A building manager hits back

A couple of weeks ago, this column applauded the Greens for getting in on the strata act and mentioned, specifically, that we supported their aim to get rid of "ludicrous" 10-year building management contracts.

I must admit I was thinking of the developers of large buildings who install their own subsidiaries or mates as building managers on lucrative (and often undemanding) 10-year contracts before the majority of owners have even taken up residence.

But there is a whole other type of building manager who own units in the buildings that they look after, where they are resident caretakers. One of them - let's call him Joe Manager - has taken me to task.

"I am an onsite property manager," writes Joe. "I was fortunate to buy my business on a 20 year contract before the laws in NSW were changed. But I think to look at a one-year contract would not work, and it seems to me those people including yourself have not thought it through.

"I would not have spent over a million dollars on the office, unit and business if it was a 10 year lease, let alone one year. After all where would my job security be? Who is going to buy a business that has a one-year lease?

"I have had no complaints about the way I conduct my business, and I make huge savings for the owners by doing many repairs myself, or by searching out the best quotes. My charges for the work I do for owners is about a quarter to one-third the cost to get someone in. I have a good relationship with my committee and strata manager. Why would you look to ruin all the good managers who would leave the business?"

Joe has a point although I do have a problem with strata owners and residents being regarded as a business resource to be exploited. These are our homes, after all. And what happens when one of the good guys sells the contract to a crook.

The real problem is that our Strata Laws are an out-of-date shambles that don't make any real distinction between good operators like Joe and the fat cats on feather-bedded contracts who do a bad job and charge the owners like wounded bulls for the privilege.

You can read more of Joe's letter below and, like him, you can email us here on flatchat@jimmythomson.com.

JOE'S LETTER IN FULL

I am a bit concerned that you wrote "instead of the ludicrous 10 year terms now" in reference to the proposal to limiting building management contracts to 1 year.

I am an onsite property manager. Currently ARAMA (Australian Resident Accommodation Management Association) is trying to get the limit of 10 years on a contract increased - probably to 20 years to bring it back in alignment with QLD.. I was fortunate to buy mine on a 20 year contract before the laws in NSW were changed. But I think to look at a 1 year would not work, and it seems to me those people including yourself has not thought it through.

I would not have spent over a million dollars on the office, unit and business if it was a 10 year lease - let alone 1 year. After all where would my job security (the main reason I bought the business) be? Who is going to buy a business that has a 1 year lease? Could you tell me another business that only has a 1 year lease, that involves a large capital expense to get into the business? The proposal does not make sense. Are you saying you would have to reapply for the position every year? Who else does this for their job? Again it seems typical of the people today and Govt. to
react wildly to one or two bad apples to create enormous changes and red
tape for everyone in the business.

In my case I have had no complaints about the way I conduct my business, and I make huge savings for the owners by doing many repairs myself, or by searching out quotes, contacts etc. My charges for the work I do for owners is about a quarter to one-third the cost to get someone in. I have a good relationship with my committee and strata Manager. Why would you look to ruin all the good managers who would leave the business?

So I really don't think you have thought your comment through; and I suggest you contact ARAMA to understand the other side of the story. Other than that, I read your column weekly, and find most of the information most informative and useful, noting down a few points that I was not aware of.

Regards

Joe The Manager

JIMMY'S REPLY

It works in the USA. I understand that you would have reservations having bought a business based on a 10-year contract but the other side of the coin is that NSW residents are being ripped off wholesale by developers who sign them up to a long-term building contracts - either to their own subsidiary companies or to "sympathetic" independents - who then give them substandard service and make sure defects are not addressed until after the six-year window is closed.

We can't stop developers from running their own building management companies and we can't stop them from installing their mates as building managers - but surely we can make them accountable on a regular basis to their clients. Why would anyone not want their customers to have a real choice?

Most apartment residents just want a quiet life and if their building managers are doing a good job they will keep re-employing them. The way things are now, the bad building managers treat apartment owners like cattle, to be milked for as much money as can be got out of them. Meanwhile the government has made it harder for owners to take legal action against the people who are ripping them off.

I also think there's something wrong with companies paying millions of dollars for business when there is no real accountability. Priority number one has to be getting that money back - not servicing their clients which is what they are paid to do.

You have a good relationship with your EC and I salute that. But I can't think of any other business that depends on client contracts signed by a minority of people that tie those that come after them to 20 years under the same terms with no comeback or say in the matter.

You could spend a million dollars on a restaurant with no guarantee - apart from your own good service - that the customers will stay with you. Do you have any 20-year contracts with suppliers?

One of the reasons I support the Greens' proposal is that a few years ago I bought into a building that was signed up to a developer/manager contract for 20 years and they provided a "building manager" who turned out to be a jumped-up concierge who ran vendettas against residents who complained about him, paid bills for other buildings out of our accounts and hired a tradesman for the smallest of jobs (like changing light globes). This clown even cut back our cleaners' hours so as to inflate his Christmas bonus - so we had an allegedly prestige building with filthy common areas.

The managing company (one of our top five developers) refused to listen to our complaints and when we insisted that he be removed they said we would have to pay his wages until he found another job (which would be some considerable time, given what a bozo he was).

That's what a 20-year contract gets the consumer from an unscrupulous manager - no accountability, abuse, laziness and disgustingly poor service. I am sure you are the exception to this ... and that would make you one of the much-valued exceptions to this otherwise corrupt business.

By the way, I don't know the details but I believe the Green's policy is to allow existing contracts to continue on a renewable basis, with the addition of clauses that mean the contract can be cancelled for non-performance (which is fair). Do you have non-performance cancellation clauses in your contracts?

You probably don't see this issue from the same angle as me - but apart from our own experience I get dozens of emails from apartment owners who are being robbed blind by some of your counterparts in other firms.

By the way, the problem I described was resolved when the EC kicked the developer/manager out (they are apparently still threatening to sue) and replaced them with a company that only asked for a two year contract. They are smart and efficient and saved us thousands of dollars a year while earning decent money themselves. Seven years later they are still running the building.

JimmyT

JOE'S COUNTERPUNCH

The other thing Developers do (as in the case of our building), is tie in the Strata Management Contract to mates. We had to threaten legal action to finish our contract after the 4 years was up, and we save around about $6000 a year in Strata - and we get a far better service.

I know what you are saying, there are managers who are ripping off owners. From my point of view, everything I do must save the owners money. I'll give you an example. In our building we have water filters which I change,
and charge the owner $65. I asked my supplier what they charge (actually he asked me what I charge first) - and the shop charges $99. Another building manager (from Chatswood - who I was not impressed with) said he was charging $150.

So I feel I am saving the owners money and the manager in Chatswood is ripping off the owners. Second example, I change all the lights in the building (and charge about $20 for every 5 lights or so). But there are
large flood lights at the back, because of the height, I had to get electricians in, who were charging about $150 for 2 lights. So I went out and bought a longer ladder, and now change these myself, saving the building about $300 a year.

I have saved the building a lot of money by continually finding new tradesman, when I think their prices are too high. (eg. we have replaced our pool guy, our plumber and electrician in the last 2 years). My job is to keep the building costs down, I have a vested interest in this, as I pay 2 levies.

Getting back to the problem of bad managers, I think that new contracts have to be water tight, declaring that all lights are to be changed at a set amount, or not to be charged. Certainly my contract goes into a lot of detail as to what work I have to do. But with a good relationship, we do have grey areas, I do the gardening but twice a year I get some professionals to come in and do a big clean up, that Strata fees pay for.

I would suggest, that if you have contracts for 10 years, that in the contract every year the committee has a review process, and if they decide the manager is not performing, they are allowed to give him 1 years notice (or perhaps 6 months) - to give him a chance to lift his game or get fired.

You might have to have a vote at the AGM, as you would need to stop one or two people who had a grudge against the manager perhaps getting rid of him when it was not deserved.

If you just had one year contracts I can imagine, you would get companies forming with very cheap labour bidding for the contracts. In some ways this might save money, but after 2 years I know this building very well, so I can often pin-point a problem better than (most) trades persons. This experience would be lost.

I would be scared of the Govt. making any changes, in case they make it worse, or create new mountains of red tape, regulations etc

Regards,
Joe.

ANOTHER MANAGER WRITES

My wife and I manage a building on the North Shore as you probably know there are a lot of talk about having managers or not .There of course are a few bad managers out there but there are a lot more very good managers who take pride in there job and the people they work for .If there is a bad thought re having managers or not you have to look at buildings with out managers and ask yourself would I live in a building with out a manager .

We have a lot of un-managed buildings around us and you can certainly tell the difference from the outside whether its managed or not so what do you think its like from the inside there is just no one to help the owners / tenants if they have a problem.

In our building we try very hard to keep costs down by doing a lot of repairs our selves instead of getting some one to do them in this way the costs are kept to a minimum which of course keeps the building costs down any building employing new managers should look at the handy man aspect whilst employing them .

The term of management of course is a problem but again who would buy a business for a million plus dollars with a 10 year contract unless it had an extension of 5x5 or more with it.

GB, North Shore

JIMMY'S LAST WORD

First up, it seems we've been talking about two different beasts - the external "corporate" building manager of a large new complex and the residential caretaker/manager of (usually) older blocks. Now, there is absolutely no reason for the corporate building managers to get contracts longer than a couple of years at a time. If they do their jobs properly, the contracts will be renewed (and word will get around and they'll pick up more work.)

But our Government, in its infinite lack of wisdom - or maybe in a typically sleazily profound knowledge of what its doing - doesn't make any distinction between the corporates and the caretakers. This ingenuousness allows them to justify handing their mates the keys to the strata kingdom.

The government will not address this issue any time soon because they have been bought off by developer donations (that's $8 million dollars of your money laundered as developer profits and pumped into Labor and Liberal troughs).

I reckon caretaker/managers who have bought an apartments so they can run a business deserve some sort of protection from ECs changing contracts at a whim or because of some ulterior motive. However, reading Joe and GB's letters, you can see that they KNOW there are bad building managers out there.

So where's the protection for the owners? That would come from their contracts having clear performance benchmarks. If they consistently meet their expectations under the contract no one can have any complaint. If they fail to meet contractual obligations, they can't have any complaint if they are sacked. And there should be a review of contracts to make sure they are fair for ALL parties in the first place.

That's why the Greens campaign is a breath of fresh air. The major parties aren't going to bite the hands that feed them so generously unless it's going to cost them votes. Funny, isn't it, that the only thing that Labor and the Coalition agree on is looking after the people who look after them?