Body corporate - how to make financials less confusing

Hi,

I'm a first time unit owner in a block of 8, and I've also been appointed as the Chair. I'm really daunted by the complexity of the financials.

We are having financial problems, but I'm at a loss as to how to find solutions, as my eyes glaze over when I look at the balance sheets and see so many expenses for things that I don't know what they are.

 

Know that you won’t be able to fix all the problems all at once. Best to read the minutes from the last AGM and for things you don’t understand call your strata manager and have a discussion with them. I assume there is a strata manager in place?

 

Thank you. And yes, we do have a strata manager.

 

Ask your manager for a copy of the contract with them- Fees will be outlined there.
Other things that can appear in the balance sheets are any repairs or maintenance items.

 

Who was your previous Chair, Secretary, and Treasurer? Assuming you didn't buy your lot off all 3 of them, a discussion should be in order immediately.

As Chair, why are you dealing with financials, or are you the Treasurer as well?

Your solicitor, at a guess, should have given you a rundown on the status of the Owner's Corp financial position before you purchased, should there have been any wafts that turned into stinky and unpleasant things, unless you used a conveyancer, in which case that might have been your role in due diligence.

How bad is level of financial problems?

After your above chats and whatnot, write down all the questions you have, no matter how "basic", and have a chat with your strata manager, as to how the OC got to where it's at, where it is actually at right now, and what options are available, including special levies, to address the situation.

And these should be discussed with your fellow Committee Members at each stage, some of whom may display supportive, do-nothing, or hostile opinions, in which case you may require some testicular fortitude (ie. a (metaphorical) lump of 4 x 2) to move forward.

 

Thank you. All good advice.

I have had chats with the OC Manager, but have been left still unclear. E.g. he told us we were in the negative and couldn't afford to do several of the things we'd committed to at the last AGM, but when I asked him if he thought we should have budgeted differently at the last AGM, he said 'no', yet he didn't suggest we raise a levy either. (He was not our manager at our last AGM - he took over after).

And you are right, there is one hostile owner, to whom I really do need to muster up some ovarian fortitude.

 

OK, so harnessing your ovarian fortitude, firstly a discussion is in order with your fellow Committee members in relation to this matter.

Is your OC Manager just a new manager working for the same Strata Management Company that has been looking after you building for the last X years, or is he a new Strata Manager that was hired after your last AGM (ie. where the old Strata Manager got the boot)?

If the former, then a meeting is in order with your Secretary & Treasurer (and interested Committee members) and the Principle of the Strata Management Company as to what the <dickens> is going on and why hasnt a Special Levy been recommended to bring your OC back into the black and/or new guy gets the boot, and is replaced with someone competent.

If the latter, then a meeting is in order with your Secretary & Treasurer (and interested Committee members) and the Principle of the Strata Management Company as to what the <dickens> is going on and why hasnt a Special Levy been recommended to bring your OC back into the black?

And then you can decide what you collectively want to do from there.

You havent mentioned the outcome of any discussions with the Secretary, previous Chair or Treasurer as to how the books got into such a state?

You might find this very useful.

 

Thanks for the reply.
We got the current OC Manager about 6 months ago, shortly after our AGM, & after the last OC manager quit.

as for the committee, it’s just me and the abusive woman (whose partner also often chimes in).

there is no treasurer, and our secretary is our of the loop for the most part as she doesn’t have email. I have to phone her up whenever I update her on things.

None of the other owners seem keen on joining the committee. We’re all first time owners & don’t really know what we’re doing.

 

I think you need to write to every owner asap and call an emergency meeting, via zoom if necessary for those who live elsewhere. I would think these "new owners" will want to know what is going on if they have a quarter of a brain. They can then get themselves involved and get something started. Maybe I live in an alternate universe, but I would think that anyone who is smart enough to get themselves into a position to buy their own home will want to get this sorted as it is in their own best interests. When they receive the notice to raise a levy, they will suddenly get themselves interested.

 

You’d think so, wouldn’t you, but I guess we’re all so busy with trying to stay employed (the most important thing for owning & keeping property), that this is a lower priority.

We did have a meeting (including with a few of the non committee members) after we realised we had to cut costs & raise a levy to pay for out insurance.

But now we reallly should raise a levy to pay fir some other maintenance that we previously agreed to when we thought we had the money. I guess it’s up to me to bring it up, since the OC manager hasn’t.

mist just stressful because the aggressive owner tends to make a big fuss in response to things that will cost us money.

 

Get as much sorted out as you can with this manager for now, but I would seriously look at appointing a new strata manager at the next AGM. I suggest you start looking into some companies, get quotes, interview managers, prior to the AGM. This gives you time to raise a motion to dismiss current manager.

 

Thanks. Good advice. And yes, I’m on it.

 

A cashflow projection may likely produce more additional meaning than balance Sheet & P&L which are historical reports of what was. A projection of cashflows and actual cash available can have scenario's included for the timing of receiipts of levies and outgoings on each project (eg repaint common areas) and also regular recurring maintenance (eg lawns, pool etc). These may be short term, medium term and longer term and assist to demonstrate where future cashflow deficits may occur so that levies could be increased. Maybe a projection that is qtly for 3-5 years. The strata manager should have a strata maintenance plan that can be used to align to the projection. The timing of this could be factor eg Increase a small amount but earlier, increase at a specific future date to cover a specific need etc.

 

Thank you Paul.

 

I’m happy to read the financials and translate to plain English if you want to send them to me, feel free to PM me.