Rising tensions between Queensland homeowners and property managers over locked-in management rights contracts lasting up to 25 years will be raised at the state government's housing summit today amid concerns of rising body corporate fees.
Key points:
- Annette McLaren says nearly half of her maintenance fees go towards the property manager's annual salary
- Strata Community Association of Queensland is calling for management contracts to be capped at 10 years
- Other states such as Victoria and NSW have contracts that are reviewed after three or 10 years
It comes as tenants question what property managers do to justify increasing fees.
Annette McLaren and her husband purchased their dream home in south-east Queensland a decade ago, but later discovered they would eventually be required to pay close to $6,000 every year in body corporate fees.
The 50-year-old clerk said nearly half of the maintenance fees for the 150-lot complex on Brisbane's bayside, were going towards the property manager's annual remuneration of $416,000, budget documents showed.
Property managers are caretakers who are appointed by developers to oversee administrative tasks and the maintenance of common property, such as stairwells, driveways, and gardens.
"It wasn't until we got our first quarterly statement that we knew anything," Ms McLaren said.
"We're just a single income family and I'm frightened that we're now going to be priced out – we won't be able to afford our home anymore."
Ms McLaren said her family must follow "a very tight budget" to keep up with the significant increases in body corporate fees each year, as well as local council rates.
"I don't know what the manager does to justify that amount of money," Ms McLaren said.
"We love it here, the area, and I know we couldn't afford anything else... We will just have to keep making changes to our lifestyle to be able to pay [the fees] for as long as we can."
Darren Potter, who is the property manager at Ms McLaren's complex, said he is being paid according to the terms of his 23-year-old contract.
"Given the age of our contract and annual salary increase clauses, we are remunerated well. We are acutely aware of this … Our response has been to work really hard, ensure value for money and create value onsite for all our owners in concert with our Owners Committee," he said.
Mr Potter said he needs a team of staff to live on-site all year to deliver the management services outlined in the contract.
"Not only does our contracted remuneration have to fund a salary, the normal raft of employer benefits, and business expenses, but it must service a loan for the onsite home that is mandatory, and the business loan that provides the gateway to an onsite salary," he said.
"Like most Australians now, we are lending to provide the services owners desire onsite and the cost of lending to get an income is increasing.
"We've not been paid more to run multiple infrastructure upgrade contracts and projects onsite. We've just found and created value for our owners consistent with our remuneration. Owners have received a demonstrable dividend in the values of their property above that of an already heated property market."
Calls for contracts to be shortened
Laura Bos is general manager of Strata Community Association of Queensland, the peak industry body for body corporate and community management, said the terms of a property manager's contract are originally set in place by developers and can extend to 25 years, making them difficult to challenge.
"[The contracts] are a huge barrier in terms of lot owners being able to choose who they want to be looking after their property, and how that should happen," she said.
"What we're seeing is quite exorbitant wages for very little return, which actually causes a lot of disharmony and frustration within a body corporate.
"The contracts are so hard for them [lot owners] to get out of and costs them even more in legal fees to challenge."
Ms Bos said the Strata Community Association will be representing bodies corporate around the state in today's Housing Summit where it will be calling on the government to end 25-year management rights contracts.
She said her organisation would like to see contracts capped at 10 years to give lot owners the opportunity to review and update their terms.
But Australian Resident Accommodation Managers' Association CEO Trevor Rawnsley said short-term contracts would result in more expensive maintenance fees.
"Most of the time, there's very little profit margin out of the remuneration that's paid to the building managers because it's spent on services," he said.
"Long-term agreements are in the best interest of the strata scheme because [building management] is often delivered at a much lower rate than what would be offered by outside providers.
"The only thing that is less expensive for a scheme is if lot owners volunteer their time to undertake some of the tasks, but that usually doesn't last long."
However, Mr Rawnsley said he agreed some contracts should be reviewed and updated every five years to ensure they were fit for purpose.
"They [owners] would be able to see the comparative values of onsite management versus off management. So we're very confident that five-year reviews would help lot owners understand that they're getting good value for money."
'Out of step with other states'
Ms Bos said the arrangements for managements rights in Queensland were out of touch with how other Australian states had modernised their consumer protections.
In New South Wales, a property manager agreement imposed by the developer expires after the body corporate's first annual general meeting and any other agreement the lot owners put in place is limited to a term of 10 years.
In Victoria, legislation was introduced last year banning developers from imposing contracts of more than three years that they would profit from, unless it was for a hotel or resort.
"The harsh reality of what we're experiencing is that bodies corporate are paying very high and handsome wages for property managers and then paying on top of that for specialist maintenance services like electrical and gardening," Ms Bos said.
Jason Carlson, who specialises in body corporate law, said new contracts should be shortened because undertaking reviews every five years is not enough to protect consumers.
"There's still no bargaining power there ... It denies bodies corporate the ability to say, 'no, we want a different model' or 'we want more self-management'," he said.
Mr Potter said strata communities should explore new contract terms and remuneration schedules that "remain attractive and supportive of this industry".
"The answer however is not, and cannot be, to reduce a 25-year contract to 10 years. The banks can't accept that risk, and mum-and-dad operators certainly won't be able to support those repayments."
Contract 'top ups' and vague terms
Mr Rawnsley said bodies corporate already exert their right to choose when they vote on whether to renew or "top-up" contracts.
Ms McLaren said that was the case when the majority of her body corporate voted in favour of the management fee increases and extended the manager's contract until 2044.
"We've always tried to challenge it the best way we can without rocking the boat. We voted 'no' each time, but it never works," she said.
"People are just complacent or unaware that the majority of what we pay is the manager's fees. Many owners don't live here either so they can supplement the [body corporate fee] increase by increasing rents."
The Strata Community Association has also called for greater transparency around the disclosure of pre-existing body corporate agreements with the property manager.
Director of Building Management Consultancy Services Barry Turner said he conducts regular assessments of management services to resolve disputes between bodies corporate and property managers.
He said most of the disputes have stemmed from the way contracts were originally drafted by the developers in vague and ambiguous terms.
"There's different management rights for different types of buildings, and we've seen generic management duties thrown at them all, and they're not relevant to the work that needs to be done."