As the built form of our strata buildings becomes more complicated, sharing facilities between strata communities is becoming more common.
These arrangements are normally established by the developer before buildings are completed and handed over to members of the strata communities.
The main purpose of providing for the sharing of facilities and services among strata communities is to access bigger and better amenities than the strata communities could hope to access on their own.
Examples of shared facilities and services include:
The legal mechanisms used for the sharing of services and facilities include:
However,the sharing of facilities comes about, the most important thing for the strata communities involved is to have a clear understanding of how the costs of repair,maintenance and replacement are shared. This should be documented in written form and form part of the records of all of the strata communities involved. It is important that purchasers are made aware of these arrangements and their liability to contribute to the shared costs before they become members of the strata communities involved.
The chairman of a strata community is a curious position. Normally a chairman is a figure head and leader of an organisation and is closely identified with the organisation’s success or failure.
It is normally quite a powerful job. However, in a strata community the chairman’s only power is to chair the meetings. Beyond that, the power rests with the Committee and the owners at large.
In a practical sense, the chair of a strata community, despite legal constraints, has the opportunity to be a figurehead and leader. The chair of a strata community can be a sounding board for the Strata Manager/Body Corporate Manager, a facilitator of effective meetings and a steward of the organisation’s standards of governance. All of this depends upon the personality of the chair and the relationship with the Strata Manager/Body Corporate Manager.
At a committee level, one of the most important things that a chairman can do is to encourage active debate. Some of the techniques for doing this include:
At the annual general meeting, the spotlight will be very much on the chair. Here are 11 points that will contribute to a successful annual general meeting:
Perhaps the single most important thing a committee can do is appoint, or recommend the appointment of, a strata management company.
A strata management company collects levies, pays bills, effects insurance, keeps the books and records and convenes, attends and minutes meetings. But what about the individual employed by the strata management company appointed to a particular building?
Their role is far more people focused than the process of strata management. A good Strata Manager/Body Corporate Manager will be the glue that holds the strata community together.
Some of the qualities needed for this role are:
One of these qualities above all else needs to be understood well both by Strata Managers/Body Corporate Managers and by the committees and communities they serve
From the Strata Manager’s/Body Corporate Manager’s perspective this means:
From the Committees’ perspective understanding empathy in strata management means:
Mutual feedback is also a matter that can benefit the relationship between the Strata Manager/ Body Corporate Manager and the committee. The Strata Manager/Body Corporate Manager might offer practical guidance on ways in which the committee might help. The committee might give encouragement for some tasks done well and constructive review and critique of organisational progress.
As with any relationship, both the Strata Manager/Body Corporate Manager and the committee will benefit from the clarity of the parties’ respective jobs.
A clear sense of direction is fundamental for the running of a company and especially a not-for-profit organisation, but rarely is it a consideration for strata communities.We believe strata communities should have a strategic plan which is a process of setting objectives and deciding how to accomplish them.
As strata communities struggle to find people to volunteer, we have developed a pro-forma strategic plan as a starting point for any strata community, no matter how large or small.
In terms of converting strategy into action we used a balanced scorecard approach to focus our attention on four key areas for our strata communities:•
Peter Drucker, a world leader in strategy, reminds us “one prays for miracles but works for results”. He says strategies lead you to work for results. They convert intentions into action and busy-ness into work
A clear statement of the role and responsibilities of any group can be the biggest step towards improving effectiveness and satisfaction.
While there are some legal differences between the role of a Committee, council or executive of a strata community (as they are variously called), this role is likened to that of a company board. The Executive Committee (Committee) should propose a plan to owners at the AGM outlining the strategic goals for the upcoming year. In setting these goals, the Committee is also required to listen carefully to the owners, as well as taking the advice of the Strata Manager/Body Corporate Manager with regard to practicalities using their professional experience.
Drawing on the board analogy, the practical functions of the Committee of a strata community are these:
Some self-analysis by most Committees would show some gaps against this checklist of functions.
This series of training notes in 12 parts will address these issues in the following order:
The series will draw on and adopt the work of David Fishel, The Book of the Board; Effective Governance for Non Profit Organisations (The Federation Press 2008)
The committee of a strata community holds the corporate memory for the organisation. It is essential that this be entrusted to the right group and that the entire group does not leave at the same time.
Thinking ahead to the unofficial term of a committee member’s tenure will help with three problems common to strata communities. Firstly, the turnover of members will avoid small cliques. Secondly, unofficial terms provide a way of fare welling under performing members without unpleasant confrontation. Thirdly, if the expectation of the period of service is reasonable, then new members may be attracted.
Strata communities are elected each year but a process of recruitment by the existing members can help maintain and enhance the committee and the community’s corporate memory.
From the candidates’ perspective a form of induction should be expected which might perhaps include a meeting with the strata manager to clarify roles and expectations.
Legislation governing strata communities does not address this important issue.Enlightened committees will take it upon themselves to plan for the future by reaching agreement as to how long they will serve and how they will over a number of years progressively retire and be replaced by others with suitable skills so that the corporate memory stays alive and well for the benefit of the strata community
The annual general meeting of an owners corporation is the most important event for your strata community each year. For most strata property owners,the annual general meeting is the one occasion they will actually participate in the process of managing the affairs of the owners corporation. It is the unimportant that it be a success.
A well-run annual general meeting will create a positive sense of community and encourage strata property owners to participate in the functioning of the owners corporation. People will be more likely to volunteer for service as executive committee members or to undertake specific tasks if the annual general meeting is run well.
At the very least, owners who attend a well-run annual general meeting will be more likely to follow the rules, pay their levies on time and be civil to others in their community if they leave the annual general meeting with respect for the process and respect for the elected leaders of their strata community.
Conversely a ‘bun-fight’ will do nothing for community spirit. The last thing sensible people want is a hostile living or investment environment because the annual general meeting provided a forum for the disaffected few to poison their community with negative attitudes and unacceptable behaviour.
Experienced strata and community title managers will have seen their share of good and bad strata community meetings. The difference between the good and the bad comes down to three things—attention to detail in the preparation of the meeting,understanding the formal requirements of the legislation concerning the process, and good leadership and communication skills of the executive and the strata manager advising them.
Risk management is the process of managing an organisations potential exposure to liabilities or loss. Risk management reduces and manages risk, compliance (our next topic)seeks to eliminate or prevent risk.
In the context of a strata community, some risks are obvious. This list starts with the less obvious but equally important.
Don’t fall into the trap of doing this based on the prevailing consumer price index movements. The consumer price index measures the increase in the cost of goods not building materials.In some parts of Australia last year,the price of building materials rose 17% yet hardly any strata communities would have used this as the basis for the increase in their insured sum.
For years our client surveys have told us that effective communication is the number one issue for lot owners when it comes to assessing the performance of their strata managers. Communication between committees and their broader communities is just as important. Our second series of training notes for 2013 will therefore focus on effective communication. This first note is about verbal and non verbal communication.
Tips for Verbal Communication:
WHAT DOES YOUR BODY LANGUAGE SAY?
|Crossing arms, rub nose or face, squint||Defensiveness|
|Bite nails, chew on a pen||Insecurity|
|Clear throat, fidget, jiggle keys Or coins||Nervousness|
|Clench hands, run hands through hair||Frustration|
|Display open hands, hold chin up||Co-operation|
|Put hands in coat pocket, display steep led fingers Smile||Friendly attitude|
The Australian Standard on Compliance (AS3806:2006) defines compliance to mean:Adhering to the requirements of laws, industry and organisational standards and codes,principles of good governance and accepted community and ethical standards.
In the context of a strata community, this means more than meeting the statutory requirements of the legislation governing your strata community–although that is part of strata compliance. The broad spectrum of legal obligations with which a strata community must comply includes these:
These laws include:
There is a misconception among committee members of strata communities that they are absolutely immune for personal liability for bad decisions that harm the interest of the strata community. This is wrong on two fronts.
Firstly, they are liable for bad decisions that harm the organisation because they did not exercise care and diligence in reaching a decision.
Secondly, even if immune personally as a committee member because they did take care and diligence but still got it wrong, the strata community itself has unlimited liability and as member of that body, they will be exposed to their share of the damages (spread among owners according to entitlements set out in the subdivision plan).
In the face of these realities, strata communities need to adopt a compliance culture that goes beyond the specific strata laws applicable to them. This involves starting a conversation about compliance at a broader level. Some good habits in this regard include leaving compliance as a standing item on agendas. Make a simple checklist of the main obligations. Nominate someone on the committee as the owner or leader on compliance issues. Make an annual calendar of compliance obligations
The place next door is having parties with noise that lasts well into the early hours of the morning. I know it’s the season for celebration, but surely, I have rights too?
In strata management there are three options for a committee faced with the responsibility of funding major capital works.
The most common method is the first. Most states compel five to ten-year forecasts for capital works and some states require this to be funded progressively.
This is the fairest way for apportioning costs between new and old owners. If sinking fund levies are not funded annually, then new owners are disadvantaged.They are forced to pay for the neglect of the former owners.
Special levies are always inconvenient for most owners. As an aging society with many older people who are asset rich but cash poor, special levies are traumatic for strata communities and their members. Usually, work can’t start until all of the money is received and it may take some time to recover money from unhappy or impecunious owners.
Borrowing involves finding a lender who will lend to a strata community without security.Almost all legislation prohibits a strata community from giving security over common property. Some lenders will lend to a strata community on an unsecured basis because there is a statutory liability on the strata community to levy with fees that are necessary to meet the obligations of the strata communities. In the event of a default the lender could have an administrator appointed to levy and recover the funds necessary to repay the loan. Funding will come at a premium to normal borrowings because of the unusual nature of the security. The borrowing costs may be tax deductible for letting owners.
Although borrowing is a relatively new option very few strata communities use this option.Most find the best method is to pay progressively and update forecasts annually to take account of inflation. This avoids the need for special levies when the work needs to be done.
Strata newsletters are a valuable and important way to communicate with owners corporations. Newsletters are distributed through various mediums–mail, email, intranet or websites. Each method has its pros and cons (cost, ease of distribution, etc) which should be carefully considered. To be most effective the newsletter should be written by a member of the community, i.e. an owner. Here are some tips that will help those who choose to build their community in this way.
Tips for a Successful Newsletter:
Strata newsletters are a valuable and important way to communicate with owners corporations. Newsletters are distributed through various mediums–mail, email,intranet or websites. Each method has its pros and cons (cost, ease of distribution, etc)which should be carefully considered.
To be most effective the newsletter should be written by a member of the community, i.e. an owner. Here are some tips that will help those who choose to build their community in this way.
Tips for a Successful Newsletter:
One of the difficult things about the management of strata communities is the“uneconomic“ nature of the activities of the committee of management.
If the committee was a commercial service provider and the owners were the client, then the owners would go elsewhere if the best outcomes of the strata community were not being met.
Due to the voluntary community service nature of the role of a committee of a strata community, the owners might feel they can’t speak up about poor performance or if they do, the criticism is often taken very personally.
In these circumstances a committee then has a responsibility to make an additional effort to listen to comments about improving services and should implement some system of reviewing their performance. This should be provided to the owners for review. A logical time to do this is at the annual general meeting of owners. Some states compel this,and the others should.
Some of the benefits of monitoring performance include:
What then should the committee of a strata community monitor? Levies are an obvious one,but successful organisations are concerned with more than just money. There are issues relating to the sharing of knowledge, compliance with laws and building internal process to better serve the owners that are equally as important as financial management.
We are building our process and systems around these areas and suggest a simple form of monitoring performance as follows:
A great truism of business is that “if it can’t be measured, then it can’t be managed “. If this were applied to strata management, then not only would committees need to monitor performance in some way, but also evaluate their own performance in delivering these outcomes. This means taking corrective action if any targets are not met. This might mean outsourcing the task, forming a subcommittee with some new co-opted owners to serve on that committee that are not members of the management committee or changing the way the committee functions.
The enemy of this process is complacency–particularly when there is a strong chairperson who takes care of it all and is resistant to new ideas and methods. This person makes an enormous contribution but if not careful can also place the community in a position of distress when the chairperson can no longer do the work
Traditionally, committees have focused well on budgets and financial planning. Some times this is to the detriment of other aspects of the management of strata communities. Other times the focus is on reducing fees and levies rather than budgeting for appropriate expenditure. Seldom, if at all do committees focus on financial control.
The budgeting process typically happens in the last quarter of the financial year prior to the AGM. Last year’s accounts are taken as the base and some rudimentary calculations are applied to increase the sums thought to have increased over the year.
Budgeting for administrative expenses is not hard. It is budgeting for capital items that presents more challenging items and test the strength of the committee. Most agree that it is fair and reasonable that owners of the day should save annually for the repair and replacement of capital items. However, not all committees back this up with adequate savings.
A budget for capital items should be reviewed annually using a quantity surveyors report about the cost and useful life of all capital items. Simplistically, if a fence costs $10,000 to replace and has a life of 10 years, then $1,000 should be put away each year to replace the fence. This should be reviewed annually to take account of inflation so that if suddenly the cost of timber rises,and the total replacement cost will be more than$10,000 a catch up payment will be made and future contributions will be increased accordingly.
Strata communities that work on this premise will have adequate funds to pay for repairs and replacements as required, will avoid the trauma of one-off special levies and will find their apartments attractive to purchasers because of a healthy reserve account.
In terms of monitoring the expenditure of funds, again, strata communities usually perform this function quite well. Usually accounts are monitored monthly or quarterly to ensure that spending is in line with the budget.
An area that requires more attention is precautionary financial control procedures. Most strata communities entrust their administrative and sinking funds to strata managers with little or no investigation into how the strata manager handles financial control internally.Three principles underpin good financial control within a strata management company:
Writing is the foundation of all communications. Every communication requires, at some level, that something be written. Even when we talk, we first compose the structure and choose the words–we “write” in our minds before we speak.
Tips to Make Your Writing Easier and More Concise:
This second note in the Effective Communication series is about listening and understanding. Active listening is a way of reflecting back on what the other person has said, to let him or her know you are listening and to check your understanding of what he or she means. It assists with understanding the person’s total communication; the verbal message and accompanying feelings.
Tips for Effective Listening
Listening is critical part of communicating. Poor listening habits will shut the door on meaningful exchange
Using Questions in Conversation: