Wild West of Strata: Clearer Standards for Entry Required as ‘Cowboy’ Operators Infiltrate the Industry
Highrise Strata Management
A specialist Owners Corporation Management firm focusing solely on large Owners Corporations.
A number of high-rise residential property assets, worth tens of millions of dollars each, are currently being managed by inexperienced and underqualified strata management companies and we must act now before it’s too late.
Melburnians’ rapidly growing love affair with high-rise apartment living is spawning a new sub-culture of experiential and dynamic apartment-dwelling urbanites whose attitudes towards high-rise living have shifted in recent years.
However, as good as this shift in societal attitude is for a city with some of the best high-rise properties in the world, it’s not just the culture of residents that should evolve and change alongside the changing times: property and asset management businesses responsible for these dwellings must change tack too!
In what is a rapidly growing space, there is ample room for new blood and healthy competition is welcomed. However, it is becoming more apparent that clearer barriers to entry within the strata management sector must be established to weed out any ‘cowboy operators’. These operators are currently managing a range of assets worth tens of millions of dollars each, despite being at times unqualified, chronically inexperienced, and, perhaps worst of all, leave buildings dangerously underinsured.
The fact that there is absolutely no minimum level of experience, education, qualification, or accreditation required to enter the industry is very concerning.
At present there is no mandatory requirement to join the peak industry body - Strata Community Association (SCA) - despite SCA being the best equipped to educate, train and advise new entrants to the strata industry.
Those who join SCA have access to a variety of training materials, industry-led advice, and best practice guidelines from those best positioned to advise them. It is a resource that should not be optional, especially not for new entrants in the industry considering the huge financial assets and human safety they are responsible for.
A loosely regulated industry
To be a registered “professional” strata management firm in Victoria you only have to pay a few thousand dollars to obtain requisite professional indemnity insurance, have a clear criminal record and register your business with the Business Licensing Authority. Even in related industries such as property management of residential real estate, you must acquire a license to operate a business with the relevant industry regulators and front-line staff must possess an agents representative level of qualification at a minimum.
The Owners Corporation Management industry has evolved from what was once a cottage-based backyard operation to now being more regulated and sophisticated across the board, reflecting the advancement in living standards and the increase in high density or high-rise dwellings, but there is still a clear need for defined qualifications, increased verification, and structured accreditation in every facet of strata management.
Shockingly, new entrants to the industry can be responsible for portfolios and new buildings worth over $100m or are put in charge of some of the newest, most modern, and ultimately most complicated structures. These buildings have levels of nuance and complexity beyond the comprehension of someone without the right training or experience.
The increased prevalence of high rise buildings in the last 10-20 years means the number of towers has grown rapidly as well as the back-end technical skills that strata managers now require.
In some cases, these properties have highly engineered safety systems, including lifts and fire sprinklers, which must be maintained and functioning in the event of an emergency.
In the end, it is the owners who suffer the consequences. If the maintenance of these properties is not being done to an acceptable standard, it poses a real threat to the safety of all residents within the buildings.
There needs to be stronger formalities around education and gateway to the industry. It's not about excluding people, instead, it's about making sure people are educated and are an asset to the industry.
The right steps forward
SCA has reported exponential growth in the industry within the last five years, now representing over 5,000 members across Australia and New Zealand.
The progress made by SCA is fantastic. The industry body has developed a formal accreditation program, encouraging those in the strata space to increase their knowledge and refine their skills by completing educational courses.
However, our industry still has a long way to go as there is no legislation and no government mandated regulation in place to ensure our industry is well qualified and experienced. Additionally, the accreditation program developed by SCA is not mandatory.
One suggestion is to scale the experience and qualification of managers against the scale and complexity of buildings managed. This would ensure anyone in the strata management industry is completing SCA accredited courses, achieving a minimum level of technical education and also constantly refining their skills and knowledge.
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I am proposing an approach of scaled responsibility whereby there is a strict correlation between accreditation and experience dictating the size and sophistication of property that can be managed by any one strata manager.
This could take on many forms, below is one theoretical approach which outlines a tier-based qualification system which, if implemented, would see stable, competent and reliable management of properties:
Tier 1
Tier 2
Tier 3
The issue we currently face is that the legislative framework has zero regulations mandating that a manager must be part of the industry body or hold any formal, industry specific qualification.
The explosion of higher density living in recent years on the back of property affordability, means that legislation hasn’t kept pace.
Although we have seen great progress from industry bodies such as SCA, there needs to be much greater legislation and mandates on entry barriers into the strata industry. Currently, there are rogue ‘cowboy operators’ managing millions of dollars of assets with no qualifications nor relevant experience.
If a strata manager is grossly underqualified, how can they be sure they are hiring the best third-party contractors to maintain the building and be secure in the knowledge that they are performing to a high and safe standard?
Of the most concern, it is the end user that ultimately suffers if the strata manager provides poor guidance and makes poor contractor selections which impact the Owners Corporation financially. The lot owners will end up paying above market rate for a service that isn't up to never mind above market standards. It also poses a safety issue. If essential safety systems in these buildings are not being maintained, there is a potential for catastrophe. Sprinklers, lifts, proper storage, clear walkways, to name a few are all vital in case of a fire or emergency.
The great work of SCA cannot stand alone, legislation and government mandate must be in place to effectively create real change, lift the standard of professionalism in the industry and ensure the safety of occupiers.
About High Rise Strata Management
Highrise Strata Management commenced trading in June 2021 as a specialist Owners Corporation Management firm focusing solely on large Owners Corporations. The team at JFB Management Services established Highrise Strata after a successful 6 years administering their portfolio without a single lost management. We are proud to say that some of our buildings have remained loyal clients of our team of managers for over 15 years.
Through extensive management experience in the industry, the Highrise Strata team came to realise that the Owners Corporation Management needs of larger, prestigious sites across Melbourne were not being attended to with the care, dedication and high levels of customer service and relationship management they deserve.
It was therefore crucial to seek out and put together a team who embrace, live and breathe customer service excellence with a level of professionalism often lacking in the industry. All our personnel strive to make every client interaction a memorable and seamless experience.
We understand that Larger Owners Corporations face different challenges to run of the mill strata schemes. We provide guidance and assistance to the Owners Corporation so that all matters are dealt with professionally. Our team take pride in being easily accessible, responsive and proactive in delivering a service experience second to none.
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