As high-rise developments boom, overhaul of strata committees of management long overdue

Oct 11, 2024
Blue scaffolding fabric lining building exterior.

There are roughly three million strata townhouses and apartments in Australia. The focus on high-rise developments to address the housing crisis has seen a 7 per cent increase in the number of strata properties over the last two years. In Victoria, the government redevelopment plan for inner Melbourne proposes that 84 per cent of new dwellings will be high rises of ten storeys or more.

Owners corporations manage and administer communal property for apartments and other dwellings.

Recently certain high-profile owners corporations have come under media scrutiny. Dubious and unethical business practices have been exposed. These include kickbacks to contractors, phantom charges, inflated fees relative to the extent of work done, and near-invisible accountability. Over 2,000 people from across Australia responded to an ABC investigation into the strata industry.

Not all owners corporations can be tarred with the one brush. There are many owners corporations where their good reputation and profitability reflect an unswerving commitment to their clients.

As housing density increases across Australia, so will the number of properties that operate under owners corporations and strata committees of management. At the bare minimum, strata owners should expect that both the owners corporation and the strata committee of management will act ethically in the best interests of all owners.

It’s easy to point the finger at owners corporations. When decision-making appears opaque, maintenance requests are ignored, emails are left unanswered, and the rules are unevenly applied, strata committees of management must also be held accountable.

Strata committees of management comprise elected owners who receive no payment. These volunteers are strata owners who are passionate about the community and its upkeep. Some have full-time jobs and care for a family. Yet, they find time to wade through the 150 emails received each week that generate voluminous work for the committee. One semi-retired strata committee of management chair said that they work three days just on committee matters. The sheer volume of work sits in the hands of a dedicated few.

Strata committee of management volunteers tolerate intrusions into their personal time. Aggrieved owners arrive on their doorstep unannounced to demand, complain, or criticise. Only the most impervious of strata owners nominate to serve their community year in and year out.

The work that flows to a strata committee of management is often complex and relentless, magnified by time pressures to get things done. The volume of work is compounded when there exist limited or poorly documented policies, processes, and procedures. These are necessary to guide continuity, consistency of decision-making, and the even application of rules.

Incomplete information leading to flaws in decision-making, punctures in process, undocumented approvals for expenditure, and favouritism are often outcomes that reflect the administrative strain on overloaded strata committees of management. The strata community is often quick to expose perceived weaknesses but slower to offer support.

Staff changes in owners’ corporations contribute to the communications melee, especially when the recording of historical documentation has been ad hoc and resolutions can’t be found or don’t exist.

Deficiencies in communication rarely sit well with strata owners when kept waiting for a response. Where gossip is the currency that drives community cohesion, it is easy to breed discontent. Then the strata committee of management’s activities become the target. Frustration can translate into heckling at public and annual general meetings as angry owners zealously ventilate their discontent while shouting for answers.

The time for change is now.

As high rises proliferate across Australian horizons, more strata communities will have operating budgets that sit around one million dollars per year. Their annual turnover approximates that of a small business. For-profit owners’ corporations should be subject to the same rigors regulation as applied to companies by the Australian Securities and Investments Commission (ASIC).

Strata committees of management must also be held accountable for the integrity of their conduct and operations. In the interests of good governance, trust, transparency, reliability, and accountability are paramount. Regulation may be a lever to encourage strata committees of management to operate more professionally. The challenge is to ensure that any regulation is applied consistently and considers the diversity of strata communities.

Strata owners should expect that the strata committee of management’s strategic objectives or work plans reflect the expressed needs of the entire community and not the wants of a chosen few. How many committees of management deliver services that reflect the demographic profile of their community? Do strata committees encourage members from the spectrum of strata owners?

Strata community expectations of their elected committee members are sometimes overly inflated when it comes to judging their performance. The vast and elusive blend of knowledge, skills, experience, and behaviours required to be a committee member more reflects the topic of a Doctor of Philosophy than the supposedly casual contribution of a volunteer who has their heart in the right place for their community.

The time is now to undertake a comprehensive review of the state legislation that oversees the operations of owners corporations. It must expose the antics of unscrupulous owners’ corporations and regulate for an evolving future. The strata committee of management, entrusted by strata communities, must be able to withstand the closest of scrutiny. Strata owners are no longer willing to be victims of owners corporations and strata committees of management power games. Penalties should be considered for rogue committee members if found to breach their fiduciary duty.

Across Australia, strata owners are frustrated and angry at owners corporations shonky behaviour. Federal legislation of owners corporations, perhaps under the Corporations Act 2001, with state-regulated strata committees of management with an annual turnover of one million dollar or more may help to address these issues.

Standards for ethical conduct, good business practice, and accountability must be raised, monitored, audited, and enforced. The legislation must not disadvantage smaller strata developments. But, it must be fit for purpose to accommodate larger strata communities as they come online. It must position strata owners and strata communities at the centre of the legislation.

Harmony and community connection are the deserved outcomes of good governance and a transparent relationship between owners’ corporations and strata committees of management.

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