Considerations When Contemplating Use of Owners Corporation Advocates and Consultants
As in real estate where we have Advocates who have a professed desire to help the consumer when selling their home, we are now seeing a move by organisations identifying Owners Corporation Management as a potential new service area.
Real estate Advocates / Consultants are not generally remunerated by the consumer under their advocacy model, but by sharing in commission proceeds with the selling agent that they nominate. Many body corporate/owners corporation consultancies have now sprung up replicating the real estate sales advocacy model. I guess it could be argued that in fact the consumer is ultimately paying for the advocacy service.
How Transparent will your Owners Corporation Management Tender Be?
Your Owners Corporation (Body Corporate) wishes to change its manager and an advocate/ owners corporation consultant / strata consultant, is approached to assist you. You can be pitched different methods of paying or engaging your advocate/consultant.
1. The advocate/consultant indicates they can find you a manager and give you a separate invoice for their services. Nice and clean and everyone knows the cost.
A qualification here, is that ‘find you a manager’ should mean running a clean tender process that shows probity. Not recommend a manager that in fact pays a fee to be on a preferred manager list or has perhaps an ‘alleged’ non-disclosed commission agreement with the advocate or consultant.
2. They indicate that they will find you a Manager for FREE. The Owners Corporation is not having to pay.
Yes, this is a rather sad indictment on society in some ways that we don’t like getting a separate accountable invoice and often open ourselves up to issues and have a whine about any perception of a hidden fee when things go South. The Financial Planning Industry long feared that having to invoice separately for services would be detrimental to their business model, but if anything, this fear has been turned into a positive marketing tool, when the advice is on a separate invoice. Not flogging you a product with the biggest commission.
FREE is a great marketing term. However FREE to theOCguide means you or your committee of management should pull out the notebook and start writing out the questions that inevitably should have been asked if things end in tears.
A quick internet search on any given day will reveal that many owners corporation management businesses will offer independent advice on how to change your current manager yet recommend themselves. That is the sad fact of marketing, I guess. What do we know?
And a final thought to complicate matters. We find now that on a more regular basis, in an attempt to maximize the return on their developments, developers seek to sell management rights to Owners Corporations. I can plainly see that under the Owners Corporation Act that this creates a conflict of interest and one can also see that crunch time is coming for these types of practices (1 December 2021 in Victoria is a start in addressing some of these issues with a few changes to the OC Act). We get it that business is ‘business’, but from experience don’t like to see the future of people’s investment tossed under a bus for a few dollars, which ultimately can reflect poorly on a developer down the track.
Lesson from This Is
You are the Owners Corporation. You are in control. You can insist on being part of the tender review process if using an Advocate or Consultant. And actually, discuss the remuneration for the process in front of the parties in the same room, both the owner’s corporation strata advocate/consultant and the recommended manager. Good when there is nothing to hide which would allay any fears or perceptions re your OC being disadvantaged.
If you are proceeding with using a consultant or Advocate, make sure you get an invoice addressed to the Owners Corporation for the service. Keep it transparent.
For the purpose of transparency, The OCguide has for the past 14 years provided assistance via its online guide and by answering increasing volumes of queries, all at no cost. This increasing volume of queries could not be ignored and in fairness the demands became a full-time proposition, and not for just one person. A decision was made to provide paid services in March 2021. We at the guide will continue to take queries and respond where we can assist, but where significant time and resources are required by an Owners Corporation you can discuss our services with us.
The OCguide does NOT;
- Take, require or accept any type of Commission from Owners Corporation Managers.
- Require the OC Manager to pay a preferred manager list fee to The OCguide.
- Require the OC Manager to pay any form of registration to The OCguide.
- Require compensation to The OCguide for the awarding of longer-term management agreements, more than 1 year (3 year limit under OC Act Changes). The OCguide insists that client OC’s never sign for more than 1 year with any new agreement so as this can act as a probationary period for the client OC.
- Create exclusive, binding renewal agreements between themself and the manager of your Owners Corporation. These must now be declared if they exist by the manager and there is a view that recent changes in the OC Act may render such agreements as contravening the Act.