STRATA WARS – May the 4th be with you. Duties of the Manager – “The dark side of Strata Management”

I write this insight piece based on over 14 years direct and continuous experience as a Strata Community Manager and business owner.  

Far too often we see the dark side of the industry emerge, where managers lose sight of their duties and obligations. Strata management firms often become too focused on profit and maximising revenue streams while failing to generate nor deliver genuine value for their clients.

The Jedi Code guides Jedis not to act for personal power or wealth but seek knowledge and enlightenment. Whether you are a fan of Star Wars or not, we can and should take something from this moral code, regardless of what industry we operate in.

At the end of the day, we are here to help people and get better at what we do.

The phrase “the dark side” perhaps originated from the film, Star Wars Episode IV: A New Hope. George Lucas, the director used this phrase as a concept to show the evil aspect of the underlying controlling power of the universe.

Strata Managers may not have Luke’s light sabre or Han Solo's Millennium Falcon to navigate daily challenges however, many businesses, to some degree, find themselves succumbing to the seduction of the dark side, even without the alluring voice of James Earl Jones.

We sometimes wish the poor practice we see was from “A long time ago in a galaxy far, far away…” however it is happening now, in our cities.

Historically, low barriers to industry entry and a lack of ethical accountability have allowed this to occur. Our industry body (Strata Community Association / SCA) should be commended for championing continuous improvement and lifting the bar, so that we may be seen by the public as the trusted advisors we are.

Section 122 of The Victorian Owners Corporations Act specifically defines the duties of a manager as acting honestly, in good faith and exercising due care and diligence, whilst condemning the improper use of the manager’s position to gain advantage personally or for any other person. 

The mandatory obligations outlined in the Act  should be intrinsic in every business dealing – the need to list these in black and white makes it clear that some may have lost their way and perhaps succumbed to the Dark Side….

Far too often, Strata Managers defend their appointment when faced with termination, usually ending up in court. 

Upon termination there are instances in which Strata Managers seek to withhold or withdraw funds from the Owners Corporation’s bank account in lieu of damages. SCA have subsequently made it clear this is not an acceptable practice.

Handover of records between strata managers is often shambolic, petty and spiteful. It should be a function of the manager to hand over comprehensive records. Is the outgoing manager exercising due care and diligence?

Some businesses seek to offer a one-stop-shop service. They set up ancillary businesses offering facilities management, fire and electrical services as well as a number of other essential services. Whilst there is a valid argument that synergy between operations can deliver benefit to the Owners Corporation, what processes are in place to maintain the Chinese wall?   

When does this relationship blur towards the dark side where the manager willingly or even accidentally makes improper use of the manager's position to gain, directly or indirectly? 

Say the manager offers an after-hours emergency call service, great! Say the call centre is an associated entity, ok. Say that entity subcontracts a plumber to attend site, legal.

What isn’t clear is the less scrupulous transaction underpinning the whole support chain. A large markup charged to the Owners Corporation which I would pose is a little unethical…

I do not suggest any of this is illegal, merely challenge our industry to consider this in context of Section 122.

Recent legislative change has prohibited property developers from appointing associated entities as strata manager. One wonders if in the not too distant future we see the above practices outlawed also?

Staying on Section 122 - let’s look at Insurance commissions. They have always been a hot topic. Natural disasters, financial crisis, flammable cladding and a global pandemic have all contributed to an increase in strata insurance premiums over recent years. In some cases, this has resulted in a doubling of premiums and accordingly also the commissions.

This leads me to ask, has the average workload for strata managers increased proportionally? At what point does the continued exponential climb in premiums cause the manager to pause and consider Section 122?

I pose these questions to challenge everyone in this powerful industry to pause and take stock of their organisational practices. If the questions make you uncomfortable or you disagree with how they’ve been laid out, I think that provides some food for thought. 

We are blessed to be operating in an industry that has proven itself to be recession proof and is mandated by legislation. We get to wear many hats and appreciate the diversity this brings to the role each day. The ability to have a positive influence on the lives of so many puts us in the position to be unsung heroes, but will we?

You may ask, how does one stay within the light? I put it to managers that if the guiding consideration for the decisions you make which affect your clients is, “does this generate and deliver a needed and genuine value-add for them?”, then you have acted in accordance with Section 122.

I challenge strata management firms, large and small, to pause for a moment and not lose sight of our obligations; to act honestly, in good faith, exercising due care and diligence and not making improper use of our unique position to gain advantage that sees the dark side win.

May the strata force be with you.