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

  • Professional strata management companies should probably offer one professional service – strata management. Ideally – nothing else.
  • Good operators will be good operators and shonky operators will be shonky. A leopard doesn’t change its spots – regardless of legislation, professional memberships, or if they own another strata services company.
  • Having been in the strata industry for 12 years – working with Committees and strata companies – we know the strata industry and players better than anyone else.

 

For the past 2 weeks, a lot of our conversations have resolved around ABC’s Netstrata story. It’s sent shockwaves across the strata industry and it has (rightly so) had OC Committees very concerned.

 

Netstrata news summary:

  • Netstrata in NSW manages 1,000 buildings with about 30,000 apartments
  • Netstrata has a number of subsidiary companies that provide services to the strata industry
  • Stephen Brell the owner of Netstrata has stepped aside from his role as President of SCA NSW

NetStrata article links:

 

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

Profitabilit and Ethics in Business Management

It should be added that were those amongst the SCA Vic that were against to 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 the strata principals (minus the ‘principals’ of the plethora of the one-man bands).

What was presented to the room had most in attendance 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 strata industry that we know, this is what was said:

  • Netstrata charges their clients 38 line items of charges and fees – and “you guys needs to get more creative with how you charge clients…” (!!)
  • Netstrata charges each owner $15 for a pre-AGM survey – regardless of whether owners completes the survey or not (!!)

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

Good operators will be good operators and shonky operators will be shonky. This doesn’t change – regardless of legislation, professional memberships, or if they own another strata services company.

Some of the Qualified Strata Companies are members of the SCA (Vic) – some are not. Some are members of the REIV (Owners Corporation Chapter) – some are not. Regardless of which, we are 99% confident that our partner companies are all doing the right thing 100% of the time.

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 help guide through the process of changing strata companies, and we recommend companies that we think are good operators.

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

Once again the shonky operators will be shonky and they 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 to ensure that their building and owners corporation is getting:

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

Companies in Victoria that own strata subsidiary companies?

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

“Ms Fletcher discovered that all major services at Tiara were contracted to companies in the Network Pacific group, including Essential Services Compliance Pty Ltd and 24 Seven Maintenance Solutions.

With a number of those contracts set to expire, the Tiara owners committee — with Ms Fletcher at the helm — decided to appoint new contractors in their place.

Engineer Jason Kerr took over the maintenance contract and compiled a list of about 400 problems at Tiara that needed fixing.

He said some of the firefighting equipment at Tiara had not been checked in up to 18 months.

“Things like extinguishers, hose reels, things that fight fires in the building, they are there to protect the residents and the owners’ assets, so there were deficiencies there,” he said.”

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:
Network Pacific

What is the strata industry in Victoria and nationally going to do moving forward?

There will, over time, a slow shift away from strata management companies receiving insurance commissions but the problem for the industry remains one of how to increase management fees.

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

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 3-4 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. Not there’s anything wrong with that if they’re acting for and working for the Owners Corporation. Also, 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, a best outcome always has to be achieved for all parties involved.

———-

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

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

Let us know if you have know anything to add, share, or ask on office@strataconsultants.com.au

 

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

 

The contents of this article or website are only intended to provide a general overview of the topics discussed. The author of this article makes no representations as to the accuracy or completeness of any information and the information is not intended to constitute investment, legal or professional advice. You should seek professional advice before acting or relying on any of the content. This article does not contain references to any specific company, organisation or individual, unless expressly specified.
Posted
April 02, 2024
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