NAT: Race to the Bottom or Sustainable Future? The Strata Management Fee Debate

The recent webinar presented by strata law expert Michael Kleinschmidt from Budgen Allen Graham Lawyers tackled the industry hot topic of the declining cost of strata management fees. The session sparked a lively discussion, with both lot owners and strata managers offering their perspectives on the ‘race to the bottom’ trend.

Video: Strata Management Fees: Practical answers to the ‘per lot fee’ dilemma

Attendees of the webinar had a lot to say on the topic of strata management fees. From the registered audience of over 900 people, we received almost 100 comments during the hour long session. We thought it might be helpful and add to the conversation if we collated the comments and shared the main ideas expressed in chat during the session. We’ve provided a breakdown of Michael’s presentation and the chat comments below.

Michael Kleinschmidt’s key points focused on the critical issue of declining strata management fees and what can be done to resolve the situation.

• Crisis Point for Strata Management: Macquarie Bank’s 2023 Strata Management Benchmarking Report suggests the industry is at a tipping point. Revenue must increase to avoid unsustainable costs and potential company closures.
• Technological Innovation: Michael discussed the benefits of utilising technology to improve efficiency within strata management companies.
• Healthy Competition vs. Price Wars: Michael acknowledges the value of healthy competition, and discussed the need to ‘raise the bottom’ rather than a ‘race to the bottom’ where companies undercut each other on price at the expense of quality service.
• Win-Win Solutions: There is an opportunity to explore alternative fee structures that align the strata manager’s remuneration, where possible, with the clients so both win.
• Normalisation of Fair Prices: One of Michael’s key messages was the need for the industry to establish and normalise fair pricing models that ensure a sustainable future for strata management companies.

Overall, the webinar raises awareness of the challenges of low strata management fees and encourages stakeholders to work towards a more sustainable future for the strata industry.

Lot Owners Chat Comments: Seek Affordability and Transparency:

• Financial Concerns: Many owners expressed concerns about rising strata fees, particularly in a climate of economic hardship. Affordability was a key priority, with calls for cost-effectiveness and transparent fee structures.
• Value for Money: Several comments highlighted the importance of ensuring fees reflect the quality of service received. Lot owners want to be confident their hard-earned money is being used effectively in managing their properties.
• Open Communication: A recurring theme was the need for better communication from strata management companies. Owners want clear explanations of fee breakdowns and justifications for any cost increases.

Strata Managers Chat Comments Highlight Sustainability Challenges:

• Profitability Concerns: Strata managers highlighted the difficulty of maintaining profitability with stagnant or declining fees. They argued that fair pricing is essential to ensure the quality of service and attract skilled professionals to the industry.
• Increased Workload: Comments emphasised the ever-growing complexity of strata management. Factors like compliance requirements and evolving regulations add to the workload, requiring experienced professionals.
• The “Race to the Bottom”: Several managers expressed concern about a “race to the bottom” mentality in fee structures. Companies undercutting each other on price compromise service quality.

Finding a Sustainable Path Forward:

There is a clear need for a more balanced approach to strata management fees. Striking a balance between affordability and quality service is essential for a healthy strata ecosystem.

Potential Solutions Explored:

• Tiered Service Options: Offering different service packages at varying price points to cater for diverse needs and budgets.
• Transparency and Communication: Clearer communication regarding fee structures and justifications for costs can foster trust and understanding amongst lot owners.
• Focus on Value Proposition: Strata management companies must effectively articulate the value they bring to the table, demonstrating how their expertise benefits residents.
• Standardisation: Owners and committees could benefit from standardised forms for quoting services.
• Ethical Practices: Transparency around costs, including commissions and hidden fees, is crucial for a healthy market.
• Defining Scope of Work: Clear communication between committees and managers regarding expected services can improve cost effectiveness.

The webinar highlighted the need for a more balanced approach to strata management fees. Several potential solutions were explored, including tiered service options, improved communication, and a focus on value proposition. By fostering open dialogue, exploring innovative solutions, and prioritising both affordability and quality service, stakeholders in the strata management industry can create a more sustainable future for everyone involved. We encourage you to continue the conversation by sharing your thoughts in the comments below.

Video presenter:

Michael Kleinschmidt
Bugden Allen Graham Lawyers
E: michael.kleinschmidt@bagl.com.au
P: 07 5406 1280

Article author:

The Lookupstrata Team

This post appears in Strata News #698.

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