The Netstrata Saga – How Many Other Strata Companies Have Strata Subsidiary Companies?

For the past two weeks, a lot of our conversations have revolved around ABC’s Netstrata story. It has sent shockwaves across the strata industry, and OC Committees are very concerned (rightly so).

Stephen Brell also happened to present the week prior at the SCA (Vic) Principal’s Retreat at the Mantra in Lorne:

It should be added that there were those amongst the SCA Vic who were against having Stephen as the guest speaker (including a well-known OC lawyer who was staunchly against it).

Having been in the strata industry for over 12 years, we know most, if not all, of the strata principals (minus the ‘principals’ of the plethora of one-man bands).

What was presented to the room caused many attendees to recoil in shock, as it certainly didn’t pass the pub test.

What did Netstrata have to say to the strata industry at the Mantra in Lorne?

I wasn’t there, and we don’t attend SCA events, but from the principals of the strata industry that we know, this is what was said:

Before continuing here, I will reiterate and add to my earlier point:

What do we do here at Strata Consultants Melbourne?

For the past 10 years, we’ve been working with Committees to move away from their strata company – sometimes because of poor service and sometimes because they’re shonky.

Committees contact us when they’re not happy with the strata company. We guide them through the process of changing strata companies, and we recommend companies that we think are good operators.

What we sometimes receive in return are legal letters accusing us of ‘tortious interference’ – perhaps there’s an ABC story there?

Once again, the shonky operators will be shonky and will also fight hard to keep their OC management contract even against the grain of an unhappy OC Committee.

So, it’s an interesting strata industry sometimes.

Why are OC Committees in Victoria concerned?

The reality of the situation in Victoria is that there are plenty of strata companies that own subsidiary companies that provide services to the strata industry. Does this in and of itself mean there’s unscrupulous conduct at play? Probably not, but it’s not a good time for Committees to ask extra questions.

At the end of the day, the fundamental goal for all Committees is to ensure that their building and owners corporation are getting:

1. the best quality service provider; and
2. the best market value.

Companies in Victoria that own strata subsidiary companies?

• Property company Network Pacific accused of manipulating proxy votes to keep lucrative management contracts
• ‘Like dealing with mafia’: Body corporate hikes fees 80%

In this ABC article from December 2017, Melbourne-based Network Pacific Strata Management company was reported to have awarded work to related companies:

How to find if your current strata management company owns subsidiary companies?

1. Look and read through the management agreement / contract of appointment—typically, it’s located in ‘Section 11.5 Special Conditions – Disclosure of Beneficial Relationships with Supplier’s
2. Look at their website, sometimes these will be openly advertised:

What will the strata industry in Victoria and nationally do moving forward?

Over time, there will be a slow shift away from strata management companies receiving insurance commissions, but the industry’s problem remains how to increase management fees.

The reason that strata management fees need to go up over time is because insurance commissions effectively subsidise the amount of strata management fees paid by owners corporations. 

• Strata lawyers back Trowbridge-recommended reforms

What should OC Committees do with insurance commissions until then?

1. Appoint a good, honest strata management company
2. Put in place checks and mechanisms to ensure the building’s Residential Strata Insurance Policy is appropriate

We work with perhaps three to four companies that have, for years, integral to their business model, elected not to receive any insurance commission or remit the commission back to the owners corporation.

We work with companies that, integral to their business model, receive insurance commissions. Note that there’s nothing wrong with that if they’re acting and working for the Owners Corporation.

Additionally, when we run strata tenders for larger buildings, we put in place fixed amounts or caps as a balancing point between the OC and the management company. In the long run, the best outcome must always be achieved for all parties involved. 

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Strata Management Consultants Melbourne – we are 100% and don’t own any other strata company.

For us, working with (and only working with) quality and dedicated strata management companies is the key.

Look out for our next articles in this series:

• Strata management in Victoria that are still owned by developers
• Strata management in Victoria that own Building Management & FM companies