What to consider when renewing your strata agency agreement

The role of a strata manager is complex. Their job involves several skills and specialities, but if you live in an apartment or strata managed building, and are unhappy with your strata manager, you can have them replaced – and it’s not as difficult a process as you may think.

The number one reason why people tend to switch strata management companies is that they’re unhappy with their current strata manager. This unhappiness can be from a variety of issues such as poor building maintenance, unresponsiveness, mismanagement of funds, unnecessary or overspending of capital works funds.

To encourage committees to review and renew their strata agreements based on merit, rather than just allow them to roll on without proper analysis of the efficacy of the incumbent strata manager, the NSW Government recently introduced new legislation that changes the way in which strata managers are appointed.

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Some changes to note

Strata management contracts that were agreed before 30 November 2016 will still end on the expiry date of the agreement, but only if that date is within three years, otherwise they will expire three years after the start date.

A strata agreement entered into at the first AGM, can only be awarded for a maximum initial period of 12 months, then a further three years thereafter. Also, if a strata manager was appointed by the developer, their tenure will only be allowed to run until the first AGM, at which time a new agreement will have to be put in place either with the current manager or another strata management provider.

What to look out for

The legislation is partly designed to prevent strata management providers from locking committees into long-term contracts which prevent termination for unsatisfactory service.  It’s therefore worthwhile to avoid companies that try to steer your strata committee into signing a long-term agreement, as it’s no longer legal for any agreement to go for more than three years without having to go through a tender submission or renewal process.

The new legislation also makes specific reference to strata manager arrangements with tradespeople and other service providers, specifically outlawing the practice of strata managers receiving a commission from any contractors appointed to carry out maintenance and repairs to the building.

‘This new legislation is ushering in a new era of transparency around all aspects of strata management, which we wholeheartedly welcome,’ said PICA Group CEO, Greg Nash.

‘We feel the changes will help position our strata managers as relationship managers and professionals within the industry by driving an improvement of strata management service levels and standards’, Nash says.

Before you sign up

So, before you enter into a new strata agreement, make sure that agreement is no longer than the new legal requirement of three years, and find out if your strata management company has any preferential deals with trades that may preclude you from putting contracts out to tender and getting a better price.

Also examine the scope of services they provide to ensure that everything you need from them is covered under the terms of the agreement, and make sure you can terminate the agreement quickly and easily if you’re unhappy with the level of service they’re providing, so that you’re not liable for financial penalties for early termination. Ask for a fixed price agreement so you know what you will be billed for at each payment interval.

The right strata manager can make a world of difference, so revisit your strata management agreement and ensure it reflects the current needs of the owners corporation to protect and maintain your property investment.

For more information on strata take a look at the differences between strata managers and property managers explained, strata manager vs self-managed strata pros and cons and how to dismiss your strata manager.

Disclaimer: The information provided is a general guide only, and is not intended as a substitute for legal advice. The company disclaims all responsibly and liability for any expenses, losses, damages and costs which might be incurred as a result of the information provided by the company.