What does Bad/Average/Good strata management look like?

Hi all,

I am looking for an apartment to live in (first timer) and found one that ticks most of my boxes on floor plan, location etc. It is slightly less than 10 years old.

When I looked at the strata report myself, there were some findings that left me a little unsure such as:
- Admin fund is in deficit (capital works fund looks healthy though), though the capital works levy makes up a much higher proportion of the total levy than the admin. There was evidence of a transfer from capital works fund to plug the admin deficit last year. The strata report flagged a “possible” special levy in future if they want to fill the admin deficit. There were no previous special levies.

- I noticed in the minutes of AGMs the motion defeated/deferred to engage a consultant to “inspect for health and safety risks on the common property”. Not sure if there is something more innocent going on or a red flag.

- A recent inspection of the building defects was conducted by an engineer consultant (related to common area and a sample of individual units) so not clear what the next steps will be taken or if any special levies will be raised.

- I do not see any mention of cladding. A friend who lives in a nearby apartment got charged special levies for fixing cladding, though he lives in a high-rise. This one I am looking at only has 6 levels so not sure if it cladding reviews are to be expected here.

Obviously the strata management is less than perfect but I have little sense of what is bad vs average/typical vs good (e.g. I have to get used to non-major defects being normal for any apartment block). Basically, my thinking is that if I walk away only to find the strata management in other apartments I am interested in are similar or even worse then I probably would’ve been better off going for the property (when weighing up with desired floor plan and location) and cop any potential special levies if it’s just once-off. Just trying to figure out what I’m prepared to accept (for potentially a good price) and what I cannot accept for any price.

Would be interested to get people’s thoughts on what bad, average and good strata management looks like.

 

Look for functionality. Read the minutes from the meetings and see if anyone is fighting anyone, or if there are any ongoing legal battles that could drain funds.

Also compare the 10 year maintenance plan to what is actually happening and whether they are ahead or behind on it. This will gives guidance as to whether the BC is proactively maintaining the building in accordance with the plan, and whether the strata manager is doing their job of keeping everyone and the building in line.

Remember, a strata manager is there to basically manage the affairs of the body corporate but they do not really make decisions, that is political, which is why a functional and harmonious BC is so important. Plenty of good strata managers get rail roaded by arrogant and dysfunctional body corporates, often with competing agendas and personality clashes. This is why it's so important. If the BC is functional, the strata manager is able to do their job effectively and the rest generally follows.

- Andrew

 

Usually there is little money in the admin fund. It is designed to cover admin costs not have excess funds sitting there.
The sinking fund is where extra money is held for repairs etc. depending on the owners as to how much is in it. Some people like to pay the minimum, others like to pay to build it up so they can avoid special levies. You vote on how much the levies are.
There should be a 10 year plan in place which calculates expected expenditure.
The important thing is to attend the next meeting. See how things are run. If you don't like something stand up and say something. Join the committee if you are that way inclined. Remember the owners are in charge. They appoint the strata manager.

I bought one property that had $100k in the sinking fund (big complex). And another that had $100 (no zeros missing). Small block of 12. I instigated sacking that strata company as they were hopeless.

 

The admin fund is not that consequential other than to say that the deficit should be remediated by higher levies to fill the gap (presuming they have not made an accounting error).

You do need a copy of this report however. That will tell you what is coming but closely review the scope in case it has been limited.

 

In my experience, a good strata manager is relative to the strata committee. I don't think you can have one without the other.

There will never be a way to reach efficient resolutions when your committee is dysfunctional and fighting with one another over everything. I took a good look at their books and the property's history with strata company turnover. Generally this can be indicative of potential issues.

If anyone has a reason as to why strata committees attract lunatics, I'm dying to know.

 

To me, that report is a red flag. The funds being raised each year are insufficient.

Owners get to vote on issues, and an under-funded admin fund means that adequate levies aren’t being charged. Usually the result of dis-interested or absent owners voting for the lowest possible costs.

Capital works fund (sinking fund) should be completely separate and NEVER used for general admin costs. Possibly illegal? It is to fund future building maintenance, e.g., full repaint every 10 years.

Have you seen a copy of the building defects report? Reading that is essential.

Regardless, the property may still be a good buy, but don’t pay top dollar. Factor in the strong possibility of increasing charges and/or a special levy. I would want $10K tucked away “just in case”.

But the finances are just one aspect.

How does the building look?
Are the grounds, footpath, gardens neat and tidy and well maintained?
Are the common property and facilities (pools, gym, lift, if applicable) clean and tidy?
No peeling paint?

Overall, is the impression of a clean, tidy and well maintained property?

 

Defeating the OHS motion is actually not bad once you get the OHS guy out he can find thousands of dollars of problems (and usually will), its best to keep deffering that bad boy (indefinitely) Look for the telltale signs of ACP panel to find cladding. Warning signs are any legal action, paid building managers, any kind of student accom, hotel or holiday letting contracted to the building. Loans the building may have taken out to fix stuff. The big one in older strata is a few owners running the strata like a cartel fixing their own units first paying themselves reducing their own fees etc. Good buildings can be run without massive sinking funds an OC at war with itself or third parties is hell on earth.

 

I can only tell you who NOT to go with. Have had an ongoing issue with www.neighbourly.co on our 3rd strata manager in under 12 months all more useless than the last (Used to be called VJ Ray but have undergone a rebranding.....didnt solve the problem).

Lol only saw this post as looking for recommendations on a new strata manager come the AGM in March 2023

Lol....only problem is none of these threads seem to recommend good strata managers......

 

If it passed all the building regulations and is only 10 years old then you should be sweet, its the older style units 30+ years old that you need to aware of concrete cancer and the like which is expensive to rectify.

 

Take a walk around the building, inside and out. Speak to some the residents if can. Everything looks/sounds ok?