Key Takeaways:

A strata company lured a committee with a $20,000 annual fee, hiding clauses that allowed up to 75% in extra commissions. What seemed like a bargain quickly became a costly trap.
Vague contract terms and rushed decisions let the manager pocket massive hidden fees, proving low prices can mask expensive clauses.
Owners Corporations are urged to insist on full transparency and carefully review agreements to safeguard against deceptive practices.

Years ago we had a Committee appoint a strata manager (not recommended by us) who quoted $20,000 per annum to manage the building. The strata companies that we put forward were all quoting around ~$36,000-$43,000 to take on the strata management.

What was the catch (aka the strata trap) for the Owners Corporation?

The $20,000 was outright fraudulent bait pricing. The strata manager in question absolutely knew what game they were playing. The Committee and Owners Corporation at the time probably did not.

The Committee without our input went ahead, chose that company, and signed a management contract that contained this wonderful clause:

That’s right—you’re reading that 100% correct. The strata management company would be entitled to receive anywhere from 0% up to 75% (yes, 75% as just 25% shy of 100%). Now if you watched the ABC’s Four Corners program on 9 September 2024, titled ‘The Strata Trap’, you would clearly know that they went for the 75% rather than the 0%.

What is bait pricing in strata management and how does it work?

Monash University offers this definition of bait pricing:

“advertising an item at an unrealistically low price as ‘bait’ to lure customers to a store or selling place.”

Now even if the Committee had taken their word at face value, that they were a good and capable operator, how did they miss the fine print the contract of appointment??

Perhaps the bait pricing was too good and worked as intended. Perhaps the Committee Members were too busy with work and other commitments. Perhaps someone threw around a half-informed statement along the lines, “Oh, we have this manager on this other building and they seem pretty good.”

What hidden costs did the owners corporation end up paying?

Even assuming that the appointed strata management company took 0% insurance commissions, the owners and OC still got slugged really badly over 2 years of ‘management’: