Rising tensions between homeowners and property managers in Queensland over suspended administrative deeds of up to 25 years are being raised at the state government’s housing summit today amid concerns about rising corporate fees.
Core items:
- Annette McLaren says almost half of her maintenance fees go towards the property manager’s annual salary
- The Strata Community Association of Queensland is calling for management contracts to be limited to 10 years
- Other states such as Victoria and NSW have contracts that are reviewed after three or ten years
It begs the question of what property managers are doing to justify rising fees.
Annette McLaren and her husband bought their dream home in south-east Queensland a decade ago, but later found they were paying nearly $6,000 in corporate fees each year.
The 50-year-old clerk said nearly half of maintenance fees for the 150-lot complex on Brisbane Bay would go toward the property manager’s $416,000 annual allowance, budget documents show.
Property managers are caretakers appointed by property developers to oversee management duties and maintenance of community properties such as stairwells, driveways, and gardens.
“It wasn’t until we received our first quarterly statement that we knew anything,” Ms McLaren said.
“We’re just a one-income family and I’m afraid we’re going to be overpriced now – we can’t afford our homes anymore.”
Ms McLaren said her family had to “stay on a very tight budget” to keep up with significant annual increases in corporate dues, as well as council rates.
“I don’t know what the manager is doing to justify that amount of money,” Ms McLaren said.
“We love it here, the area, and I know we can’t afford anything else… We just have to keep making lifestyle changes to be able to pay.” [the fees] as long as we can.”
Darren Potter, the property manager of Ms McLaren’s complex, said he was being paid under the terms of his 23-year-old contract.
“Given the age of the contract and the annual salary increase clauses, we are well compensated. We are very aware of that… Our response has been to work really hard, ensure value for money and work with us to create value for all of our owners, Owners Committee,” he said.
Mr Potter said he needed a team of staff to live on site year-round to provide the management services outlined in the contract.
“Our contractual compensation must not only support a salary that will fund normal benefits and business expenses, but also service a mandatory on-site home loan and business loan that provides access to an on-site salary,” he said.
“Like most Australians now, we are lending to provide the services that local owners want and the cost of lending to generate an income is rising.
“We were no longer being paid to undertake multiple on-site infrastructure upgrade contracts and projects. We have found and created only value for our owners that is consistent with our compensation. Owners have also received a proven dividend in their property’s values in an already heated real estate market.”
Plea for contract reductions
Laura Bos, executive director of the Strata Community Association of Queensland, the industry’s leading body for corporate and community management, said the terms of a property management contract are initially set by developers and can extend to 25 years, making them difficult to contest.
“[The contracts] present a major hurdle when it comes to landowners being able to choose who to take care of their property and how to do that,” she said.
“What we see are quite exorbitant wages for very little in return, which actually causes a lot of disharmony and frustration within a company.
“The contracts are so hard on them [lot owners] to get out and cost them even more in legal fees to fight it.”
Ms Bos said the Strata Community Association will represent entities across the state at today’s housing summit, where it will urge the government to end 25-year administrative rights contracts.
She said her organization would like to see contracts capped at 10 years to allow property owners to review and update their terms.
But Trevor Rawnsley, CEO of the Australian Resident Accommodation Managers’ Association, said short-term contracts would result in more expensive maintenance fees.
“Most of the time there’s very little profit margin from the compensation paid to building managers because they’re being spent on services,” he said.
“Long-term agreements are in the best interests of the shift arrangement because [building management] is often delivered at a much lower price than what would be offered by external suppliers.
“The only thing that’s less expensive for a project is if the property owners volunteer their time to do some of the tasks, but that doesn’t usually last long.”
However, Mr Rawnsley said he agreed some contracts should be reviewed and updated every five years to ensure they are fit for purpose.
“She [owners] could see the comparative values of onsite management versus off-management. As such, we are very confident that five-year ratings would help property owners understand that they are getting value for money.”
“Not in line with other states”
Ms Bos said the Queensland management rights arrangements bear no relation to how other Australian states have modernized their consumer protections.
In New South Wales, a property management agreement imposed by the developer expires after the corporation’s first annual general meeting and all other agreements reached by property owners are limited to a 10-year term.
A law was introduced in Victoria last year banning developers from entering into contracts longer than three years that would benefit them, unless it was a hotel or resort.
“The harsh reality of what we are seeing is that corporations pay very high and handsome wages for property managers and then pay extra for specialized maintenance services like electrical and gardening,” Ms Bos said.
Jason Carlson, who specializes in corporate law, said new contracts should be shortened because conducting reviews every five years is not enough to protect consumers.
“There’s still no bargaining power there… It denies bodies the ability to say, ‘No, we want a different model,’ or ‘We want more self-government,'” he said.
Mr Potter said shift communities should explore new contract terms and compensation plans that “remain attractive and support this industry”.
“However, the answer is not and cannot be to reduce a 25-year contract to 10 years. Banks cannot accept that risk, and mother-and-father operators certainly will not be able to support these repayments.”
Contract increases and vague terms
Mr Rawnsley said corporations are already exercising their right to vote when voting on whether to extend or “top up” contracts.
Ms McLaren said that was the case when the majority of her body voted to increase management fees and extend the manager’s contract to 2044.
“We’ve always tried to challenge it as best we can without shaking the boat. We’ve voted ‘no’ every time, but it never works,” she said.
“People are just complacent or don’t realize that the bulk of what we pay is the manager’s fees. Many owners don’t live here either, so they can top up the fees [body corporate fee] Increase through rent increases.”
The Strata Community Association has also called for more transparency regarding the disclosure of pre-existing corporate agreements with the property manager.
Barry Turner, director of Building Management Consultancy Services, said he conducts regular assessments of management services to resolve disputes between corporate bodies and property managers.
He said most disputes stem from the way contracts were originally drafted by developers in vague and ambiguous terms.
“There are different management rights for different types of buildings and we have seen them all being given generic management duties that are not relevant to the work being done.”
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