5 Signs Of Poor Body Corporate Management

poor body corporate management

There’s nothing quite like that sinking feeling when you realise things have gone pear shaped when you weren’t looking. It’s particularly pertinent for strata schemes where most lot owners’ only brush with their body corporate management is paying levies and voting at annual meetings.

Although there is “help” available when disputes arise there is no oversight to body corporate management other than that provided by the lot owners themselves.

Which is great if you have a strong Committee who work well with a professional management company.

If you don’t, well, problems can arise, and it’s possible that things can get really bad before anyone realises.

Who Is Responsible for the Body Corporate Management?

body corporate managementWhen things go wrong it’s a very human reaction to immediately start searching for someone to blame!

In body corporate’s there is going to be a number of parties that could be at fault but in most cases the root cause will usually turn out to be a collective failure of most or even all the parties in one way or another.

Management of a scheme is the responsibility of lot owners.

The combines lot owners elect a Committee to actually do the work at the Annual General Meeting.

The body corporate may also appoint a Body Corporate Manager and / or a Building Manager as independent contractors to take over part of the tasks of the Committee.

Poor management is a result of a breakdown somewhere in that chain of command, or as I’ve already said, more likely in a number of places.

5 Signs of Poor Body Corporate Management

Please note that the following items are indicators only. My job is to find threads that may indicate prejudicial circumstances for buyer. I find those threads then follow them to find out if there’s anything nasty lurking in the background.

Often there is not and the scheme and management have very good reasons for doing what they’re doing.

However, sometimes, particularly when two or three indicators show up, it means someone in the chain of command has dropped the ball and a crisis may be looming.

Here are five signs of poor body corporate management.

1. Poor Recovery of Levies

In Queensland levies must be disclosed prior to entering into a contract to buy, which means, despite what they may say, every lot owner has actually been notified that levies will be payable.

It’s surprising then just how many strata schemes have significant amounts of Levies in Arrears.

Now some levels of arrears are to be expected since it’s unlikely that all the lot owners will be on top of things 100% of the time. That said it is possible for long stretches of time for even the largest buildings to have very small or even no levies in arrears.

Contrast that with other buildings, some big, some small and everything in between, that have high levy arrears, up to 20 – 30% or even higher, which is the level where arrears will begin impacting on cash flow.

So what’s the difference?

Whilst it’s true that buildings with more investors and those that do holiday letting do tend to have more owners in default, it’s certainly not set in stone. The main indicator of success with minimising levy arrears is the amount of time and effort put into collection of the levies.

Committees and body corporate managers with good collection policies, clearly communicated to lot owners, and most importantly a process for following through on those policies, will have the smallest levels of arrears.

It’s a simple rule of collections: when an account is overdue you must consistently ask for payment if you want to receive it.

High levels of levy arrears is a sign their isn’t a firm, well executed policy and an indicator of more serious management issues.

2. Late or missed Annual General Meetings

Annual General Meetings (AGM’s) have specific purposes, things that need to be taken care of each year, at regular intervals, for smooth management and consistent cash flow for the scheme.

If a body corporate does nothing else each year they should at least have an AGM. Without it there will be no Committee and no levy issue, both serious hiccups in the process.

AGM’s are so important that time frames have been legislated; an AGM must be held within three months of the end of financial year. Consequently a late AGM is a contravention of the body corporate legislation.

Now there are valid reasons why AGM’s may be late, most commonly because a quote is being obtained for lot owners to vote on at the meeting.

Mostly though it’s due to errors or delays that could have been avoided.

One late AGM is not really a problem.

Several years worth of late AGM’s is frankly slack, particularly without leave of the Commissioners Office, but worst of all is AGM’s that are missed altogether. Nothing says “no one here cares” more than no AGM and that’s not reassuring when talking about your very substantial investment.

3. Slow or no response on repairs and maintenance

Body corporates tend to operate on a schedule (just like the AGM’s above), with certain works done at certain times of the year. That’s because a lot of these things are on autopilot.

Inevitably, however, there are going to be issues arising. An example would be light globes blowing in the basement car park or a loose railing in the stairwell, although it could a range of things including substantial building defects.

In a well managed body corporate issues are reported and dealt with promptly.

In a poorly managed body corporate issues may drag on for months, years even, and in some cases never get addressed at all.

Unresolved issues can, and often do lead to bigger issues like this landmark case in NSW where a water leak into an apartment from common property was ignored for years, even following mediation. Eventually the lot owner sued and won a settlement:

In addition to repair of the works, the judge also awarded damages for loss of rent, carpet replacement, legal costs, mediation … The total damages came to over $230,000. Given that there were only five lots, this was a severe awards cost

Swift resolution of common property maintenance and repair issues (each lot owner is responsible for his or her own lot) is important to maintain harmony and overall value of the scheme.

It’s important to note that an important part of repairs and maintenance is prompt payment of invoices, something many body corporates overlook. Paying tradespeople promptly keeps them onside and avoids the ongoing challenges of finding someone to do works.

4. Budgeting in Arrears

The budget is an important document, since the budget is actually the yearly levies.

The administrative fund budget is an estimate of what will be spent in the forthcoming year, with reference to the past year costs, works that might need to be done and the current balance of the fund.

That total estimated figure becomes the levy issue for the year.

Budgeting in arrears circumvents this process. Specifically it a process where the scheme resolves to collect less than the plan to spend.

For instance, say the scheme has decided that running costs and works will cost $100,000 for the year, but at the AGM it’s resolved that the administrative fund levy will be $90,000. This leaves a $10,000 shortfall.

Body corporates are no different that any other individual doing a budget; if you spend more than you collect then the balance must be funded from somewhere else.

Sometimes it’s “borrowed” from existing sinking funds by way of a deficit of funds. Sometimes creditors simply don’t get paid.

This practice is contrary to legislation and more than that it’s simply dishonest. It is a deliberate decision to keep the levies low to suit lot owners at the expense of the scheme management and it’s creditors, otherwise known as “having your cake and eating it too”.

Paying lower levies is a valid option. But then you must adjust your budget to a lower figure. To incur works without funds to pay for them is unethical and really doesn’t achieve anything other putting off the pay day.

5. Slow or no recovery of fund deficits

Most strata schemes run one bank account for both the administrative and sinking fund. That means if they overspend in one fund their is still money to meet costs. However that will create a deficit in the fund as discussed at number 4.

There are numerous occasions when a deficit can arise for all sorts of reasons, from simple timing issues for levy payments to the process of budgeting in arrears.

If funds are overspent in one fund the legislation is clear; those funds must be recovered, and the sooner the better.

Sometimes though, that doesn’t happen.

Usually it doesn’t happen because the lot owners are simply reluctant to pay more levies.

Unfortunately what that means is the debt hangs around and is only slowly whittled away, or in some cases not recovered at all.

The core problem is sooner or later those funds must be repaid, either as directed by an Adjudicator if a lot owner eventually complains or as a special levy when works are required but there are no funds available.

It’s a particular problem if you’re new to a scheme. It’s incredibly frustrating to be in a position to finance a debt incurred by someone else.

In those circumstance I believe a lesser purchase price, to the value of the portion of the debt the Lot would be required to pay, be negotiated. You are going to have to pay it eventually, so get the funds from the outgoing owner now.

What to do if you have concerns?

A property is a big investment, and when that property is part of a strata scheme the common property forms as much of the value as the lot itself. It’s to your detriment if the scheme is poorly managed.

If you have concerns, speak up! Bring the issues up with your Committee, and if that doesn’t work, talk with the other lot owners to see if they have queries. Do some research like this website; there are hundreds of others out there.

Speak with the Office Commissioner of Body Corporate and if you have to make an application for adjudication. Even consult a strata lawyer.

Maybe it will be necessary to join the Committee yourself. If there are problems with contractors maybe it’s time to change contractor, or in the case of a building manager, issue a breach notice.

And if you’re buying into a particular scheme, get a pre purchase strata report: if there is a significant problem you’ll be glad you did.

What do you think? Are there other symptoms of poor management? Leave a comment and let us know.

THE BASICS OF BODY CORPORATES

A little knowledge can go a long way


I see so many stressful and frustrating issues in body corporate records that result from simple misunderstandings it hurts my head. If I could do one thing to help it would be to teach everyone the basic rules, so they can avoid all these dramas.


With that in mind I've put together a short eBook that sets out the basics everyone owning in a body corporate really should know. It won't make those big issues go away, but it will give you a firm grounding from which to communicate.


It's completely free, so please, download it now!

Download Now

Comments

  1. Thanks, I appreciate the comment.

    • Jasmine Barillaro says:

      Hi,

      I live in a complex where my home has been attacked by white ants. I’ve had to involve a lawyer to fix the problem. It only got fixed because I involves a lawyer. Now I’m asking for a barrier and once again having to involve a lawyer. It’s the only way I get any communication for something to change. There i someone who does the gardens and the cleaning but apparently they’re not getting paid but on the budget it states they are.

      Our body corporate fees have gone up alot but nothing is happening for the complex.

      • Hi Jasmine

        It sounds like you’re having quite the struggle. Have you ever considered joining the committee? That might be a way for you to communicate with someone who will listen.

        • Jasmine Barillaro says:

          Hi Lisa,

          I think I will have to. I’ve been to one meeting this year and the AGM will be at the end of this month. Also, I have looked at the sinking fund forcast and our opening balance is out by $55,000. Also we have a negative admin fund. Our opening balance needs to have $165,000 in it for the next financial year. Currently, we have $70,000 for an opening balance. What are your thoughts on this? Considering no one is really in arrears.

          • Hi Jasmine

            If no one is in arrears and you have a deficit then the scheme has overspent on their budget. The deficit in administrative funds should be repaid in the next financial year. So for owners that will mean the levies need to increase to repay what was spent, and, if the overspend was in normal everyday business, then increased again to be able to pay the higher costs.

            It possibly the same with your sinking fund. The balance is too low because the levies need to be higher. But because you’re already behind then you need to increase even more to catch up.

            It often happens in schemes where owners simply won’t increase levies, so the problems increase until finally their comes a crunch, usually in the way of massive increases or special levies.

          • Jasmine Barillaro says:

            Hi Lisa,

            So basically it’s not looking good. Our complex isn’t in great shape either.
            After speaking to people, certain things haven’t been done for years. Does, this mean
            that if the complex isn’t in great condition and our fees are low, that it will cost a fortune?

          • Hi Jasmine

            I’m afraid it does. The purpose of the sinking fund is to accumulate cash so works can get done as they need to without having to tap owners for extra funds.

            If the sinking fund is not accumulating and the works are not being done sooner or later there’s going to be an expensive reckoning.

  2. We own a a three bedroom duplex and the other owners have a one bedroom. We pay the larger amount of sinking fund and admin fees due to the larger property. I’ve been told that we should pay the same amount of body corp fees. Is this true?

  3. The real estate agent in mackay qld. Is refusing to provide a disclosure notice on a unit ( 12 units in the complex) this 1 unit only is going to auction on 4/4/16. Does a seller have to provide a Disclosure Notice on that unit, outling levies, insurance ect. ?
    Thank you for your time.
    Christine Anderson
    The same real estate agent would not supply me with a disclosure on another unit I wanted to purchase so I didn’t buy it. Because of the lack of information on the unit complex.
    Thanks again Christine

    • Hi Christine

      Yes that’s correct. You cannot sell a lot in a body corporate in QLD without a disclosure statement. It’s mandatory.

  4. Eric Rivera says:

    Please get rid of those arrows! I’ve attempted to write a comment 3 times now because I accidentally pressed them and changed page! I’m over writing what I wanted to ask you!

  5. Joan Wall says:

    would the body corporate be responsible for the movement of the land around our home and also we have broken pipes in the bathroom the insurance will not cover they say it is due to movement in the soil we are on a concrete base

    • Hi Joan

      That will depend on the type of plan you have – standard format plan or building format plan. Either way definitely discuss it with your body corporate committee.

  6. HI, I own a townhouse in a strata scheme in Sydney. We are having number of maintenance issues (roof leak, Water leak, balcony timber repairs etc) which we have reported to strata manager but they either are very slow in responding or simply brush off saying executive committee had advised for “wait & watch”. What are my options to deal with this situation? How can I get this strata company to start responding me promptly and get the things moving? Thank Sam

    • Hi Sam

      You’re focusing on the wrong people here. The Strata Manager has no power to do anything about it, they are basically office workers. Your issue is with the committee.

      That said, “watch and wait” is as strange response. Wait for what? Are you receiving committee meeting minutes? Whatever they have discussed should be in the minutes. I’d start there to get up to speed on what, if anything, has been discussed.

      Moving things forward you need to have made a formal written complaint and request for repair. You might have already done this. If so, follow up asking again. From there you have a couple of options. Adjudication is the best bet but there are steps you must take first. Conciliation is one of them. You will need to demonstrate that you have tried to resolve the matter yourself before you can proceed. That’s what the letters are for.

      Another option is to get quotes for the repairs and put forward a motion with alternatives at the next general meeting to get the works done. In that way you bypass the committee altogether. It might not get passed, but its not a waste of time as it does demonstrate effectively an attempt to resolve. And you never know, it might get passed and your issues fixed.

  7. KAREN zaini says:

    I live in Strata, we all have cracked tiles in bath room they need to be guttered so they say.
    We got a quote for two nearly $40,0000 ,by the time we do all could get to $240,000 for 16 units
    Some can pay some can not
    Will this go to vote or because we live in strata we have to pay.

    • Hi Karen

      It will certainly be voted on. All large expenditure is. Keep an eye out for voting materials and vote when the option arises.

      Maybe the scheme could consider a strata loan?

  8. Hi!

    I’m a lot owner and member of a Community Titles Scheme unit complex in Queensland. I am also the Secretary of the Body Corp Committee.

    Over the past 6 months, none of the Body Corp Committee members of our complex have been able to actually speak with our Strata Manager, nor will she reply to repeated requests for her to call us back, nor will she reply to emails about issues we have. We’ve been trying a couple of times a week during this 6-month period to contact her one way or another.

    We have contractors who have not been paid during this time, we have no idea what is going on with an insurance claim we lodged months ago, and other issues have not been resolved. The fact that we can’t get ANY communication going with our manager is untenable, particularly when tradespeople have not been paid during this time. But their company sure charges us for things that they claim is their due (ie for stationary and stamps – but nothing has been sent out for ages!).

    What should be our next step? We’ve spoken with her manager who promised us that things would start moving again, but now HE is not returning our calls or emails either. I’m thinking of going and camping in their reception until I see one of them! But on a serious note, is there an ombudsman or mediator who we can complain to? We just can’t continue to function this way – absolutely nothing is being done, and we are quite powerless to pay outstanding tradespeople.

    Any advice would be very much appreciated!

    • Hi Tyna

      The problem here is this isn’t a body corporate matter, it’s a commercial contract matter. You have contracted with the manager and they are not providing the services you want or need.

      You need to get a hold of your Administration Agreement. It will tell you the term of the contract and under what circumstances the contract may be terminated. I suggest if you’re having issues with your manager you think about replacing them. Depending on how long the term has to run, the easiest way might be to wait it out and appoint someone else.

      If the term is long maybe consider terminating the agreement. That may require legal action to make stick but if you’re not getting any satisfaction it might be your best bet.

      You can get a copy of the administration agreement by 1) asking for it and seeing if they will provide or 2) booking an inspection of records (free for committee members) through reception and going there and reviewing the body corporate records. You can then copy the agreement (72c per page).

      It is common for insurance claims to drag on for months or even years, although, that said, its usually as a result of apathy somewhere along the chain.

  9. I think it’s important to have good corporate managers. It can be pretty bad if they don’t pay any attention to the needs of the employees or the company. If they don’t take either of those things in mind, then what’s the point of having them?

  10. Thanks, Lisa and Braden. Agree completely with your comments. They are more than happy to take their fees, but we’re getting nothing in return – I consider this to be fraud!

    I think at the next AGM in December, we will not be renewing our contract with BCS, but instead, changing to a completely different company to actually do what we pay them to do. We (the Body Corp Committee) have now put all non-urgent projects on hold, until this is sorted out. We just can’t afford to have honest tradespeople (who had done the work) to not be paid on time. We don’t want to get a bad reputation out there because we don’t pay our bills on time through no fault of the Body Corp Committee. We’ll let our departure be the message to our manager. We can’t find a reason to stay, but every reason to find a new company.

  11. Bob Cruise says:

    Hi Lisa,

    I am a committee member of a older brick “6 pack” unit block
    The old underground plumbing in the building has cracked and caused several leaks over the last few years at great expense to repair and through extraordinary water use in the quarter due to water leak.
    At the 2014 AGM the committee voted and approved a remedying of the plumbing issue by running pipes above ground from the mains water point so the pipes no longer ran underground and thus cracks and leaks in this existing underground pipework would be circumvented . This was recorded in the AGM minutes.
    No action was taken by the Body Corporate manager in the following year and the lack of action was raised in the 2015 AGM which was also minuted.
    In April 2016 the piping cracked again and again a large repair and water bill resulted – this would not have occurred if the Body Corporate manager had done their job and actioned the quote resulting from the approved motion in the 2014 AGM.
    The committee would like to sue the Body Corporate manager and/or company for lack of action and negligence in relation to this issue. The supporting evidence is quite clear through the 2014 and 2015 AGM minutes.
    The committee will be voting to change to a different Body Corporate companies and managers at the next AGM.
    2 Questions
    A) Who do we need to submit a claim to in relation to the negligence of the Body Corporate manager to recover monies related to this years repair and excess water use
    B) Should we wait to we have started with the new Body Corporate business before proceeding with this action

    • Hi Bob

      Wow, that’s rather a challenging situation.

      I think, though you will be best to check with a Solicitor, that the matter isn’t so much a body corporate issue as it is a breach of contract issue – ie you’ve contracted with the manager and through their negligence you’ve sustained a loss. Its my understanding this is a small claims matter and should be referred to QCAT. A BCCM Adjudicator would not have jurisdiction.

      Yes its most likely better to wait until you’ve moved manager before seeking restitution from the current manager. Sometimes people act badly when they think they’ve been rejected. This doesn’t necessarily mean they will but better safe than sorry.

      That said it might be worth having a discussion with your current manager and letting them know how you feel. Maybe you can negotiate a settlement that works for you both.

  12. Terry Delaney says:

    Hi Lisa,

    I am a committee member and have trouble getting any response from our current Strata manager regarding setting a date for our AGM which is normally held each year in December along with sending out the agenda and voting papers.

    The current contract with our current Body Corporate finishes on 30-Nov and we are looking to move to another Body Corporate and this was raised in this year’s AGM motions so the current Strata manager is aware of the committee’s intentions.

    Is it possible that the current Strata manager is delaying providing a response until after 30-Nov they can say “so sorry would really love to help you but your current contract finished on 30-Nov” or is the current Body Corporate and Strata manager still obliged to have an AGM in December as the changeover will not be legally binding to a majority vote is received at the AGM to change over.

    Look forward to any light you can shed on this matter

    Cheers

    Robbie

    • Hi Robbie

      This is a curly one. No they’re not obliged to keep working once their contract ends. They should at least be preparing a Notice of Meeting though because they are still employed and that is what you require. That’s what they should do, but there’s no guarantee that people will act the way they should.

      From your perspective you need to take this piece by piece. First set the date. Second deadline date for when the Notice of Meeting has to go out and third the meeting itself. Keep at the current manager until they take some action.

      If they absolutely refuse to take action, which sometimes they do, contact your preferred new manager and ask for their help. It may cost the scheme a little extra, which is unfortunate and to be avoided if you can, but its a backup in case things go pear shaped. A committee motion to appoint them to bridge the gap, ratified at the AGM should be OK. They should be able to work through it with you if necessary.

  13. Hi

    I trust all is well,

    Well our levies was R1360.00 when we moved in and the building is not well taking care off, no one wash our windows, cut our grass, cars getting stolen people make a noise till midnight and they have send us our new levy statement for R1528.00. I would like to know how can i not pay this new levies and still pay the old levies because i don’t see no need for the large amount when there is no swimming pool? yes its a three bedroom and two bathroom apartment in South Africa but i still don’t feel that the levies must be this high especially if they don’t look after the complex please advise thank you

    • Hi Levi

      Happy New Year.

      Annual levies are calculated by a budget estimate. Perhaps this coming year includes an estimated amount to do some works around the property, hence the higher levies.

      Its a double edged sword. If you pay less then less is done. If you want more done then it needs to be paid for.

  14. Graeme Dunn says:

    Hi Lisa,
    We have a by-law related to smoke from town houses occupied by smokers drifting to town houses occupied by non smokers. This by-law was voted on and approved at the last AGM.

    The BC Committee Chairperson is stating that we need to provide an undercover outdoor area for smokers. He feels that if the by-law is challenged by a smoker within our complex and the matter ends up with the Commissioner, that we would have a more solid case for enforcing the by-law. Recent submissions to the QLD Government seem to indicate that we have nothing to fear from including a smoke drift related by-law.

    Do you feel that we need to provide a smoking facility, the large majority of residents don’t want it, to appease the Commissioner?

    Thank you

    • Hi Graeme

      It doesn’t matter whether a by-law is registered as much as it matters is it enforceable, which is pretty much what it seems the Chairperson is saying.

      In Queensland its not enforceable. Body corporate’s do not have the power to make rulings regarding the use of the lot.

      Proposed amendments to the legislation suggest categorising smoke drift as a “nuisance” which will allow bodies corporate to make by-laws that can stop the drift. Similar legislation has been passed in NSW that does allow Owners Corp there to take action. As a trade off though they provide designated area for smokers. I suspect that’s what your Chairperson is alluding to.

      If the matter goes to Adjudication then the ruling judge will not care if there is an alternative smoking facility provided. It makes no difference to the validity of the by-law with reference our current legislation and case law. Having the facility might stop an application from being made though. And when the amendments are passed into law having the area will be useful.

  15. Jasmine Barillaro says:

    Hi Lisa,

    I’m only reading one side of what you are writing because there continues to be added lines, on the left hand side. This means it is cutting off what you are writing on the right hand side. I would love to read what you have written but because it has been cut off. I can’t read it.

  16. Jasmine Barillaro says:

    Hi Lisa,

    I have been told from the committee, that everytime we contact the Strata company/Manager. We get charged for it. A disbursement fee. Any calls, emails etc. If this is so, how much do they get paid on average? Do we get charged to cc them in to emails?

  17. We had to move from our town house due to noise. The on site manager would not do anything about it either. We got told off for parking on the driveway. Everyone else did and I drove through the complex today. They are still doing it. The weeding in the front gardens are terrible and the lawns are dying. We can’t sell the town house as it’s worth $60,000 less then what we paid for it. So we are renting it out.

    • Hi Matthew

      I’m sorry you’ve experienced this. You highlight a good point about values. May I ask … did you buy new?

      New properties falling in value immediately after registration seems to be something only units suffer from and it is so disheartening when the experience of living in the scheme is unpleasant, as yours was.

      If you haven’t already do send an email complaint to the body corporate about the appearance of the scheme. Its owners like you who make their dissatisfaction known who are more likely to get some action.

      • Hi Lisa,

        I did buy new in 2010. I have contacted body Corp about the state if the complex. It will take them half a week to reply and they don’t really care. The only time I would hear from them is I did not pay my fees, in guessing. Is there anything I can do to get the on site manager removed?

        • Hi Matthew

          Its difficult to get a manager removed but repeated complaints should spur the committee into taking action to get them to do their job properly.

          Of course if there is no committee, which is the most common reason manager’s aren’t instructed or followed up, you could consider joining committee and taking a more active role in maintaining the property.

          • Hi Lisa,

            Thanks for your responses. They have been great. We have just had a new born and joining the committee is just not a option. I will complain. Like every week and hopefully the place will start to look better. I have paid a lot off so in hoping by January we can sell or use the equity in it to buy some where else. It’s just disappointing when you work so hard and spend money that you earn for other people to through it back in your face. Thanks again

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