A step-by-step guide to changing strata managers
You were excited when you first moved into your sparkling new apartment. You’d budgeted for the strata levies, understanding that they were paying for the gardens to stay neatly trimmed and the lifts to work smoothly. But recently, the complex has been looking a little shabby. The exterior needs repainting, but the work hasn’t been done. A light in the lobby hasn’t been fixed for two weeks. You’ve been meaning to raise it at the AGM, but your strata company hasn’t yet scheduled one and nobody is returning your calls.
If this sounds familiar, it might be time to consider whether your strata manager is doing their job. Sometimes, it can be solved with a conversation. On other occasions, there’s nothing to do but change managers. But what are the warning signs, and how do you dismiss a strata manager?
We spoke to Heather Lynn, Strata Business Consultant for Independent, to find out why, when and how to get rid of a strata manager.
When is it worth changing strata managers?
Can't decide whether to work things out or change strata managers? It can be hard to know whether your experience is par for the course or a parade of red flags. Termination of a strata manager can be a big decision, so don’t take it lightly.
“What’s the most common thing we hear from people who are unhappy with their strata management company? That they don’t respond to communication or don’t take action,” says Heather. “If an owner calls up to report that the lights are out in part of the building and nothing is done to fix that, people get unhappy very fast.”
Sometimes, you can fix the problem just by highlighting the issue. “There’s plenty we can do to help if we know that an owners corporation is unhappy. If it’s a personality clash, we can assign a different strata manager to the complex. Sometimes it’s as simple as agreeing on turnaround times."
Other times, the issues run deeper. If complaints about your strata manager involve the following, it might be time to change companies.
- Substantial levy arrears. Chasing levies is an integral part of your strata manager’s role. There will always be a few late payers, especially in a large complex, but they should be kept to a minimum. If your scheme has a huge hole in the budget, it can cause problems down the track when things come due—and it speaks to a strata manager who is not doing their job.
- Shabby common areas. Overgrown gardens? Elevators always out of service? Peeling paint? If your complex is looking run down, your strata manager might be falling down on the job. A good strata management company responds quickly to maintenance and repair requests and develops a proactive schedule to keep the property in great condition.
- Late AGMs. Legislation requires your owners corporation to hold an AGM every year, within three months of the end of the financial year. If your scheme is scheduling AGMs late—or worse, not at all—you could find yourself in real trouble.
How to change strata management companies
If you haven’t been able to resolve the problem, you’ll have to change companies. Here’s the step-by-step process for doing so:
1. Check your current agreement
Ask your strata manager to provide you with a copy of the current agreement between the strata management company and owners corporation. This sets out:
- The length of the contract and expiration date
- The terms under which the agreement can be terminated early
- The form in which notice should be given, whether written, via email or otherwise
- The length of the notice period
- Any extra procedures that must be completed before the strata manager can be changed
Generally speaking, a contract can only be terminated before its expiration date if the strata management company has breached its terms. Most contracts allow a period of time for the strata manager to mend the breach before the termination procedure can be started.
It is important that you follow the terms of the agreement correctly. Otherwise, the owners corporation might find itself the subject of a lawsuit. Get legal advice before proceeding if you are terminating the contract prior to the expiration date.
2. Decide on a new strata manager
You may have decided to change strata management companies, but you can’t end the agreement without knowing who your new company will be.
“Normally the executive committee makes the decision,” explains Heather. “They have a meeting and decide to get some tender proposals. That might mean sending out an invitation to tender, or just ringing around and getting some pricing from local companies. Once the executive committee has decided who they want to go with, they put together a document outlining their recommendation for the owners corporation.”
Need some guidelines on how to choose the right company? Check out our comprehensive article on choosing a new strata manager here.
Strata managers worth their salt are happy to visit your building and provide a detailed quote and proposal to ensure they meet your requirements. They’ll also be happy to go through their systems with you to alleviate any fears of the same problems recurring.
“At Independent, we work in teams,” Heather says. “That means that even if your nominated strata manager isn’t at their desk, there are three other people who all know your scheme and your building who can respond. That’s a real win for owners who have had communication problems with strata companies in the past.”
3. Call a meeting of the owners corporation
You’ll need the agreement of a majority of owners to change strata managers. Once the executive committee has put together some information and made a preliminary decision, it must be taken to the owners corporation.
Usually, this is done at an AGM. If you are changing strata management companies at the expiration of a contract, the timing will coincide with the AGM anyway. If you are terminating due to breach, and the AGM is a long way away, you may choose to call an Extraordinary General Meeting (EGM) instead.
The preliminary work done by the EC means that the process is more efficient. It’s important to note that only financial members, which means those whose levies are up to date, are able to vote. You’ll need to record the resolution in the minutes in accordance with legislation.
How to minimise the awkwardness
Changing strata managers can be uncomfortable for everyone. Your current strata manager is there in the room as you effectively fire them.
You can’t avoid it altogether, but there are things you can do to soften the blow.
- Make sure the strata manager knows ahead of time what your decision is. There’s nothing worse than blindsiding them on the day.
- Make sure that all owners know the reason for the change and the reasons for recommending the new manager. That way, you can get any contentious discussions out of the way before the meeting, and keep things efficient.
- Keep things courteous. Even if feelings are running high, you can be polite. There’s no need to hit the strata manager with a laundry list of complaints. If you’re terminating for breach, you need to outline the breach in your written notice. At the meeting, you can simply take the vote and record the owners corporation’s decision in the minutes.
- If you’re confident enough, you can actually run a general meeting without the strata management company’s help. The executive committee delegates the power to run meetings under Section 58 of the Unit Titles (Management) Act 2011. However, the EC can run the meeting themselves. If you choose to do this, it’s important to make sure that the meeting is conducted according to the rules and minuted correctly. If you don’t follow correct procedure, the meeting and any decisions made will be invalid.
4. Sign the paperwork
Once the owners corporation has passed the motions to terminate the original contract and appoint a new manager, you can sign the contract with the new strata management company.
You should also provide formal notice to the current strata manager. The notice doesn’t have to be delivered by mail. An email is perfectly fine.
There is no specific wording that is required for the termination to be valid. However, if you’re terminating for breach, Section 55 of the Unit Titles (Management) Act 2011 says that your written notice must state:
- That the corporation believes the manager has committed a remedial breach
- The details of the remedial breach so that the manager identify:
- the function that was neglected, or
- code of conduct that was contravened, or
- gross act of negligence or misconduct.
- That the manager has 14 days to either:
- provide a written defence explaining why the issue doesn't amount to a breach or
- remedy the breach
- That the owners corporation may end the contract if the written representation is not accepted or the breach not remedied.
Example termination notice
Dear [current strata manager]
RE: [Property address]: Notice of Termination of Management Agreement
This [letter/email] serves as written notice that we will not be renewing your management agreement after [date]. This accords with the [number of days] notice required by that agreement.
Management of the property will be taken over by [name of new strata management company]. We would be grateful if you would ensure that all relevant documentation is available for collection by [new strata management company] by the last working day before [date].
On behalf of the owner’s corporation, thank you for your assistance in managing [property name]. We wish you all the best.
[Name of authorised representative]
Provide the minutes of the meeting at which the motion was passed to the new strata manager, as well as the signed contract.
5. Ensure a smooth handover
Once the outgoing strata manager has been formally advised of the process and who the incoming strata manager is, they will start the handover. This means handing over all important records and documents, including a roll of owners and all the financials.
It would be wise for a nominated member of the owners corporation or executive committee to ensure that this is done. If your old strata company was lax in handling paperwork or keeping records, it’s likely that they’ll also be tardy in providing information to the new company. Staying on top of the process makes changing strata managers a far smoother affair.
Ask the new strata manager for a list of things that they need so that you can make sure nothing’s missed. It’s also a good idea to schedule an executive committee meeting with the new manager to discuss the day to day running of the complex, plus any house rules, administrative tasks or reporting requirements.
If your current strata manager is not meeting your needs, contact us for more information about how we can tailor a package to suit your development. As Canberra’s most experienced strata company, we provide the full suite of strata service.
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