How to avoid being scammed by a strata manager

A reader writes, "We pay huge strata levies in our block of units and get no straight answers when we ask how the levies are spent. We have now been asked to pay extra levies to upgrade the lifts. I think we are being ripped off or skimmed by our managing agent. How do we get accountability?"

Ask your strata managing agent for the accounts of your units' levy account. The agent is obliged to provide all strata owners with a report setting out levies received from owners and how they are disbursed.

To ensure propriety the owners' corporation should insist that levy money is held in an individual administrative and sinking fund for your building. Your levies should not be pooled or mixed with levies for other buildings.

Pooling makes it more difficult to determine whether your levies are properly spent.

The strata manager's report must be sent to the treasurer of the owners' corporation within a month of its preparation and forwarded to the corporation at regular intervals, such as every six months.

Some contracts with managing agents in larger unit blocks may require monthly reporting, particularly when major maintenance work is being carried out.

Expenditure should be carefully scrutinised to see that the work has actually been done, or is being done, and to determine no levy money is being diverted to the manager's entertainment or holiday budget.

If you don't want to wait six months to investigate a particular transaction or expenditure, the agent can be asked to supply an itemised account of a transaction causing concern within 14 days of the demand made, provided the transaction took place not more than six months before.

Is there a limit on the levy owners can be charged by managing agents?

There is no legal limit but the figure should be set out in the agency agreement with the owners' corporation. This is a legally binding contract.

The developer still owns several of the units in our block and has appointed its own choice of managing agent. Can we remove them?

Under current rules the developer may appoint a strata managing agent when the owners' corporation is constituted.

But this nominated strata managing agent cannot continue in the position after a strata scheme's annual general meeting is held when the initial period ends.

This is when one third of the scheme's unit entitlements have been sold. This allows the owners' corporation the choice of appointing another strata manager or, if it approves the developer's choice, reappointing that agent.

Our dispute continues and we haven't had satisfactory answers. Can we refuse to pay levy contributions as a protest against the management?

This isn't advisable, at least partly because late levies attract a 10% late fee. It also means your vote won't count at the general meetings.

Owners in dispute with the managing agent should refer the matter to the executive committee or arrange for a motion addressing the issue to be included on the agenda of the scheme's next meeting.

The owners' corporation can also apply to the Fair Trading Office for mediation with the managing agent to sort things out.

Must we stick by the maintenance contractor chosen by the managing agent?

There is no obligation to use the contractor nominated by the agent.

It's a matter to be sorted out at the regular meetings between agent and owners. You can say you are unhappy with that contractor and the executive committee can choose another.

What can we expect our managing agent to do?

The managing agent's obligations are set down under the Strata Schemes Management Act.

They include administrative duties such as calling meetings with owners, maintaining trust accounts and records, issuing levy notices, repairs to and maintenance of common property and renewing building insurance.

The agent is not responsible for repairs to individual units, only common areas and where faults affect the building generally.

Your plumbing faults are your responsibility.

The agent has a fiduciary relationship with the owners' corporation and that relationship is one of trust, confidence and responsibility in which its foremost duty is to act in the corporation's best interests.

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