Is strata management is better suited to your property

If you opt for strata management, all the responsibility of admin, record-keeping and dispute resolution is taken care of by professionals dedicated to keeping your property and owners corporation compliant, protected from potential risks, well-organised and harmonious.
Good strata management will mean the following:

• Organised, productive meetings. All strata properties must hold an Annual General Meeting (AGM), at which the strata property’s financial position, committee voting, administration, and relative maintenance matters should be discussed. If AGMs are poorly organised, important items may be missed, leading to bigger problems. Late AGMs can indicate a pattern of poor organisation and could be a sign that your property matters are not being prioritised as they should be. Strata management would ensure such meetings occur on time, in a well-organised manner.
• Well-managed fees and levies. Strata management can help the owners corporation set annual budgets, adjust levies accordingly, and pay invoices and bills on time, which means you will likely avoid the headache of accounting and financial management. On the other hand, self-managed strata will require owners corporations to handle all this themselves, which could hurt your property’s market value and compliance if not managed well. For example, a high volume of fees and levies in arrears could indicate that your strata/body corporate property doesn’t have an efficient follow-up system in place. While a lack of systems and processes can be concerning, having levies in arrears can lead to more significant budget problems. It may even lead to expenses not being adequately covered. This could cause other concerns for both prospective buyers and current owners.
• Good compliance with strata legislation. A strata management provider should be able to clarify your queries and help you implement your state’s strata legislation. Laws are often amended, and it’s paramount for your strata committee to be up-to-date and compliant with all these changes. If you miss important deadlines, it could lead to heavy fines for your property. There may also be expensive legal consultation fees involved if your building fails to comply with certain legal requirements. Having a dedicated strata management provider who works alongside your committee and provides guidance and consultation on legislative requirements will help you to take action promptly when necessary. Best of all, you and your owners corporation is less likely to be liable for something missed or incorrectly completed, as strata management providers have a tried and tested process run by experienced professionals
• Effective financial management. A strata management provider can help your committee manage the property’s finances transparently and ethically. Strata experts can see the finer details when numbers don’t seem to add up and help investigate matters on your committee’s behalf as well. They can share financial reports and offer insights to help you get the best value from your strata property.
• Prompt dispute resolution. If a dispute does arise, strata management will be equipped to deal with the issue pronto. Having this handy resource will also save your committee time and money when it comes to serious disputes — a strata management provider may be able to handle mediation without having to escalate the problem to more formal (and costly) despute resolution options.

It’s up to you

Strata management is often the most reliable way to manage your strata property. Although self-management looks like the most effective and efficient method of managing your strata property on paper, it could end up costing you valuable time and money, and maybe even cause disputes with your neighbours, in the long run. It is important to consider this if you need to choose between strata management or self-managed strata

PICA Group tip

If you’re considering buying into a self-managed strata property, these are the top items to check out:

• Availability of records: Ask to see the records and check if they are all in order and up-to-date
• Details: Is the note-taking done by hand or typed? How well are the receipts filed and noted? What technology is used? These details determine a good strata report
• Conflicts: Are there any disputes between committee members or long-standing issues? It’s worth finding out how cohesive the group is and how their decision process works.

Having set up the very first strata scheme in Australia back in 1948, we’ve come a long way in our knowledge and experience across a variety of property types. Whether you are new to strata management or an active committee member, we have developed an extensive library of resources to assist you. Click here to download our FREE Community Living guide on managing disputes. For a consultation to review your current by-laws with the Kemps Peterson Legal team, click here. To find out more about the services we offer, click here for a free strata assessment.