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Strata industry shake-up

WESTERN Australia’s strata management industry could be set for big changes if key recommendations of a recently completed Government inquiry into the industry are adopted.

Under the Strata Titles Act 1985 there are no requirements for regulation or licensing of the strata management industry. In fact there is no mention of strata managers at all in the act. 

Given that there are more than 157,000 residential strata title units valued at more than $25 billion – and 4000 to 5000 strata schemes being managed by more than 120 strata managers who hold millions of dollars of property owners’ fees – the act is in need of an update.

This problem is compounded by the rapid growth of this type of ownership, which is driven by the increasing popularity of medium density living in the State.

The number of strata title units in WA increased by 9 per cent in the period October 2002 to February 2003.

While to date there have been no cases of impropriety in the local industry, the act does not require that strata company funds be deposited into a trust or bank account, or for those funds to be audited. There also are no requirements for long-term planning for major repairs and maintenance or uniform standards reporting on strata schemes.  

The Government’s inquiry committee found that, under the current act, there is potential risk for the misuse and/or mismanagement of strata company funds in the absence of regulation of the handling, recording and protecting of strata property owners’ funds.

In addition, the system for resolving internal strata property disputes is considered cumbersome, unclear, potentially costly and often ineffective.

On the whole, this is not good news for anyone in a strata scheme or planning to invest in one of the many residential apartment developments springing up around Perth.

The committee has developed 21 recommendations to be implemented to make the act more workable and to remove the risk of impropriety at strata management level.

Some of the recommendations include: the licensing and regulation of strata managers; a requirement that strata company funds be held in a trust account; that managers establish reserve funds based on future long-term expenditures; and that 10-year management plans be prepared and reviewed every five years 

Property Council of WA division councillor Brett Wilkins said the act was in bad need of an overhaul.

“It is a big potential problem. We have had strata developments now since the mid 1960s and there are millions and millions of dollars being held in strata management funds,” he said.

Mr Wilkins said the inquiry report was well researched and developed, however the Property Council would have liked the requirement for unanimous resolution to approve the termination of a freehold strata scheme to be abolished.

With many of Perth’s strata buildings now over 30 years old, issues of maintenance and redevelopment are arising. To counter the emerging problem of poor amenity in strata title buildings the Property Council suggested in a position paper submitted to the inquiry committee that a strata scheme be abolished if no more than 25 per cent of owners voted against it.

Mr Wilkins said there was a number of strata buildings around Perth that required urban renewal, however with strata title legislation only having provisions for unanimous approval of strata scheme termination, urban renewal was often difficult.

Strata Titles Institute of WA president Mark Atkinson said the institute was currently developing competency standards, which could be used as a basis for any licensing framework that was introduced.

“STIWA advocates the regulation of the industry and view it as a positive that the government is examining the industry,” he said.

Mr Atkinson said while there was not a crisis in the industry, there was a potential risk for impropriety.

“Strata managers do hold large sums of money and, like other professional industries that hold large amounts of the public’s money, they need to have the spotlight turned on them.”

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