Key Takeaways:
- Smaller owners corporations in Melbourne are under the most fee pressure, because they do not benefit from the same economies of scale as larger developments.
- Low management fees can sometimes result in hidden charges, overloaded managers, or lower service standards.
- Most Committees change owners corporation managers because they have lost confidence, not to save money. The usual triggers are unreliable advice, a lack of accountability, and being excluded from decisions about their own building.
- When comparing management proposals, owners corporations should focus on value, transparency, and service quality rather than the lowest fee.
A few months ago, I had coffee with Richard, the Managing Director of one of Melbourne’s larger owners corporation management companies.
One of the topics that came up was how much owners corporation managers charge for their work.
The discussion confirmed something I had been observing for several years. Across Melbourne, smaller owners corporations are increasingly being targeted with low-cost management proposals as more operators enter the market and competition intensifies.
At first glance, lower fees may appear to benefit owners. However, this raises an important question: is the owners corporation management industry under-pricing itself when it comes to managing smaller buildings?
For many townhouse developments and boutique apartment buildings across Melbourne, the answer may well be yes.
And for owners, that under-pricing rarely works out in your favour. More often, it ends up costing you more.
What the numbers say about smaller-building fees
The evidence has been mounting for some time. Management fees on smaller buildings have barely moved, even as the cost of delivering a professional service has climbed. Software, insurance, wages and office rents have all gone up. The fees on a small block have largely stayed where they were.
It also helps to compare owners corporation management with residential property management. The median weekly rent in metropolitan Melbourne is around $580. At a typical fee of about 6 per cent, a property manager earns roughly $1,800 a year to look after a single rental. A strata manager, by comparison, is often paid somewhere between $300 and $500 per lot a year to run the entire owners corporation.
The two roles are not identical, and a strata manager does gain some economy of scale across a building. But the gap is hard to ignore. For work that carries real professional and legal weight, owners corporation management is paid a fraction of what comparable property work attracts.
For owners, the takeaway is simple. The fee you already pay is modest for the professional work involved. So when one quote lands well below the rest, the real question is not why the others cost more. It is what gets left out to make that number work.
Why smaller buildings are often under-priced
The same work for a smaller fee
A smaller building costs almost as much to run as a large one, even though far fewer owners share the bill.
In a large apartment building, management costs can be spread across dozens or even hundreds of lots.
In a small townhouse development, many of the same obligations still exist. Annual general meetings still need to be organised. Financial records still need to be maintained. Insurance still needs to be arranged. Maintenance issues still require coordination. And the same compliance duties under the Owners Corporations Act 2006 still apply, no matter how many lots there are.
The workload does not shrink in proportion to the number of lots.
For owners of a smaller building, this is the catch. A rock-bottom fee is hard to deliver well, because the maths simply does not stretch far enough.
More competition, lower fees
Melbourne’s owners corporation management industry has seen a growing number of independent operators enter the market over the years.
Many bring valuable experience and expertise. Others compete mainly on price in an effort to establish themselves.
Greater competition can be beneficial for owners corporations because it provides more choice. However, it can also place downward pressure on fees, particularly where Committees focus mostly on headline pricing during the selection process.
In some cases, lower management fees become the main selling point, rather than service quality, systems, experience, or long-term value.
What a cheap management fee really costs you
A low management fee is not necessarily a problem.
The real question is whether the fee allows the manager to provide the level of service the building requires.
Hidden and add-on charges
One concern often raised by Committees is the presence of additional fees that are not immediately obvious during the proposal stage.
These may include charges for:
- organising maintenance works
- additional meetings
- debt recovery administration
- project coordination
- certificates and documentation
- after-hours support
This is why it is important to review the entire fee schedule rather than focusing solely on the annual management fee.
Margins on tradie invoices
Some owners corporations are surprised to discover that certain management businesses may receive commissions or administration fees associated with contractors and suppliers.
A low headline fee can quietly be recovered through these margins on your repairs and maintenance. In other words, you can end up paying for the discount somewhere else.
Transparency is critical. Committees should understand how contractors are selected, whether commissions are received, and how any financial relationships are disclosed.
Why low fees can slow your service
One of the less obvious consequences of very low fees is manager workload.
If managers need to oversee a large number of buildings to make the numbers work, responsiveness can suffer.
This may lead to:
- slower communication
- unresolved maintenance issues
- delayed follow-up
- reduced strategic guidance
For many owners corporations, these service issues end up costing far more than any initial fee savings.
While management fees are often the focus during appointment discussions, they are only one part of the equation. For many owners corporations, the real test is whether their manager is responsive, proactive, and capable of helping the building navigate issues as they arise.
If you are not sure your current fee is buying that level of service, it can be worth having the arrangement reviewed.
Why service matters more than the fee
Price often gets attention during the appointment process.
Service is usually what determines whether the relationship succeeds.
The number one reason Committees actually switch
After years of speaking with Committees throughout Melbourne, one theme consistently emerges.
Owners corporations rarely change managers because they want to save a few hundred dollars.
More often, they change because they have lost confidence in the manager. The frustrations tend to be:
- advice they could not rely on
- little accountability when something went wrong
- being left out of decisions about their own building
- the feeling that no one truly understood the building
In many cases, service quality becomes far more important than the annual management fee.
What good service looks like in a smaller building
Good service is not necessarily about having the largest management company. It is about the right combination of responsiveness, genuine expertise and professional systems. It means transparent financial management, maintenance dealt with before it becomes a problem, and communication you can count on.
Smaller owners corporations deserve the same standard of service as larger developments.
How owners and Committees can choose well
Before appointing an owners corporation manager, Committees should ask:
- How long has the business been operating?
- What support resources exist behind the manager?
- What technology and systems are used?
- Are there any additional fees?
- How many buildings does the manager oversee?
- How are contractors selected and managed?
- What service standards can the Committee expect?
These questions often reveal more than the fee proposal itself.
Weighing up value, not just price
The cheapest proposal is not always the best value, and the highest fee does not automatically mean the best service. The better comparison is not one fee against another, but what each fee actually delivers, and what the wrong choice could cost you later. Seen that way, paying a little more for professional management often works out cheaper in the long run, because it heads off the bigger problems that surface when a building is managed on the cheap.
Thinking About Changing Your Owners Corporation Manager?
If your Committee is weighing up its options, or you are simply tired of chasing a manager who is not delivering, it costs nothing to find out where you stand.
Our Consultants help owners corporations across Melbourne review their current management, run a proper tender, and move to a new manager without the hassle. We will look over your existing arrangement, tell you honestly whether it is good value, and talk you through your options.
There is no cost and no obligation. Just a clear picture of whether your building is getting what it pays for.
