NAT: Strata Management Charges – Why the race to the bottom is not good for anyone

This National article is strata management charges and building a sustainable strata management industry.

Table of Contents:

• QUESTION: For 52-unit apartment building that is six years old, what is the typical range of management fees charged by a strata management company?
• VIDEO: Strata Management Charges – Why the race to the bottom is not good for anyone

Question: For 52-unit apartment building that is six years old, what is the typical range of management fees charged by a strata management company?

Answer: Anywhere from $10,000 – $28,000 (excluding GST) per annum for base management fees.

It is impossible to provide a clear answer without a deeper understanding of how much work would be required to manage your owners corporation (OC).

I would expect an OC of your size to pay anywhere from $10,000 – $28,000 (excluding GST) per annum for base management fees, which is generally an OC’s key consideration when assessing pricing for strata management services. There is, however, almost always ‘more than meets the eye’ when it comes to the total cost of engaging a strata management company.

Management companies offering base fees on the lower end of that spectrum are highly likely to charge additional fees for various tasks that don’t fall within their contracted standard scope of work. This means the total annual cost of strata management services could easily reach the higher end of that spectrum (or more) if it’s a busy property.

If the strata manager is receiving insurance commissions and/or being remunerated through related entities (like a maintenance company, debt collection agency, or an insurance broker that they own), this may also enable them to present a base fee at the lower end of that spectrum. These alternative income streams can result in your OC paying more than it ordinarily would for the services associated with these ancillary income streams (particularly for insurance), so appropriate consideration should be given to the impacts of these arrangements.

Companies offering base management fees on the higher end of the spectrum might offer an all-inclusive pricing model or may not derive income from the ancillary streams detailed above. They’ll also typically have a lower building count per strata manager, which is usually associated with a higher level of service to the OC.

Whilst this is undoubtedly a simpler and more transparent approach, it can be a balancing act if the property is quieter than expected (as the OC may be paying more than it needs to) or busier than expected (as this can impact the strata manager’s capacity and profit margin).

Other considerations that impact pricing include if there is a building manager, building defects, or large-scale maintenance programs are underway (or about to be), whether the committee is harmonious, and so on. Ultimately, the strata manager will set a price where they’ll attempt to balance adequate service levels with a fair profit, which is easier said than done.

If you are questioning the current pricing or exploring the market, it is advisable to liaise with an independent strata management expert to assist your OC with understanding the full picture when it comes to pricing.

Callum Wilson
The Strata Shepherd
E: info@thestratashepherd.com.au
P: 0431 925 908

This post appears in Strata News #700.

Video: Strata Management Charges – Why the race to the bottom is not good for anyone

We spoke with Alex McCormick, Branch Manager from BCS Melbourne and Nathan Clarke Licensed Strata Manager & Branch Manager from Hunter Strata after we noticed a series of posts on LinkedIn from both Alex and Nathan concerning low strata management charges and their impact on the strata industry.

The video discusses:

• Sustainable management.
• Focus on outcomes.
• The race to the bottom.
• A lack of understanding of the economy of strata management and how it relates to employment and remuneration of staff.
• The need for ‘good client citizenship’ from owners and committees – what are you (the client) actually looking for?
• The correlation between fees paid for strata management, and how these translate into the availability of service.

We encourage you to engage in this conversation, share your thoughts and post your comments below.

Alex McCormick
BCS Melbourne
E: alexander.mccormick@bcssm.com.au

Nathan Clarke
Hunter Strata
E: nathanclarke@hunterstrata.net.au

This post appears in Strata News #686.

Have a question or something to add to the article? Leave a comment below.

Read next:

• Understand Strata Management with this Five-Minute Guide
• NSW: Q&A The Management Agency Agreement
• NAT: Q&A Yearly Increases To Strata Insurance

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