Premium Strata: Diamond Guarantee

Premium Strata: Diamond Guarantee

Sydney-based company Premium Strata is proud to offer premium strata management services, tailored to individual needs and scheme requirements, as well as providing building management services through its sister company Premium Building Management. The company’s co-directors, Leanne Habib (CEO) and Inger Brettle (COO), spoke to The Australian Business Executive recently about the rise of Premium Strata and the challenges facing the industry today.

“I am the founder of Premium Strata,” Ms Habib tells us, “back in 2007. It really came from a passion of wanting to deliver a service concept that competitors weren’t providing.”

Leanne Habib (CEO)
Leanne Habib (CEO)

At that time, and even to this day, many strata companies were focused on quantity rather than quality. In response, Ms Habib came up with the name Premium Strata to indicate the exceptional quality customers could expect from her service.

“Coming up with the name ‘Premium’ was all about providing that premium, high-end service. Since then, we’ve grown the business organically, based predominantly on word of mouth. Today we employ well over 20 staff, and are growing rapidly.”

Ms Habib’s career began in real estate, before she moved on to working in strata management in 2000. Seven years later she was setting up her own business in the form of Premium Strata.

“I’ve been with Premium Strata just under five years,” Ms Brettle explains. “I had been in the real estate industry since 2000. I first started in property management, and subsequently managed properties held in trusts and estates at Perpetual.” Eventually, she received a phone call from colleagues suggesting she try her hand in the strata industry.

“I met Leanne at the company where I gained my first exposure to strata management. I then moved to other strata management companies, larger organisations, and eventually joined Premium Strata five years ago, becoming a co-director three years ago.”

Inger Brettle (COO)
Inger Brettle (COO)

For Ms Habib, bringing another director on board was contingent on finding the right person for the job. She found that they complemented each other in terms of skills and objectives, especially regarding customer service.

Premium Strata’s position in the high-end of the market is due to its unique setup, giving the company an edge over many of its competitors and a significant advantage in the market. Its Diamond Service Guarantee ensures that a licensed strata manager handles all customer’s requirements, and avoids customers having to deal with different departments, which is typical in the industry.

A strata manager manages the day-to-day affairs for a strata titled or community titled scheme or building. This includes the conducting of meetings, collecting strata levies, arranging repairs and maintenance, managing a scheme’s financial affairs and insurance. A strata manager also handles issues and complaints between residents.

The sister company is Premium Building Management, which provides onsite building management services.
“Basically,” Ms Habib explains, “a building manager is somebody who is usually stationed onsite at a building and oversees the daily cleaning and maintenance services. The building manager reports any repairs needed and is the contact for any contractors performing work on common property. He or she typically works during normal business hours and reduced hours over the weekend.”

The smallest building that the company provides building management services for is 66 units, but the service is more commonly found in buildings of over 100 units. Generally, it is these type of developments that warrants the use of a building manager.

Electron Management

“If a building has a lot of common amenities,” Ms Habib says, “like a pool, sauna, barbeque areas, and communal gardens, then it is beneficial to have someone onsite who is pro-actively managing the use of those facilities.”

“Exclusivity also plays a part.” Ms Brettle adds. “Smaller high-end buildings with units in the higher price brackets typically also have higher service expectations, warranting the appointment of an onsite building manager.”

The building managers employed by Premium Building Management are dedicated to servicing just the one building. This is different to other companies that provide building managers on a more part-time basis, and have them look after several sites at once, floating between buildings.

“Effectively, they’re only getting a limited service,” Ms Habib says, “and it’s very hard for building managers to deliver high quality service when they’re spread across too many buildings.”

Premium Strata applies a similar concept to strata management. Its strata managers look after a smaller portfolio of buildings, which is a crucial difference, as it allows its managers more time to provide the best service for each individual client, be engaged and pro-active in avoiding issues before they escalate. It is often a difficult to quantify, long-term saving for the owners they represent. The old adage “you get what you pay for” comes to mind.

Dream Scaping

This level of high-end service is hard to find in the industry, with the quality and expertise of most companies not matching that offered by Premium Strata.

“A lot of new strata managers in the industry are being thrown in the deep-end with a very large portfolio of buildings and without proper training. There are not enough well-trained, quality managers. It is a real skills gap our industry is faced with.”

Ms Habib mentions the company’s mandatory recruitment requirement: all new managers must be fully licensed strata managers.

“Many of our competitors will hire anyone who holds the minimum qualification, the so-called certificate of registration. You obtain this certificate by completing a short course, whereas the licensing course is years of education, as well as years of on the job training.”

With the new development application requirements for councils to provide adequate housing for the boom in Sydney, Ms Brettle admits that brand new developments are becoming more and more complex to manage.

“These are not your traditional three storey apartment buildings.” she explains. “These are large, multi-level buildings that have shared facilities; buildings that are split into different segments called stratums or BMCs (Building Management Committees), or may form part of a Community Association. These are not stock standard, textbook examples.”

This means that managers require many years of experience in the industry to understand how to manage the separate entities to an appropriate standard.

“If it’s not set up and managed well,” Ms Brettle adds, “you can put these schemes into a lot of trouble, and it could be difficult and costly to rectify.”

Not only does a manager need to have an understanding of the legal side of strata, they also need to have people, negotiation, management and communication skills. All skills developed through careful mentoring, close management and nurturing over the years.

Renfay

Ms Brettle adds that the latest NSW government legislation reforms are making it more complicated for strata managers to do their job. “More and more responsibility is placed onto the strata manager,” she says.

Ms Habib adds: “a lot of people burn out and as a consequence leave the industry, especially with these larger portfolios that many of our competitors are giving their strata managers to manage. It’s pretty much impossible to do your job and to do it well with such a large portfolio.”

On 30 November 2016, new strata regulation was introduced in NSW. One of the improvements in the new regulation is the restricting of proxy farming, ensuring that the use of proxies at meetings is better regulated. In the old legislation, owners were allowed to use as many proxies as they wanted.

“Under the old legislation,” Ms Habib says, “a few people could have a disproportionate influence on the voting process through the use of proxies.”

This kind of proxy usage typically happened in schemes with a significant number of non-resident owners. Investors often don’t show the same level of involvement in the running of the building and delegate their vote to others. “The new legislation has put a cap on how many proxies one person can hold.”

Another change in the legislation stipulates that tenants are now allowed to attend General Meetings. This is a major change, because previously tenants weren’t even part of the OC.

“They have no voting rights,” Ms Habib says, “they have no entitlement to address the meeting unless authorised by the meeting, but they do have an entitlement to attend a meeting of the OC.”

Inside Outside

Another significant change is the introduction of electronic meetings, meaning people no longer need to be present and can instead join remotely. In the old legislation, the only way one could attend a meeting was in person or by proxy.

“Now, it’s opened up so you can vote by any electronic means. Especially for large schemes where in the past achieving a quorum was difficult because of investor owners being overseas or otherwise not able to attend meetings. It has the potential to change the dynamics in terms of how buildings are managed.”

Another significant change has come in the requirements for quorums, the minimum number of owners that must be present for a meeting to go ahead. At the moment the Owners Corporation has to wait 30 minutes from the start of the meeting in order to achieve a quorum. “Now, with the new legislation, it’s giving the power back to the chairperson to decide that if, after thirty minutes, they still cannot achieve a quorum, the chairperson now has the discretion to decide whether or not they proceed with the meeting.”

This typically affected larger schemes which often struggled to achieve a quorum. The OC will now be able to have just the one AGM, as opposed to having several adjourned meetings over the year.

Further industry issues addressed by the new legislation are centred on building defects, with fire defects and water penetration being the most common issues found in new developments. These are often just simple compliance issues for fire-related defects and failed membrane systems causing water penetration.

Complete Landscape Services

Ms Habib admits that these issues often come down to the quality of the building, and that a significant portion of new developments experience building defect issues.

“The government have recognised that this is an issue,” she explains, “and they’re making some useful changes to address this.”

Under the new legislation, which will come into effect in July 2017, when a development is lodged for construction, a 2% bond will need to be paid by the builder on the construction costs. If the work is not done to standard, the Owners Committee has some kind of financial recourse to assist with getting defects rectified.

There are many owners who feel they are not getting good value from their strata management agency. According to Ms Habib, the way Premium Strata’s pricing is set up ensures this doesn’t happen to its customers.

“Our fees are capped,” she explains, “where most of our competitors provide you a base management fee and then charge you extra for all the disbursements, referred to as schedule Bs and Cs. This means that every meeting a manager attends, every work order raised, every compliance certificate applied for, every envelope and cheque used, every email and phone call made on the owner’s behalf is charged as an extra item. This makes it difficult to get a clear upfront picture of their actual total cost for managing your building.”

“Our pricing structure is completely different. We give you one capped fee for your disbursements and one capped fee for the base management. It covers all of those items that our competitors would normally charge extra for. There are no hidden charges.”

This means the OC can carefully budget for these costs, avoiding surprises. With Premium Strata, clients can rest easy knowing that all services are included in the overall cost.

Not only are meetings unlimited under the capped disbursement fee, but this structure allows the company to be very transparent.

“On the Managing Agency Agreement,” Ms Brettle explains, “the agency needs to disclose what fee they’re going to charge the Owners Corporation. We simply list the base management fee and the capped fee.”

Many competitors will list a lower base fee, giving the owners the appearance that they are entering into a lower cost contract, but because they cannot quantify how much work will be generated in the following year, they do not really know how much they will eventually be charged.

“The other benefit of Premium Strata’s all-inclusive fee is that our staff are not spending all their time constantly trying to capture the cost of every phone call, writing of an email etc. Our managers are freed up to spend their time managing the portfolio and managing the individual schemes.”

Ms Habib says: “we don’t just simply refer issues to the committee to make a decision on. We suggest options and recommend solutions. We try and make their roles on the committee less complicated.”

A lot of strata owners feel like they don’t get this kind of expertise and service from their strata manager, but at Premium Strata, staff make it their priority to provide this service.

Plumber and Electrician

Some competitors have several different departments that need to be navigated by the clients depending on the specific issue being faced. This is not the case at Premium Strata.

Ms Brettle says: “Our concept is that you have one point of call, and that is your strata manager, and your strata manager is then expected to provide you with the information during that call and not refer you to various departments.”

This system is backed up by a lack of voice response (IVR) technology at the company. “This way,” Ms Brettle concludes, “when people call our office they speak to someone, not an automated service.”

In a challenging industry faced with legislative changes and customers who expect more, Premium Strata stands out by the quality of service it offers, achieved by working with a unique personal service concept and management which is proactive rather than reactive. The company works hard to earn and maintain its excellent reputation.

Find out more about Premium Strata by visiting:

Premium StrataThis Premium Strata business profile has been made possible by the generous support of:

Complete Landscape Services
Electron Management
Inside Outside Facility Services
Mr. Washer and Plumber & Electrician
DreamScaping
Renfay Projects

To view this editorial as it appeared originally in The Australian Business Executive magazine, click here.

Strata Data: High-Rise Living

Strata Data: High-Rise Living

As the main business in the Terandi group, Victoria and Adelaide-based body corporate management company Strata Data has nearly forty years of experience in the rapidly growing strata industry. Australian Business Executive recently spoke with Marc Steen, COO of the Terandi Group, to learn more about the industry and Strata Data’s place within it.

Marc Steen

After studying for his commerce and law degree, Mr Steen began his professional life immediately after graduation, starting work for a strategy consulting firm called Bain International.

Marc Steen, COO of the Terandi Group
Marc Steen, COO of the Terandi Group

Then followed a move to Europe and the completion of an MBA at the Insead Business School, just outside Paris, before a move back to Australia and New South Wales, where he worked for a number of years for Diageo at its head office in Bondi Junction.

Mr Steen held both strategy and marketing roles with Diageo before moving west to take up a position as general manager of South Australia and Northern Territory. In 2006, Mr Steen moved on from Diageo to start his own company, Trades Monitor.

Trades Monitor turned out to be an extremely successful venture for Mr Steen, and was named by BRW as one of the ‘Fast 100 Growing Companies in Australia’. As a consequence of this success, the company was bought out in 2010 by NASDAQ-listed company Ebix.

After the buy-out, Mr Steen stayed on with Ebix, continuing to assist the company. In 2015 he left to join Strata Data and the Terandi group. In several of his previous roles, Mr Steen had links to strata, making the move into body corporate management a relatively easy one.

“With my family background, I’ve always been on the fringes of strata,” he tells us. “My dad, when I was born, was a strata manager. He was one of the first strata managers in New South Wales, and he set up one of the very first stratas in NSW.”

Mr Steen’s father owned a business called Independent Property Reports, which took care of pre-purchase inspections for strata title properties. During university holidays, Mr Steen helped out at the company, gaining a wealth of valuable experience in the business, making strata management a natural progression from his previous roles.

“The main client group [for Trades Monitor] was strata management companies. 90% of our clients were strata managers. I used to go to all the strata conferences, the state conferences, the national conferences, so I know a lot of the people in the strata industry.”

Terandi Group

The Terandi group incorporates several other companies owned by Terry and Di Smith, Strata Data’s owners, who began Terandi together back in 1977. Those other companies are Rent All, Maintenance Matters and Credit Recovery Solutions.

“There’s a number of businesses that are part of the Terandi Group,” Mr Steen says. “So Strata Data is the largest, and I guess was the first and is the focus, and Strata Data is a body corporate management business.”

Both Rent All, a property management company, and Maintenance Matters, which handles property maintenance and repair, operate exclusively in South Australia, whereas the main company, Strata Data, operates in Victoria and SA.

Strata Data was formed at the same time as Terandi as a family business for Terry and Di Smith. The Terandi group focused on strata management to begin with, but over the following decades grew both organically and through acquisition.

“As part of that growth, there was diversification into others areas. So, not only did the whole body corporate business grow, but that’s when the property management business was also started and the Maintenance Matters business, and then the most recent addition, Credit Recovery Solutions, which started three years ago.”

Terandi has experienced steady growth over those decades, creating the opportunity for the group’s biggest development, which came seven years ago, when the decision was made to take the business national, beginning in Victoria with the opening of an office in Melbourne.

“That’s something we’re wanting to consolidate and grow,” Mr Steen stresses, “and once that gets to a scale that we feel is substantial and operating well on its own, we’ll then be looking at where to go next.”

Rise of Strata

The growth of Victorian strata is particularly impressive going into the new year, with the industry currently growing quicker than anywhere else in the country, a fact Mr Steen sees represented in the development visible in the Melbourne skyline.

“I went to a talk from Bernard Salt, the demographer. He’s a well known futurist, and he certainly has made a point that the strata industry is a very high growth industry. This is not specific about Victoria, but people are moving more towards apartment living.”

Victorian strata growth is the fastest in the country.
Victorian strata growth is the fastest in the country.

State government development plans have changed from spreading cities out, which requires increased infrastructure, to building up, by adding more high-rise living, which is better for the environment. All around Australia this new approach to living is being employed.

“There have been lots of stats that have been done and research to show that this is actually much better, as far as not having to knock down forests or take out grazing lands to spread out; if you build up, it’s actually a greener way to house people.”

Strata Data currently supervises around 1,400 properties across South Australia and Victoria, meaning they work with roughly 20,000 single unit owners. This works out at an average of 13 or 14 units in each block.

The strata industry in Victoria does not have a particularly good reputation when it comes to relationships between managers and owners, so what is it that makes Strata Data stand out from its competitors and retain the support of its clients?

“It’s an interesting question, and I think Melbourne particularly, compared to South Australia, has got another level of complexity, which is a lot of people are investors, especially in the big city blocks, and a lot of them can be overseas investors.”

Investors from other countries, particularly China, are now moving into Australian strata, meaning maintaining good relationships is even harder. Differences such as time zones, language barriers and an understanding of the business must all be successfully negotiated.

“Our model is a high-touch, high-service model,” Mr Steen says, “so we make sure that we are staffed up adequately to provide that service, particularly as we’re not the lowest cost provider and we don’t try to be; we try to provide a high level of service to our clients.”

The company has established a number of innovative and accessible methods for customers to make contact, including increased availability on the company website in the form of an instant chat widget, allowing problems to be addressed in real time.

In addition, the company makes sure it encourages people to attend either committees or annual general meetings, to get involved in the running of the building, which Mr Steen admits is the best way to make sure clients are onside.

“Most of the unhappy clients that we getand everyone has some unhappy clientsbut most of them are people who haven’t been involved, so they say ‘we’re not happy with X,Y and Z’, but it’s usually not us that they’re not happy with.”

Quite often the issues arise from the sub-set of owners who make decisions for the apartment blockdecisions which Strata Data duly follows and enforcesmeaning the blame is often wrongly attributed to the strata manager.

“What we try and encourage people to do who might not be happy,” Mr Steen says, “is to get on the committee, speak to people on the committee, come to the meetings, because we’re not the ones that actually make the decisions, we follow owner or committee instructions.”

Usually, when people realise exactly how the process works and what they can do to influence proceedings, a higher level of satisfaction is provided for the client and a smoother working relationship reached.

Industry Issues

Working for a higher-end strata company operating in Victoria and SA, Mr Steen recognises the issues surrounding price competition. “There’s a lot of talk of competitive undercutting in the Melbourne market,” he says, “it’s hard for me to gauge, really, how that operates.”

“We don’t operate at that end of the market. We don’t try to be price competitive and provide minimum service, so we’re not really operating at that end of the market that gets so affected by that, but certainly we hear a fair amount about the tough price competition.”

The competition Strata Data sees most of is less about pricing and more about relationships with developers, where the costs involved with forming alliances can often be subject to a similar kind of undercutting.

“There’s quite a bit of competition there. So that’s the new buildings, for developers who are bringing new stock onto the market, they get to appoint the first strata manager and obviously if you’ve got a relationship with them then that’s going to put you in a pretty good place.”

One of the main issues affecting the strata is the new building defects
One of the main issues affecting the strata is the new building defects

One of the main issues affecting the strata industry is that of defects in new buildings. Another is around buildings across the country as they begin to reach half a century or more of age, where the question of what to do with them is becoming increasingly important.

“With building defects, there has been an issue,” Mr Steen says, “and particularly one of the well known ones is, there was a large building that caught on fire because of some material that was used on the building which was not fire safe.”

In response to events like this one, the industry is beginning to look at a number of buildings across the region which may need to have changes made to make them fire safe and ensure such tragedies are not repeated.

The other issue is to do with the problems surrounding knocking down and rebuilding properties that are now reaching fifty or sixty years of age, problems exacerbated by the need for 100% approval from every owner in order to do so.

“If you’ve got an apartment block for a hundred people,” Mr Steen says, “to get approval from everyone can be quite difficult. Some people may not disapprove, they just may not even turn up or vote.”

New South Wales has recently passed legislation stating that in order to knock down and rebuild an old building, only 75% owner agreement must be attained. This kind of legislation hasn’t been implemented in Victoria, meaning a significant issue still remains.

“I do think the Victorian strata industry is really well-run; it’s almost the model of the strata industry across the country, in my opinion. So the industry body, the SCA [Strata Community Australia], runs very good educational programs and has a very good management agreement, that is well used.”

Mr Steen believes the SCA has done an excellent job of running the industry in Victoria, by bringing the industry together, educating and professionalising the industry, and making the public aware of what strata is all about.

Find out more about Strata Data by visiting:

Strata Data

This Strata Data business profile has been made possible by the generous support of:

Ebix Australia

To read and download the full profile click on the cover image below. To view this editorial as it appeared originally in The Australian Business Executive magazine, click here.

Editorial by Nicholas Paul Griffin

BCS Strata: Professionalising the Industry

BCS is one of the Ausralias biggest strata companies

Body Corporate Service (BCS) Strata Management has been providing professional services to strata and community title schemes, as well as developers in New South Wales, Queensland and Victoria for over 40 years.

BCS is proud to be the market leader and largest firm in the provision of professional strata and community title management in Australia. With an unparalleled depth of local knowledge and experience, BCS delivers better guidance and reliable support to its clients.

From resorts to commercial, industrial, residential, mixed use and community title developments, BCS Strata Management tailors its service solutions to meet the unique needs of its clients across an extensive portfolio.

Ablo Jalloh is the manager of BCS’s Melbourne branch. “We’ve got two branches in Victoria,” Mr Jalloh explains, “the biggest one is in the city, which is the one I’m managing.”

Ablo Jalloh is the head of BCS Strata Melbourne
Ablo Jalloh is the head of BCS Strata Melbourne

After earning a Bachelors Degree in finance, Mr Jalloh began working in banking, both at JP Morgan Chase and ANZ, before joining BCS at the end of 2008, beginning work in the Southport, Queensland branch.

The opportunity came about after the corporate finance department Mr Jalloh was working for at ANZ was transferred to Sydney. Unable to move with the group, Mr Jalloh began looking for other opportunities.

“This opportunity came up in Southport,” he explains, “and they needed somebody who understands accounting and financial management, so that’s how I ended up joining the PICA [Prudential Investment Company of Australia] Group, which BCS is a part of.”

The change from banking to strata management may seem like an unusual professional shift, but it was Mr Jalloh’s background in accounting and finance which made it possible, since one of the primary functions of strata management is to manage money for clients.

Prudential Investment Company of Australia

BCS has been around for over forty years as a member of the PICA group, the largest strata management company in Australia. As a parent company, PICA holds multiple other strata and debt management brands, of which BCS is the largest.

“BCS has had multiple awards,” Mr Jalloh says, “industry awards from the SCA, and recently we were awarded best strata management website by the SCA, which is the Strata Community Australia, our industry body. It has had multiple other awards over the years.”

BCS endeavours to employ good people, many of whom have been with the company thirty years and amassed a high level of experience to serve its clients effectively. BCS prides itself on offering more comprehensive advice to clients than its competitors.

“We have this longevity and industry experience,” Mr Jalloh explains, “where some of our competitors, the smaller ones, will have to rely on lawyers or legal firms and accountants to provide that kind of advice.”

BCS’ financial stability is a huge plus point to the business, another significant advantage over smaller competitors, many of which may have amassed debt over the years. BCS remains debt free, thanks in the most part to its parent company’s financial stability and its effective ability to manage its affairs.

“We are the leader in the industry, by far,” Mr Jalloh says. “We manage about a quarter of a million lots, and our nearest competitor has about 50,000, and that’s a massive difference, so we have that market leadership strength there.”

Similarly, the company has excellent corporate governance. BCS’s board is made up of PICA members as well as those of a further two international companies, each of which owns a 50% stake in PICA.

“FEXCO is a financial management company in Ireland,” Mr Jalloh explains, “and the other company that owns PICA is Nippon Kanzai, which is a comprehensive building management firm in Japan.”

PICA is an investment and asset management firm established in Australia to be involved in, among other things, strata. BCS operates for PICA in just three states: Victoria, New South Wales and Queensland.

“In Victoria, we’re not that big; we are bigger in New South Wales and Queensland. We don’t have any presence in any other states, but despite that we are bigger than any in the industry. We’ve got all sorts of clients, from duplex units to multi-functional buildings; hotels, office buildings and high-end residential apartment buildings.”

Strata in Victoria

With significant issues arising in Victoria such as building defects, fires and many more concerns for the strata industry, Mr Jalloh is sure that there is plenty more to be done to prevent industry problems going forward.

“The difficulty in strata is that a lot of people get in not knowing what they are getting into. A lot of people who buy into these things don’t realise that they should not, for example, smoke and flick cigarette butts from their balconies, and/or store flammable materials on their balcony around heating pipes like the air conditioning pipes.”

The biggest challenge for the industry is to educate the public about the potential dangers in strata, to make sure accidents like the recent fire in the ducklands aren’t repeated. One of BCS’s priorities is to provide educational advice to its clients at every opportunity.

“As Strata managers, one of our responsibilities is to provide education about strata and to increase awareness to the public at large,” Mr Jalloh says.

“Letting people know that their responsibility to ensure that their buildings are operating effectively in compliance with legislation is ongoing. Just because you’ve bought into a building, doesn’t mean that you basically have no responsibility in making sure that everything that’s supposed to work is working.”

Some of the general public tend to think of the owners corporation as a hands-off third party, separate from the lot owners. The truth is that the owners corporation is the lot owners themselves and their building, and responsibility must be reflected as such.

“It’s a big challenge to let people know that – yes you are the body corporate, you are responsible for your private lot, you’re collectively responsible for your building on the common and shared property along with the other owners.”

Mr Jalloh believes that owners need to have a better understanding of the responsibility that lies on their shoulders. The body corporate manager is primarily responsible for things like financial management, legislative and compliance consulting and administrative work.

The strata managers are there to help provide advice and guidance, but at the end of the day it is the owners’ building and the manager’s responsibilities are limited, a fact not always made clear to members of the public.

“We manage our clients’ funds that they contribute every month to maintain their common and shared facilities in the building. Legislation in each state dictates how money is collected and how it is spent, so we provide legislative advice to our clients on these matters.”

As strata managers, BCS guides its clients on how to collect the money and how to spend it. The legislative and compliance consulting is equally important, as BCS has to make sure that its clients comply with all legislation regarding the upkeep of the property.

“The most common advice we give is letting the owners know the difference primarily between what a body corporate manager does, and what a facilities manager or property manager does, because oftentimes they seem to think its one and the same.”

A body corporate manager or strata manager like BCS is the one that manages the money, provides the legislative advice and the administrative and secretarial work. The facilities managers or building site managers are onsite everyday to manage the movement of people, contracts and contractors, preventative maintenance and long term maintenance.

“They show contractors – who we as the body corporate manager send over to maintain the building – they show those contractors around the building and give them access to maintain what needs to be maintained.”

In many cases, an owners corporation will not know the difference between these two managers, and not even know that they need a facilities manager to take care of these areas of upkeep, resulting in many not having one at all.

BCS is one of the Australias biggest strata companies
BCS is one of the Australia’s biggest strata companies

The Future of Strata

As the population continues to grow, moving rapidly into urban centres, the face of strata in Australia is set for great changes. “In the future, I think the government will start implementing licensing requirements,” Mr Jalloh says.

“Right now in Victoria there is no barrier to market entry, so anybody can open up shop, which means that anybody who wants to be a body corporate manager can be one, if they have a building or two, even if they don’t understand what it is they are supposed to do.”

This approach can lead to problems, as some body corporate managers will make mistakes through being unfamiliar with their responsibilities. This can often culminate in the wrong advice being given to owners corporations, which can impact negatively on the public, since they are getting different advice from different managers on the same issue.

“They are adding to the complexities or problems that are out there, making the client even more confused,” Mr Jalloh says, “because they are getting advice from the wrong person, or somebody who doesn’t qualify to give that advice.”

“I think what will happen down the road is the government will start requiring some sort of license requirements or some sort of tertiary qualifications for people to get into the industry as managers, and that would help.”

This is an issue that has been debated for some time, represented by a recent government panel being installed to review the act and provide advice. This advice has since been provided, but the government is still in the process of deciding what to do with it.

Recently there have been questions asked in Victoria as to whether owners should be prevented from using buildings for short term letting, utilising schemes such as Airbnb, an issue that has been something of a problem for strata buildings in recent years.

“If you own an apartment and you advertise with Airbnb, then you want to use your apartment technically like a hotel, guests will come in and, not often, but sometimes they cause damage to the common areas leaving unnecessary expenses for the community.”

A recent VCAT ruling stated that owners corporations have no jurisdiction in determining how lot owners use their lots, but some believe that legislation should not dictate how the owners utilise their own property, something Mr Jalloh admits represents a big challenge going forward.

This raises an issue about the role of body corporate owners, primarily as owners of the individual apartments, but also the level of their responsibility for the upkeep and maintenance of communal areas.

“You own your apartment,” Mr Jalloh explains, “but you don’t own the common areas, the access to the apartment you don’t own. So from the minute somebody walks in the front door, and using the lift and going to the hallways, until you get to your door to enter your apartment, you don’t own that bit, you share it with everybody else.”

These shared sections are the right of the body corporate to maintain, raising questions about their treatment by owners. Even if the body corporate agrees they do not want certain short term schemes entered into, the government doesn’t yet recognise this right of restriction.

Mr Jalloh admits that many of these industry issues are in the process of being rectified, and that in the not-too-distant future the industry is likely to see significant changes that will make the lives of lot owners, residents and strata management companies like BCS easier.

“This low barrier to entry, if it is addressed by the government, it will help to at least professionalise the industry. Because if licensing and certain education requirements are introduced, then professionals will get in. That would only be good for the industry.”

As it stands, especially in Victoria, there is still a certain amount of professional quality lacking due to the absence of such legislation. In New South Wales there are these rules put in place, and Mr Jalloh can see the benefit for BCS if Victoria were to follow suit.

“We’ve got an industry body, which is the SCA. That body is, if you will, the lobbying body with the government, so they are aware of this, and I’m sure whenever changes are made to the legislation these things will be talked about.”

In the meantime, BCS will continue to serve the body corporate owners of Victoria as best we can, delivering excellent advice and financial management to ensure that strata continues to be a steadily growing and improving industry.

Find out more about BCS Strata Management by visiting: www.bcssm.com.au

To read and download the full profile from BCS Strata Management profile, click on the cover image below. To read their editorial as it appeared in The Australian Business Executive magazine, click here.

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BCS Strata

Editorial written by Nicholas Paul Griffin.

Pristine Living Management: Understanding Strata

Pristine Living Management: Understanding Strata

Through providing “knowledge and experience you can trust” to property owners and developers since 2008, Sydney-based Strata Management firm Pristine Living has developed a reputation as a reliable local supplier of quality Strata Management services, setting it apart from its competitors.

As the company points out on its website, “Strata Management can sometimes be complicated and confusing,” and as a result of the contractual nature of the arrangement between the Strata Owners and the Strata Manager, the business requires longer-term business development strategies.

Pristine Living believes its unique selling point is its ability to deal with Strata clients in a clear and concise manner, regarding communication and attention to detail as the company’s main areas of focus.

Mr Washer is your one-stop shop for a reliable plumber or electrician in Sydney: 1300 039 226
Mr Washer is your one-stop shop for a reliable plumber or electrician in Sydney: 1300 039 226

Pristine by Name

Pristine Living’s Managing Director, Danielle Marchand, first became involved with the complicated business of Strata Management in the 1980s. She began by working for Robert Andrews Real Estate, where she was employed for eleven years.

Pristine Living Management's Managing Director, Danielle Marchand
Pristine Living Management’s Managing Director, Danielle Marchand

After taking a long service leave from the company, Ms. Marchand decided to move out of Strata Management, and returned in search of a new opportunity. At this point she turned to Property Management, and found herself beginning an affiliation with Australia’s largest residential apartment developer, Meriton.

“The job I landed was with a company that was doing project marketing exclusively for Meriton,” Ms. Marchand says, “for the first six months that their building came on the market.” Though never working with the company directly, Ms. Marchand established herself in the industry by renting out apartments built by Meriton.

In 1996, Ms. Marchand began working for a company called Grants Strata Management. After a successful period of almost a decade with the company, Ms. Marchand and her daughters—Guylaine Senat and Sandrine Markov—bought the company in 2005.

“We thought about how we would change the company, and give the company a much better image, an image that we would like. So effectively it took us about the best [part] of three years to get that together.”

For those years, the company continued to run under the name Grants Strata Management. In 2008 the company changed its name to Pristine Living Management, moved premises, and the current incarnation of the business truly began.

On the back of such an impressive career in the industry, Ms. Marchand was invited in 2011 to join the board of the Strata Community Australia (SCA) for New South Wales, the leading professional body for the Strata and Community Title sector. The resignation of a former board member meant that no election was necessary, and Ms. Marchand quickly took her seat, holding it for the next four years.

Accurate Locksmiths, proudly servicing Sydney for more than 10 years. Call us on 0418 375 100.
Accurate Locksmiths, proudly servicing Sydney for more than 10 years. Call us on 0418 375 100.

“It was a good learning curve with them,” Ms. Marchand explains. “I’m not with them anymore, because of a lack of time, with my schedule being very heavy at the moment. So I just resigned from my position last year.”

During her time with the SCA, Ms. Marchand worked closely with a group of Strata Managers as part of the Strata Management Chapter, which is now known as the Professionals Chapter.

At the time, the chapter was responsible for liaising with the government in order to see better industry laws passed and implemented. Within the next year or two, the new laws Ms. Marchand had a hand in writing should be coming into effect.

“We were very much at the forefront of discussions,” Ms. Marchand says, “and our group was working on better ways to manage and better ways to get our clients to understand what goes on in the industry… it was very interesting, in the sense that you were there at the discussion that would essentially at the end help those laws to be changed.”

Pristine by Nature

After purchasing and renaming the company, Ms. Marchand and her daughters set about redeveloping the business by targeting more boutique, up market properties around the city fringe, including the North Shore and Inner West suburbs.

After engaging in research on the properties already held by Grants, the new owners found that there was a large demographic divide between many of them. Consequently, it was established that some of the properties in certain areas were not the right fit for the high standards associated with the name Pristine Management.

Servicing the Sydney market for over 10 years, call us on 1300 88 36 35.
Servicing the Sydney market for over 10 years, call us on 1300 88 36 35.

The company began to move away from certain types of properties, intending to give the same quality of service to every building on the books. After engaging in a strategy to push the price up in these properties, to raise the level of its management service to be in line with other locations and improve the whole aspect of the building, the company saw several existing clients decide to move on.

“Then gradually, what we did was put our name out there and started to look at buildings very close to the Inner West, or within the Inner West, and decided to target those buildings rather than go into areas that we feel did not have the sort of buildings we wanted.”

On the flip side of that coin, a number of the company’s clients stayed with them as Pristine developed, some having been there since before 1996. For Ms. Marchand, the reason for this retention is simple, as the high level of service given to these buildings has stayed at the same exemplary standard from day one.

“We need to make sure that our philosophy is always on improving the value of [the client’s] property. In doing that we make sure that we have policies and procedures in place; sometimes we double check and triple check things to make sure that they are being done the way we want, and it does take more time.”

Pristine Living Management are award winners, including the Schindler Strata Industry Awards for Excellence in 2010. They are pictured here with Today show host Karl Stefanovic.
Pristine Living Management are award winners, including the Schindler Strata Industry Awards for Excellence in 2010. They are pictured here with Today show host Karl Stefanovic.

“We are happy to say that we are not one of the cheapest Strata Management companies, but if we can provide the service to go along with the dollars we are actually charging our clients, then there is no reason for them not to be satisfied. What they’re paying is what they’re getting.”

Another key element of the business model is the employment of high quality and trusted suppliers to undertake work on Pristine Living’s behalf. Company policy ensures that suppliers understand from the start that nothing less than their best work will be accepted.

“The moment we find that our suppliers are not abiding by what we tell them,” Ms. Marchand says, “then straight away they are spoken to. And if it persists, then we take them off our books… at the end of the day, when we get someone to go and do a job, they are the face of Pristine.”

Another example of this close working relationship is the company’s preference for working with a builder from the very beginning to the very end of a build, ensuring high quality standards are met throughout. Working this way is not always easy, and Ms. Marchand admits that the Strata Manager is almost the last person builders are likely to contact during the lifetime of a project.

“The reason I prefer to work with them at the very beginning is so I understand where they want to bring the building. Whether they intend to keep some of the lots for themselves, whether they intend to sell everything, whether they are interested to retain a portion with a view of optimizing their income on that particular property. There are things that we discuss with them; we discuss also the bylaws that they want to have in place, so that makes our job easier in the long run.”

In addition to this, arrangements will be made for the division of responsibility between owners and Management Company, especially in terms of the cost and payment of maintenance and safety issues. “If we can capture these things at the very beginning,” Ms. Marchand adds, “then when the plan gets registered, it goes in with all these bits and pieces attached to it.”

The leading body for the strata and community in NSW.
The leading body for the strata and community in NSW.

When, in 2010, the SCA introduced its first industry award, Pristine Living, despite having only 5 years of experience since buying the company, decided to put its name forward for the prize. Ms. Marchand admits it was a good exercise for the company, giving them a valuable opportunity to look within the organisation and assess its achievements since she took over in 2005.

“We could see that we actually gave away some management, but we also sustained the income because of the way we were pricing and were putting ourselves in the market. So that was one positive thing. We were able to ensure that all our staff were paid properly, and at the same time we were very much targeting education for our staff as well.”

The following year, Ms. Marchand’s daughters both went for the Strata Manager of the Year awards, with Guylaine Senat gaining a nomination to the Young Strata Manager of the Year and Sandrine Markov coming as runner up for Strata Manager of the Year. The company itself won at the Schindler Strata Industry Awards for Excellence in 2010, in the category Small Business of the Year.

Improvement in Education

Like many Strata Managers at the moment, Ms. Marchand is concerned by the fact that ordinary members of the public do not tend to have a good understanding of the Strata industry, and a lack of communication between owners and managers does not help the cause.

When working with the SCA, Ms. Marchand helped put together an easy-to-use website, encouraging clients to register in order to become aware of what it takes to become a member of the Executive Committee (the body which will serve as the voice of the Owners Corporation in overseeing the running of the Strata Scheme), and to learn about the implementing of Strata laws.

“This, for us, has been something very good in respect of our Executive Committee members getting education that they need. I still feel that, at the end of the day, those who are on the Executive Committee, they do understand, or they are getting there. However, there are those who do not, and who will never be interested to get onto the Executive Committee, except if they’ve got their own agenda. They will never learn.”

The education Strata owners receive is not enough to keep them well informed. Often, for new owners moving into a block of apartments, the only thing they will know from the first day is basic facts about the facilities.

Despite paying a huge amount of money for a property, the salesperson or property manager is often interested only in getting them to sign on the dotted line, and will provide no relevant information about what they can or cannot do. This results in people buying properties for up to $2 million, and often not realising they are actually only purchasing the air space.

In cases such as these, a company like Pristine Living is on hand to help the new owners. “You can start imagining how many jaws drop when we tell that to these people… the education should start with a package that can be given by the solicitor doing the conveyancing at the very least, explaining the pitfalls. However, no-one is prepared to do this, and I can’t see that anybody will.”

Ms. Marchand believes further issues are affecting the Strata industry at present, including the lack of parking in urban areas. “The parking has always been an issue,” she says, “and will always continue to be an issue.”

In response to the parking shortage, people are now offering spaces in and around the CBD for rent, but Ms. Marchand is certain this will create more problems for the people residing in those buildings. And the problems do not stop there.

Another huge stumbling block is the level of training for new Strata Managers, which Ms. Marchand believes is often woefully inadequate, with some new managers only receiving a fortnight’s training to gain a $50k earning. “How do you give a property that is worth millions of dollars to someone that has only got a background of two weeks in the industry… they don’t have the knowledge.”

This has a knock-on effect for small businesses like Pristine Living, which struggles to find staff due to high wage demands, a response to unrealistic contract offers from larger competitors.

“Even if I do pay the dollars they’re asking,” Ms. Marchand says, “after three months you start seeing the cracks, and then the turnover of staff is terrible… these people are there with a certification, and even sometimes have a three year license, and some of them don’t know much about [the business].”

Despite these issues, Pristine Living Management continues to offer the highest quality management service, valuing its integrity and reputation for professionalism in dealing with all facets of Strata Management. With new laws being developed, the team at Pristine is very optimistic about the future of the Strata industry in Sydney.

Find out more about Pristine Living Management by visiting www.pristineliving.com.au

To read and download the full Pristine Living Management profile click on the cover image below. To read this editorial as it appeared in The Australian Business Executive magazine click here.

Prestine Living Management

Editorial written by Nicholas Paul Griffin.

Building a State: Strata Leaders Laying The Groundwork For Victoria’s Vertical Future

Building a State: Strata Leaders Laying The Groundwork For Victoria’s Vertical Future

A new year has a way of providing us all with a focus on the future, and perhaps no other group in Australia is looking forward more than those within the booming $1.2 trillion strata sector.

Apartments, units and townhouses are being built at almost twice the rate of houses around the country, and with no sign of this trend slowing down; all eyes are on the rising skylines of our biggest cities.

Strata has found a heartland in Victoria, and The Australian Business Executive sat down with the leader of the state sector, to speak about the work that’s gone into the recent progress, and what lies ahead in 2016 and beyond.

“It’s pretty clear that Australians now want to live in or buy into strata title property, and as a result our sector in Victoria has experienced a phenomenal rate of growth that’s likely to continue for many more decades,” Strata Community Australia (Vic) President Julie McLean said today.

Strata Community Australia (VIC Division) President Julie McLean
Strata Community Australia (VIC Division) President Julie McLean

“All of a sudden, it seems the suburban backyard dream has reached its expiry date in the minds of Australian home buyers, and that’s caused our sector to grow at an astonishing rate.”

“10 years ago, the Victorian strata sector was valued at $50 billion in building replacement costs, now we sit at $300 billion, and with on ongoing development boom in tow, we anticipate that this number will double again by 2020.”

In spite of this however, Ms McLean says growing pains have never been far away from the staggering financial milestones and that’s where much of the focus must go if Victoria can possibly hope to sustain a sector housing in excess of 1.5 million residents.

“I’ve been involved with the strata sector for 13 years, and there’s never been a more important time for us to take stock, and take a deep breath before starting again.”

“26% of the Australian population now has a stake in the strata sector, so the platform that we lay for the future has to support more people than ever.”

Ms McLean’s Strata Community Australia (SCA) is the peak organisation driving this goal of industry betterment, and its work touches every corner of the country.

“Just like our office here in Victoria, there are chapters in every state and territory around the country, tasked with bringing professional progress and performance into this developing property marketplace.”

“Our principles are the same, but we each face different challenges as our respective sectors, industry professionals and stakeholder base grow, and it’s that constant learning curve that’s allowed us to develop a radar screen for developing issues.”

As each state undertakes strata law reform it is hoped that the state bodies look towards harmonising strata laws and terms across Australia. To help lot owners, managers and other industry stakeholders better understand their responsibilities when working and living in strata, SCA National has developed an introduction course called ‘A100’, as well as a ‘new committee’ pack designed to guide committees in their roles and responsibilities.

Specifically relating to Victoria, Ms McLean says there are a number of issues that will require urgent attention as business kicks off in 2016.

“The issues facing each of SCA’s regions are so diverse, and that’s no different for us here in Victoria.”

“One of the most publicised issues recently has been the spread of unsafe construction materials, including a flammable cladding product responsible for a multi-storey building inferno that lit up the Melbourne skyline.”

“The Lacrosse Apartments fire, that continues to make headlines for its multi-million dollar rectification bill, was caused by the existence of an aluminium cladding product that failed to meet Australian construction standards.”

“Experts have warned that based on a cost over quality attitude in local construction, there’s every possibility that there are tens, hundreds, even thousands of properties fitted with this dangerous product and that gives us great cause for concern.”

“The problem is how late we’re finding out about these unsafe, often imported products and we’re hopeful that a Senate inquiry into the matter provides some solid measures to limit their use and stop them from getting past the border.”

Ms McLean says issues like building defects are those that typically illicit a reactive response from authorities, and SCA (Vic) is adamant this ethos must not be applied to another issue affecting Victorians.

Renewal of the built form is the second emerging issue for the strata sector. Of the 88,475 Owners Corporations in Victoria it is estimated that 35% of all Owners Corporations will need to be refurbished or redeveloped between now and 2035.

Strata leaders are laying the groundwork for Victoria’s vertical future including at the Aquilo Estate
Strata leaders are laying the groundwork for Victoria’s vertical future including at the Aquilo Estate

Walk-up residential buildings, typically built between the 1950s – 1970s, form a significant proportion of the residential buildings in Greater Melbourne. Many of these buildings were built at minimal cost during a period that had few planning controls and limited regard for aesthetics or internal amenity. These buildings have a 30 – 60 year life span due to poor design and maintenance.

Ms McLean says that many of these buildings are in crisis with underground sewers collapsing, long concrete driveways needing replacement, sagging roofs and beams, rusted window lintels resulting in large external and internal cracks.

“Throw in a bit of concrete cancer and we have all the ingredients for a building facing a large special levy to repair the problems or to take the opportunity to demolish and start again.”

Currently the termination of an Owners Corporation for any reason requires 100% of all lot owners (and their banks) to agree. Termination of Owners Corporations need to balance protecting a person’s home versus the economic and sustainable imperative of redevelopment.

SCA (Vic) supports lowering the threshold based on sliding scale. For buildings older than 25 years the threshold for termination should be 75%. For buildings between 10 & 25 years, the threshold should be 80% and for buildings less than 10 years old the threshold should remain at 100%.

Linked to both these emerging issues is the current threshold for Maintenance Plans and funding, and the difficulties in recovering costs from defaulting lot owners. Currently the threshold for an Owners Corporation to obtain a Maintenance plan is 100 lots or an annual turn over $200,000.

“Of our 88475, 1% represent properties greater than 100 lots. This means that the vast majority of properties do not have a maintenance plan or any funding in place to properly maintain, replace or upgrade their building over its life span.”

SCA (Vic) suggest that it should be mandatory for all properties to have a maintenance plan and that a more palatable approach to achieve this goal would be to phase in the requirement over a 5-year period similar to what NSW has introduced. It would require properties with lots 80-100 to obtain a plan in the first year, properties with lots 60-80 to adopt a plan in the second year, lots 40-60 in the third year and 13-40 lots by the fourth year.

“This is just another example of the diverse range of issues that we have to rapidly respond to for the benefit of our many stakeholders.”

Along with these fast developing issues like unsafe construction products, and renewal for strata properties, “the biggest challenge”, says Ms McLean, “will be getting State legislation to evolve and meet the demands of 21st century living.”

“Although our legislation governing our sector is relatively new (2006), it has failed to keep up with the rate at which we’ve grown as a sector, and as a result the government has called for a review of strata laws in 2016.

“Issues like building defects, scheme termination and strata manager licensing are just a handful of those which we hope to see some real progress on over the next couple of years.”

“This progress is something we’ve been chief consultant to the State Government on, since engaging in meetings with them since August, and at this point it’s looking like we’ll see sweeping changes brought in by 2017.”

“New South Wales last year welcomed a strata reform package that’s set to completely modernise the laws governing their some 2 million stakeholders, and we want the same opportunity for Victoria, sooner rather than later.”

About Strata Community Australia (VIC)

Strata Community Australia (Vic) is the peak industry body for Strata and Community Title Management in Victoria. Supporting more than 80% of all owners corporation management firms, it is the only organisation solely focused upon representing this increasingly significant industry, and reaches and represents more than 530 owners corporation professionals who manage approximately 375,000 lots. 

Find out more by visiting: www.vic.stratacommunity.org.au

To view this editorial as it appeared originally in The Australian Business Executive magazine, click here.

Network Pacific Strata Management: Franchising Success

Network Pacific Strata Management: Franchising Success

Market-leading Strata Management Company Network Pacific Strata Management began trading in 1994, starting out as a home operation. The group now operates as a successful and vibrant business, boasting multiple offices and managing strata properties across Australia.

John Botha is the Managing Director of JFB Management Services Pty Ltd, which commenced trading as the founding Franchisee of Network Pacific Strata Management in January 2015.

As a previous employee of Network Pacific, Mr Botha began running his own business after being given the unique opportunity to purchase his Network Pacific portfolio and set it up as a franchise of the group.

John Botha

Mr Botha has been with the Network Pacific group of companies since moving to Melbourne in February 2008, when he took on the role of Owners Corporation Manager. Seven years later, he was given the opportunity to purchase his portfolio and set up a franchise.

Managing Director of Network Pacific Strata Management Group, John Botha
Managing Director of Network Pacific Strata Management Group, John Botha

“I own a franchise of Network Pacific Strata Management,” he says, “and I work closely with the franchisor, who was my prior employer. So I’ve gone from employee to franchisee within Network Pacific Strata Management.”

Mr Botha emigrated from Namibia, in Southern Africa to New Zealand at age 15, where he later completed a Bachelor of Commerce degree at the University of Canterbury, majoring in advanced corporate finance and investment analysis in 2005.

After graduating, Mr Botha was employed in a Residential Property Management role with a company called Braziers in Christchurch, which he did for two years before looking to further his career in the property industry.

The next step was a move away from Residential Property Management and onto Owners Corporation Management. To do this, Mr Botha decided to move to Melbourne and look for work, where within a week he was employed as an Owners Corporation Manager at Network Pacific.

“I’ve been managing Owners Corporations since February 2008,” Mr Botha tells us. “Within a couple of years I moved up within the Network Pacific organisation, taking on the Senior Owners Corporation Manager’s role.”

Stepping up into a team leader role, Mr Botha was now heading up the Owners Corporation department, working as an intermediary between the MD and CFO and the Managers who take care of the day-to-day client management services.

Two years later, negotiations were underway for Mr Botha to purchase his portfolio and begin the franchise chain, the details of which were finalised in December of 2014, with the franchise officially commencing business in January 2015.

Network Pacific Strata Management

“Within my franchise portfolio, I manage 20 Owners Corporations,” Mr Botha says, “thus 20 different legal entities, and they comprise about 1,600 lots under management, including residential apartments and mixed use commercial space.”

The wider group of companies is about ten times the size of Mr Botha’s franchise, meaning he essentially bought 10% of the group’s business. When asked about the success of Network Pacific, Mr Botha is full of praise for his franchisor.

“We are essentially, a specialist Owners Corporation Management Company, we’re not born out of some of the traditional models where you’d have a Real Estate Sales and Property Management Company who suddenly decides to start managing Owners Corporations as well.” Network Pacific’s core business is Owners Corporation Management.

A particular focus on customer service is key to Network Pacific’s success, ensuring a high level of staff availability and endeavouring to make any client interaction as pleasant and seamless as possible.

Network Pacific are problem solvers for any issue that may arise for its clients. “When someone takes the time to ring you,” Mr Botha stresses, “obviously they’ve got an issue they’d like addressed, and they’d like it addressed as soon as possible.”

In addition, the company has always maintained a very high staff to property ratio, exceeding the industry standard of a single full time staff member to every 1,000 lots under management.
“We operate a lot closer to 750 lots per full time employee,” Mr Botha says, “so when you look at it, we’re essentially 33% overstaffed, but we actually take pride in that, being able to deliver valued service to the clients by not having any staff member over-burdened, and there is always someone available to assist our clients.”

The company prides itself on a team management approach to Owners Corporation management, ensuring there are always two people working on any portfolio, allowing for holidays, sickness and other commitments to be covered by a member of staff familiar with the portfolio, which ensures constant management.

As a feature of its business, Network Pacific has also set up many sister companies that provide essential services to address clients’ most significant issues, ranging from fire and electrical services to other innovations such as the car park lock.

“This is a common complaint within Owners Corporations, when somebody parks illegally in somebody else’s car parking space. The only legal way to deal with that is to deter people from parking in your spot, so we came up with the car park lock.” In addition, Network Pacific also offers a share car product, a tailor-made service for some of the larger properties that may want to establish a share vehicle within the building exclusively for the use of residents.

Network Pacific endeavours to offer a range of services outside of its core responsibilities to owners, making the lives of their building residents easier by adding value and benefits to the management of the property.

Founding Franchise

Mr Botha’s team has a strong and proven track record in successfully administering a portfolio of Owners Corporations, ranging from 5 lots to in excess of 250 lots per Owners Corporation, averaging in excess of 100 lots per plan under management since 2008.

The team’s diverse experience and exposure ensures it is able to successfully attend to all Owners Corporation Management needs for various properties of any size and description, including residential, commercial, high-rise, mixed use and many more.

“Since purchasing my portfolio” Mr Botha says, “and setting it up under the Network Pacific banner, I have been leasing office space within their head office”. This allows the franchise to share many back-end resources with the company, such as reception, data entry and administration staff. Within the next 12-24 months, depending on growth, the plan is for Mr Botha to set up his own office in an alternate location.

“Setting up the first franchise, provided an opportunity to retain myself within the Network Pacific group,” he tells us, “whilst also catering for the organisation to continue to expand and grow through the franchising structure. At this stage, JFB Management Services Pty Ltd is the only franchisee of the Network Pacific group.” However, in time, Network Pacific will look to further expand the business by introducing additional franchisees to the program.

“Network Pacific as a group purchased an 1,100m2 office building in Burwood East, in January this year, which is the company’s new Head Office where all the Victorian operation of the Network Pacific group of companies is based.” The company also has branch offices in Bundoora Victoria and Brisbane Queensland. Furthermore, Network Pacific also has an international office in Malta which is where most of the administrative and back of house functions are carried out.

The international office offers an excellent opportunity for streamlining the business, as it takes care of any process type work that comes in during the day i.e. accounts payable, Owners Corporation certificate preparation, financial support etc, which is turned over at the Malta office for the following Australian workday. “We’ve seen a good opportunity in efficiencies there, by moving that operation offshore, which is working extremely well thus far.”

Having the offshore office allows Network Pacific to dedicate more resources to the back-of-house operations on a similar cost base, which allows our Owners Corporation management team in Australia more time to focus on the relationship management aspect of the business.

Strata Management

“Network Pacific Strata Management deals with anything and everything related to the day-to-day operations concerning Owners Corporations, which includes everything from the financial management and administration of that entity; through to the day-to-day operations of organising repairs and maintenance for anything related to common property.”

A typical Strata Management service includes the management of all facilities, the tendering of all relevant service contracts and the overall financial modelling and forecasting for the Owners Corporation. “That is approved by the owners at the AGM, in terms of setting the operating budget for the year. Then, based on that budget, we issue Owners Corporation fee notices to all of the owners on lot liability basis, and we also deal with the collection of those fees.”

Funds are collected and deposited into independent trust accounts held in the name of each Owners Corporation, as they are their own independent legal entity. The company then administers those trust accounts on behalf of the Owners Corporation. These funds are used to cover any maintenance or upkeep issues that arise within the communal areas of the building i.e. common area cleaning, maintenance, building insurance, electricity usage etc.

“At the AGM you would have a committee elected, which is a group of owners and/or their proxy representatives, who we would liaise with on a very regular basis concerning any items pertaining to their building/Owners Corporation.” The committee makes the majority of the decisions on behalf of the Owners Corporation members, and we would meet with them on a quarterly basis to present any quotations of service contracts and act on the committee’s instructions to carry out any works.

There are several key issues that affect the running of an Owners Corporation, highlighting the benefit of hiring a professional Strata Management company to oversee the needs of the Owners Corporation and act as arbitrator for its needs. “Simply put,” Mr Botha says, “if you can get 100 people to educate themselves on the legislation and then agree on anything, if that was possible, then you wouldn’t have the need for professional Owners Corporation Management.” The reality is that it is impossible to get perfect agreement between owners, meaning it is vital for services like those provided by Network Pacific to be available for the committee to take advantage of. “It is becoming a more complex and litigious landscape that we operate in,” Mr Botha adds, “and the demands on Owners Corporations are such that you really do need a specialist in the field to look after it for you.”

“We obviously deal with the dispute resolution side of it as well, which is becoming more and more prevalent in society across the board. But where you’ve got ‘X’ hundred people living in one building space, for them to live together harmoniously you need a level of governance in place so that you don’t have anarchy.”

Era Apartment 2
Era Apartment 2

Building Defects

A large challenge in the industry at the moment is the growing number of buildings across the country reaching in excess of 50 or 60 years of age , putting more pressure on those Owners Corporation members to plan and act on continuing building maintenance issues.

“For anyone looking to purchase a property,” Mr Botha tells us, “there are already provisions in place under the Section 32 documentation, of sale of land, particularly for multi-dwelling sites where there is an Owners Corporation Certificate included, which actually contains a lot of very useful information.”
Prospective buyers are therefore given an idea of how well run an Owners Corporation is before they buy, as well as the financial details and level of fees for the lot. Naturally, the older the building, the more repairs and maintenance are generally needed, as well as the day to-day operational costs, which also increase with the age of the building.

“The industry is very slowly moving in the right direction in taking away some of the historical barriers when it comes to dissolving a plan and knocking the whole thing down and rebuilding it, which previously required a 100% unanimous resolution.” Steps have been taken in New South Wales to ensure this kind of action only needs a special resolution, 75% of owners’ approval, to go ahead. Mr Botha believes Victoria will follow suit in the near future. “Particularly given the ageing buildings that there are out there, this is a positive step in the right direction. Ultimately, it’s not just the financial burden; it’s also looking at the safety of the residents and the occupants within those buildings.” The reality is all buildings have a finite lifespan and the “cost of repairs and maintenance of infrastructure is outweighed almost against the cost of dissolving the plan, and rebuilding it again. I think there are positive steps being taken by the industry in that regard.”

Credit should also be given to the legislators for setting the wheels in motion to drive this change. Mr Botha refers to the model used in Singapore, where it is more commonplace for an entire building to be knocked down and rebuilt. “Provided that’s handled appropriately,” Mr Botha adds, “which I think will come in time, as Australia becomes more and more experienced with it, as to how to relocate all the residents from one building to another building, in freeing up that space.” The industry would need to work closely with property developers in order to facilitate this change, though Mr Botha doesn’t believe this will prove to be a significant issue.

“If you have a site that has 20 or 30 apartments in it now, you could negotiate with a developer that those 20 or 30 unit owners would own a property within the new development on the site where their property was.” One of the benefits of this action is that there is the opportunity for developers to expand and add units to the new development, meaning more housing stock is made available as well as lessening the on-going costs per unit.

“Then, rather than having a derelict property that they’re living in,” Mr Botha adds, “they’ve got a nice, modern, safe/compliant, high quality, new property.”

One solution to the practical problem posed is for developers to acquire a parcel of land very close to the existing property, with the aim of completing work on a new property and rehousing residents before the old building is taken down.

Owners Corporations

There is plenty of information available out there for people looking to get involved in an Owners Corporation, but Mr Botha believes it takes more than just a large amount of money to run a successful Owners Corporation. “Having a large pool of funds is important on the one hand,” he admits, “but secondly you’ve got to look at whether the assets within the property are being maintained.”

Some committees are very stringent on spending money, but equally very good at building up the pool of reserves, meaning when they really do need to use money they don’t have to call on additional capital levies as the funds are already available. “It’s a balancing act between having enough reserves in place for the long term capital maintenance required, but at the same time spending some of that along the way to preserve the capital value of the existing assets in place.”

Keeping a close eye on the overall financial position of the Owners Corporation is therefore very important, as well as carrying out inspections on the property to assess the level of maintenance against capital reserves.

Prospective purchasers will also have access to the previous year’s Annual General Meeting minutes, which can provide valuable insight into how well the Owners Corporation is currently being run. “If not,” Mr Botha adds, “any prospective purchaser can also contact the Owners Corporation manager and request to inspect and view the Owners Corporation register, which will include copies of all minutes of meetings, including committee meetings.”

“You can gain a pretty good insight as to whether there’s a functional committee in place. Occasionally, for whatever reason, committees do become dysfunctional. The saddest thing to see is when an Owners Corporation, and particularly its committee, loses perspective on their overriding obligations.” The job of the strata manager is to guide the committee and keep them focused, so they can continue to protect the interests of the Owners Corporation at large and act in good faith.

“We can’t give legal advice,” he says, “but generally provide guidance to a committee and refer them to the relevant experts eg. Legal, engineering, etc who can advise them on what matters to consider in any dealings that they do have, so as to ultimately obtain a commercial outcome that’s in the best interests of all owners and the Owners Corporation.”

Mr Botha uses the example of an Owners Corporation faced with a $100,000 building defect, which may be better served raising a levy of $2,000 from each owner and fixing the defect rather than going through the lengthy and expensive process of legal action. “To run any decent sized defect litigation matter through to the end,” Mr Botha says, “you are going to spend a significant sum of money in legal and expert witness costs in doing that, and I mean six figures plus. Not all of the costs are recoverable even in the event of a favourable outcome which in itself is never a certainty”

“The constant challenge for us is up-skilling,” Mr Botha concludes. “As a professional manager you’re expected to know a little bit about everything, you’re expected to be a lawyer, a building consultant, but most importantly you’re expected to be a mediator and a peace-keeper.”

Keeping up with the changes in various legislation affecting Owners Corporations and knowing how to apply them in each individual scenario is an on-going challenge, especially with the industry evolving into a more professional one. “We strive for the upmost level of professionalism and excellence in everything that we do in servicing our clients, rather than a model where you just maximise the number of properties you’ve got under management.”

Counting the number of cranes dotting the Victorian skyline, as well as the number of properties in various stages of planning and construction, Mr Botha can see significant growth in the industry in increasing the volume of stock that will require professional management.

“The challenge for the industry is going to be having enough new people enter the industry who have the right skill sets to be able to competently and professionally administer those additional Owners Corporations/properties that come online.”

o read and download the full profile click on the cover image below. To view this editorial as it appeared originally in The Australian Business Executive magazine, click here.

Written by Nicholas Paul Griffin

MGA Whittles Group: Forty Years On and Stronger Than Ever

MGA Whittles Group: Forty Years On and Stronger Than Ever

With its three—armed approach to the insurance and Strata businesses, the MGA Whittles Group has been providing quality services to the people of South Australia and beyond for over forty years. The Australian Business Executive recently secured an exclusive interview with John George, the group’s Executive Chairman to discuss the success of MGA Insurance Brokers and Whittles Body Corporate in greater detail.

MGA Insurance
The original arm of the business was established in October 1975, placing MGA in its 40th year of existence. The company began after Mr. George left his job at South British United Insurance Company and established his own business, initially known as .I.R. George Insurance Services, which was the origin of MGA.

During this period there were only a handful of international brokers practicing. At that time, insurers began to recognise the benefits of distributing their products and capacity through brokers rather than the traditional method of employing sales staff.

There was no legislation covering the industry at that time, and it remained that way until the introduction of the Insurance Agents and Brokers Act in 1984, followed almost two decades later by the Financial Services Reform Act

“It is very much now a controlled industry,” Mr. George says. “A major percentage of wholesale products, being those commercial products, are delivered through the medium of insurance brokers.”

Insurance brokers offer the client a wide range of services, and MGA acts as the agent for the client rather than the insurer. Not all insurance companies can be all things to all clients, so many of MGA’s accounts have risks spread across a variety of underwriters.

We work for our clients,” Mr. George says, “and we will search the market, that we know extremely well, to come up with the best cover, the most competitive rate for our clients… It extends the reach of the general client, it gives that client access to the entire insurance market.”

It is not the broker that pays out on claims; this is the responsibility of the cover holder or underwriter. The broker’s responsibility is to make sure the client receives the correct amount and has secured the best deal on a particular claim.

“It’s been my experience that most clients need that security of somebody that they’re dealing with that which maybe has nothing to do with insurance broking, but they can trust. They are in their own businesses, do require insurance, which is a very important part of their business.”

“They are looking to have that responsibility handled by somebody that really knows what they’re doing and can protect their business for them. They pay a fee for that service and it’s up to us as brokers to charge the correct fee, which will pay all of our costs and give us a bottom line.”

At the end of the day the broker is judged not only on its premiums and fee, but the level of service that is provided for the client. It is often the ease of ‘you get what you pay for”, and Mr. George believes prudent clients understand this.

“MGA has always specialized in general insurance products. That’s basically everything but life insurance, superannuation and investment advice. We’re purely involved in property insurance, liability insurance and general insurance products.”

But there are particular areas of expertise For MGA. One niche market is in the rural sector, which covers about I % of the company‘s total premiums, where the company has developed a Farm Pack style insurance policy, the broadest in the marketplace.

Another specialist policy is in Strata Title buildings, of which the company has about 5,000 insured throughout the country. MGA also handles a lot of individual commercial clients, which range in premiums from 82k per year to $500k per year.

“In terms of retail products—that is retail, house and car: the mums and dads-that still forms an important part of our business and will probably make up about 20% of our total book of business.”

Via its underwriting agency arrangements, the group is also cover holder for the insurance market Lloyd’s of London, where it is represented by an agent, meaning it often places business into the London market. Lloyds is the underwriter for MGA’s Landlord Property Protection product, as well as some of its Strata Title insurance.

“The majority of our business will be done via the Australian insurance marketplace, but there’s also a reasonable percentage in place on the Lloyds market,” Mr. George says.

In 2012, MGA was selected ahead of 130 other brokerages by leading industry publication Insurance Business as Australia‘s number one insurance broker. This is an accolade Mr. George attributes to the decision, as the business started to grow, for the company to embrace a different model to lift it above its competitors, the result being a groundbreaking innovation in the industry.

“I‘m a great believer in the power of the individual,” Mr. George says, “and the individuals are out there [as our] representatives, in our branches, in our offices, out on the road. I realised that we needed to do something to harness their power…to bring them closer into the business, rather than working with us as employees.”

MGA Whittles Group Executive Chairman John George.
MGA Whittles Group Executive Chairman John George.

In response to this realisation the company designed the Portfolio Management System, offering some of its long time brokers the chance to own management rights over the portfolios they were managing.

The selected brokers Portfolio established their Management companies and employed their own broker assistants. The company then shared income on the portfolios they were managing.

“They actually became professional contractors,” Mr. George says. “Although in the strictest sense they are not franchisees, there are some elements of franchising. Much of the stresses of having a large staff, and large HR departments to manage those staff, have reduced significantly.”

“But importantly, it gave the individuals the opportunity to grow a business. It gave individuals the opportunity to build an asset, because those management rights that we granted them over those portfolios were an asset in their own right and are saleable. And in fact quite a few of them have been sold and changed hands.”

This provided MGA with a far more efficient way of serving its clients, providing its representatives with an opportunity to be in a partnership with the company whilst also running their own businesses.

“I think that was a turning point in our business,” Mr. George adds, individuals involved went up by anything from 50-150%. It was “when we produced that, we found productivity of the quite spectacular. That was the philosophy we adopted, and that’s allowed us to expand as we have over the past 40 years.”

The insurance market is constantly changing, and having seen plenty of takeovers in recent years, the marketplace is now much smaller than it used to be in terms of underwriters.

“Where we had dozens of underwriters in the marketplace twenty years ago,” Mr. George says, “now there are only a handful of majors in Australia, so the marketplace has changed.”

MGA has remained flexible, recognising these changes and working to benefit the client. In such a tightly controlled industry, companies need to have strict protocols in place to ensure compliance with government regulations, which is a costly endeavour

“The day of the small operator, I think, is coming to an end, because they’ve been costed out of the marketplace. That said there are some excellent small operators out there who are in niche areas, [and] we’re more than happy to embrace those people.”

In light of low interest rates, and the capital market as it is globally, there is plenty of money looking for a home and a return. Reinsurance has become an investment place for capital markets, as excess money looks for a home that gives the possibility of a reasonable return.

“I think we’ll see more and more competition coming into the market,” Mr. George says. “I think we’ll see more and more innovations as far as IT is concerned, which is certainly an area that we’ve focused on within our organisation

“Our systems, I believe, now are amongst the best available, some of them are fundamental industry systems, but on top of that we’ve built some excellent add-ons.”

In order to maintain its strength, MGA Insurance has taken measures to keep costs down, maximising not only the services it offers its clients, but also the return that can be expected for shareholders.

Whittles Strata Management

In 1983, MGA Insurance won an account through its chartered accounts. The new acquisition owned a Strata company called J.S.Whittle & Co, which was managing 270 buildings. When the company went up for sale two years later, MGA decided to buy it.

“That business has sat beside our insurance broking business now since that time,” Mr. George says, “and there are a lot of synergies in the business. Although the offering is quite different, culturally there are quite a few synergies.”

Whilst Whittles operates primarily in the Northern Territory, Queensland and Victoria, the entire MGA Whittles business in most instances will work out of the same offices, as they share a central computer and admin system.

Whittles is a portfolio-based business, meaning one of the Strata managers will handle up to 150 buildings. The manager will be required to arrange the Annual General Meeting and the secretarial and maintenance needs of the body corporate, as well as insurance claims.

“Once a year, at the Strata’s Annual General Meeting, Whittles’ appointment is laid on the table and if the people are satisfied with the deal that they’re getting and the job that our body corporate manager is doing, they’ll be appointed for a further term.”

This arrangement is based on the timescales of the insurance industry, where a broker will look after a policy for 12 months before a review is done. In that sense alone it’s an ongoing, portfolio-based relationship, creating a synergy between the two arms of the business.

Likewise, the Portfolio Management System that was introduced by MGA was replicated in the Whittles arm ofthe company. “We’ve had the same excellent results with that as we have for the insurance,” Mr. George says.

As the population of Australia grows, so does the popularity of Strata, which represents a far more efficient habitation option for some people, particularly working couples living close to a city.

Strata Title homes offer many and varied options for buyers. Some community corporations can produce up to five—bedroom homes, all contained within a corporation setting offering centralized resources.

“People are busy these days,” Mr. George says, “usually with two people working in the family, and they like to close the door and walk out and know that all of the maintenance and everything is taken care of for them.”

Mr. George expects to see further growth in this area, as has been evident in the European market where there is often a tremendous amount of high-density living close to major cities, mostly a consequence of a dearth of living space.

“I think we’re seeing it here not so much because there isn’t enough space, but because it’s much more efficient and affordable. I believe that will continue.”

Older style buildings in the industry remain something of a challenge, especially those intended to have a maximum 40 or so years of life. Over the coming years many of these buildings will be need to be replaced due to escalating maintenance costs.

“Ageing infrastructure, and fairly poor construction on some of the older buildings which were put up hurriedly back in the ‘60s, in the boom years, I think it is an issue for body corporate managers and owners, as the cost of maintaining these properties grows and grows.”

Dealing with these properties has also become a challenge for legislators, although a small amount of them have now been demolished, with new ones put up in their place. This particularly has an impact on Strata groups, which are likely to have many people as co—owners of these properties.

The Group

In terms of our relationships… there has to be a fundamental confidence between all the parties for this to work effectively and efficiently. We’ve enjoyed a great relationship with most of the major underwriters in Australia, and also the Lloyds market, that’s been very much important to us in growing our business.”

The relationship between the three major parties–the client, the broker and the underwriter—is the most important in terms of running a successful business. As broker, MGA needs to be on good terms with the underwriter, in most cases at a very high level, so that if issues do arise it has access to the businesses to resolve them.

MGA Whittles operates with a proud South Australian heritage, and has embraced the area as ideal for the location of its head office. Mr. George tells us how easy a place Adelaide is to get around, and that there is always great staff available.

“There was a temptation at one stage for us to move our head office to Sydney, but I’m delighted that we didn’t do that. I feel now that we’ve made the right decision. We’re very, very happy with the place… We’re not going anywhere.”

“Nationally, we do have around about 460 personnel and of those, around about 250 of them are domiciled in South Australia. So we’re providing jobs for 250 South Australians.”

The group’s impressive growth has seen it make a move recently into South East Asia, with MGA opening up an office in Phnom Penh within the last 12 months. “We’re now at the stage where our business is growing; we believe the group, about 60% of our national receipts are coming from outside of South Australia That part of our business is growing at the most rapid pace.”

The third arm of the business is the Millennium Underwriting agency, which began as a project to develop products. It has since developed its (JVW1 Farm Pack product, Strata Title Management product and a Property Protection product.

“[Millennium] very much is a part of our group, [and] develops specialized products. In terms of business placed, there will be more business placed through Millennium than any single underwriter, so it’s very important to us to be able to offer specialist products to our clients.”

Secret of Success

Despite its many years of existence, and the changing nature of the group, Mr. George is proud to say that MGA Whittles still has the satire culture to it now as it did all the way back at its beginning.

“Whilst employing Public Company Governance, we’re still very much a family organisation, and we have been successful, even through our strong geographical growth, of maintaining that family feeling of all of our people, and that is very evident at the national conferences that we hold.”
In fact, Mr. George insists that any member of staff, no matter their position, can walk into the Managing Director’s Office or the Chairman’s office at any time for a discussion. Not to mention the fact that each of the three divisions are run by one of the sons of the founding members of the company.

“Without that, probably we would be looking at becoming more corporate,” Mr. George says, “I think we would have to, really. But our sons share our vision and so we can see no reason why the business shouldn’t be able to continue on the same growth phase that it has over the last 40 years.”

The company has endeavored to maintain a growth of 75—10% each year, something it has been able to achieve through most of its life. As the company has grown, that 10% has represented larger profits, helping the company maintain its success.

MGA Whittles has also consistently looked for acquisitions to further strengthen the group. “These people have to be a good fit for us,” Mr. George stresses, “because you’re not buying j ust a book of business so to speak, you’re usually buying the people who are in that business.”

“[There’s] not a year goes past when we haven’t had something to do with an acquisition activity, and we’re finding now with demographics being as they are, that people within their businesses… that may be looking at retirement, they have no succession plan in place.”

“We offer an ideal track for them to be able to eventually exit their businesses, and also for us to purchase it, and we pay quite generous prices to those people. That’s a major part of our success strategy”

The Strata and General Insurance industries are not that large in Australia, so the group tends to know the companies that are around, and keeps an eye out for those which maybe a good fit for acquisition.

“It costs nothing to talk to people,” Mr. George says, “you’ve got to keep your ear to the ground. When an opportunity comes, of course you’ve got to do your due diligence, but at that time you’ve got to be ready to go.”

“We’re finding we’re being approached these days; we’re becoming a broker and Strata Management Company of choice for people to be associated with.”

Some companies will be keen to get under the umbrella of a big organisation, and some will want to sell. Mr. George’s advice to companies looking to be involved with MGA Whittles is to keep communication lines open within the industry and keep an eye on what’s going on.

Order of Australia

The success of the MGA Whittles group has allowed Mr. George to make a difference in the lives of others, as well as earning him the highest recognition in his field.

In 2000 he was introduced to Geraldine Cox, the President of the Australia Cambodia Foundation (ACF), who was experiencing difficulties handling the organisation’s back office. As a result of this meeting, MGA became involved with the organisation.

“I served as treasurer Security and then Chairman of the Australia Cambodia Foundation for a total period of about fourteen years. I’m no longer the Chairman of that association, but I‘m a trustee of it still.”

As a result of his ongoing work in Cambodia, particularly that of providing education for orphaned and impoverished children, Mr. George was awarded the honour of CAM (Medal of the Order of Australia) in 2013.

Mr. George worked primarily with Sunrise Children’s Villages and a charity called AllKids, focusing on the education of impoverished children. There are huge numbers of children in Cambodia who will never have the chance to go to school, with many reaching their teenage years still unable to read or write Khmer.

“Those kids have got no hope,” Mr. George says, “and these are the kinds of people that you see ending up being trafficked and ending up in these dreadful camps. It’s really sad, and education of course changes all that.”

Further work included the building of a health centre for Children with HIV, which Mr. George oversaw most of the admin work for. For his work 011 the centre, he was awarded the Cambodian Gold Medal, presented to him by Prime Minister Hun Sen at the centre’s opening.

Back at home, 2013 was also a good year, as Mr. George was awarded the Les McKeown trophy, the highest accolade that can be given to an insurance broker in the country, granted by the National Insurance Brokers Association of Australia.

“You don’t actually go out to do it because of that,” Mr. George says of his recent accolades, “but at the end of the day it’s nice to have that recognition, and hopefully the recognition encourages others to work harder and do better.”

Prime Minister Hun Sen and MGA Whittles Group Executive Chairman John George.

Prime Minister Hun Sen and MGA Whittles Group Executive Chairman John George.

Thought-Leadership

I’d never even heard that word until about a month ago,” Mr. George admits with a laugh, when asked about his opinion of thought-leadership. “But I think the reasons for our success are the empowerment given to our good people. We’re rising to $400 million in gross receipts nationally, that’s 37 branches, so it’s a big business now. “

“You’ve got to have some courage to change things. If you believe in what you‘re doing, you can do that. It took a fair bit of courage to introduce our Portfolio Management System. We had a system here; we were a conservative, well—run company, but we wanted to do something different, we wanted to be innovative.”

Despite the cost, the risk taken by changing the system paid off with the increase in staff productivity. As a result the group ended up benefiting massively from this, and doing so with significantly less management input.

“Don’t be afraid to innovate,” Mr. George adds. “And the time to innovate is when things are going really well. And you’re feeling comfortable. When you’re feeling comfortable and things are going well, don’t sit around and pat yourself on the back and think you’re arrived, because you haven’t.”

Mr. George believes in any industry there will be new challenges on the horizon, and that laurels should never be rested on. When business is good and there is time to think, it is usually a good time to look for the next big idea.

Much of MGA Whittles” workforce has been employed for over 25 years, having grown with the company. In that respect, the group tends to have a very low turnover in staff.
“People join us,” Mr. George says, “and they tend to stay.”

“It is very, very important to value your top people, and to continue to encourage them, because at the end of the day you can’t do it all by yourself. Your good people, they need to have that feeling of family and that feeling of ownership.”

“It’s important to share with them the knowledge of what you’re doing in the business, so they have a feeling of what you as a manager have got in mind in terms of growing the business, so they’ll then automatically feel a part of that.”

But perhaps the true secret of MGA Whittles’ success is that the group‘s partners are in it because of their affection for the business, in contrast to some people in other organisations, who might be motivated only by money. The money and success come as side benefits of working in a business you love.

“If you’re determined to succeed, and you have the patience and the will and the persistence to succeed,” Mr. George concludes, “ultimately you’ll get there.”

This MGA Whittles business profile has been made possible by the generous support of:

Allianz
CGU Insurance
MGI Adelaide
JL & JK Bevan Master Plumbers
Hunter Premium Funding
National Transport Insurance
Austbrokers
Higgins Coatings

GK Strata Management

GK Strata Managements

Strata Issues and Sydney: GK Strata Managements talks company growth, commissions and delivering value.

There’s a lot of misunderstanding within the general public of how strata management companies work and the benefits that they provide their customers. From issues of compliance, to commission structures and value for money, to building maintenance issues and regulations, there’s a lot that a strata management company must cover.

To address this, we catch up with Melissa Truscott, Managing Director of GK Strata Management. Melissa takes the time to speak with The Australian Business Executive to offer her thoughts on these issues as well as her company’s continued growth.

Within this interview, she’s also invited Greg Haywood to provide a better understanding of how commissions work in the industry. Greg is the Group CEO of Prudential Investment Company Australia (PICA), and speaks to us in his capacity as President of SCA (NSW).

J. Landry: Can you describe some of the key features of GK Strata Management’s portfolio in terms of variations, location and size?

Melissa Truscott: GK Strata Management (GK Strata) has been in business for over 30 years. It was originally established by George and Kay Terry with a small portfolio managed from their home. George and Kay retired and sold their business outright to their son, David Terry, who remains in the business today as a Director and our licensee-in-charge.

GK Strata now manages almost 450 strata schemes and employs 29 staff. We manage all types of strata schemes from heritage listed buildings, residential garden estates, industrial estates, shopping centres, community associations and building management committees.

Historically, we have focused our business on servicing the Eastern Suburbs and inner-city regions. However, we are now driving the business to expand our portfolio to encompass all regions within a 15km radius of the CBD.

JL: What are the strengths and qualities of the management team and what impact have these had on the success of the company?

MT: GK Strata has two directors, David Terry and myself, Melissa Truscott, as Managing Director. David has over 20 years experience as a strata manager. During that time, he has managed all possible issues that may be faced by an owners corporation at any given time. He is extremely well-versed in governing legislation and provides a wealth of knowledge and advice. Not only to his clients within his personal portfolio, but to the other strata managers within our office who are lucky to have access to him on a daily basis to be of assistance where necessary.

Melissa Truscott, Managing Director of GK Strata Management
Melissa Truscott, Managing Director of GK Strata Management

Complimenting David’s strata management experience is the corporate business experience that I have gained over the past 20 years. My primary experience is in project management and business process improvement, which has proved particularly beneficial to the back office support of the business. I also have strong experience in human resource management, client relationship management and compliance and regulatory liaison – all skills that have been transferable to the strata management industry.

We are both passionate about continual customer service improvement. To assist us to take our customer service to the next level, 12 months ago we invested in the recruitment of Damien Excell as our Operations Manager. Damien has extensive relationship management experience across a range of industries, including telecommunications, gaming and FMCG. He has been appointed to manage general business operations and human resource management, but most importantly to improve the service experience of our existing clients.

Included in our senior management team are Frances Portokalli (Property Services Manager) and Beatriz Castro (Finance Manager). Between them, Frances and Beatriz have almost forty years experience in the property industry.

Our senior management team has a strong commitment to integrity and reliability and are highly ethical. Our clients trust and recommend us on this basis.

JL: What is the fundamental philosophy underpinning GK Strata Management’s operations?

MT: Continual business process improvement and customer focus underpin our operations so that we may be proactive in exceeding our clients’ expectations and our contractual requirements. We see this as the most important way we can differentiate ourselves in the market. We are continually considering ways to do things better to improve client experiences with our business. We investigate new concepts in customer service across all service industries and determine whether they could be implemented or adapted to our particular industry needs. We don’t benchmark ourselves against the strata industry for customer service, we benchmark across all service industries.

JL: What are some of the company’s successes that really stand out for you?

MT: We have grown the business from a portfolio of a handful of buildings to almost 450 schemes purely through organic growth and word-of-mouth. Historically, GK Strata has never considered marketing the business to achieve growth. In the last six months, we made a decision to test the waters with marketing and we have already exceeded growth in the last six months than we have in any preceding financial year.

We also have excellent retention rates compared to our competitors of a similar size.

I’m also very proud of the corporate culture that we have in our business. Considering the stressful nature of strata management, GK Strata is still a great place to work and the retention rates of our employees are also higher than our competitors.

JL: As an organisation that has previously not done any marketing, how did you decide to market yourself and how did you identify the results as a success?

MT: We recognised that the traditional forms of marketing that small business used in our industry simply wasn’t getting great market saturation. Traditionally, small strata management companies would undertake basic forms of marketing and promotion such as letter box drops and advertising in local newspapers.

Our client base is made up of virtually every market segment – young couples, families, retirees, pensioners, professionals all of which may be either investors, owner-occupiers or tenants, many with competing priorities. Traditional forms of marketing were not reaching many of these segments.

We recognised that we needed to adopt a more diversified marketing strategy. We now utilise print media, social media, internet advertising and industry education as ways to increase our brand recognition. We maintain a web-based CRM software whereby we track all potential new business leads so that we obtain an understanding of where, how, why and when a potential client has considered our services. We also monitor internet traffic and social media interactions to determine what traction we are getting in these less traditional forms of marketing in our industry.

Based on these results, our website is still a great generator of new business leads, however word-of-mouth continues to be our prime lead for new business opportunities. Participating in industry education is also starting to gain momentum for our business.

JL: You’re a board member of the NSW division of Strata Community Australia NSW (SCA). Can you tell us how that came about and some of the key aims of the organisation?

MT: A vacancy became available with the resignation of a board member mid-term in 2012. I was approached by the then vice-president to consider filling the vacancy and was appointed by the board in November 2012 for the remaining term. Whilst participation can at times be challenging and requires a commitment of your personal time and energy, I personally find the experience very rewarding working and meeting with participants across our industry and with the other board members themselves who are all extremely committed to promoting the organisation and its members across the sector.

Our key aims include the education and professional development of our members through accreditation pathways, advocacy for the sector as the peak representative when lobbying government and other bodies or associations, maintaining a code of conduct for members within the sector for the benefit of our clients, determining consistent standards of best practice for the use of our members and to promote business links and networks among all participants in the sector at local, national and international levels.

JL: Insurance commissions are a hotly debated topic in the industry at the moment. Do you feel that they’re a necessity that benefits the industry?

Greg Haywood, President of SCA (NSW): Insurance commissions subsidise the base management fees and this has been the case for over 20 years. Without them the strata industry would have complete market failure as the majority of companies would not be profitable. Market failure would result in many business failures with jobs at risk. The current arrangement has been proven to be cost effective for our clients and the strata managers as authorised representatives of the underwriter/broker has additional PI coverage.

There already exists with the larger schemes the option for a fee-for-service model and a sharing arrangement – this has been the case for many years.

Under the new proposed legislation the commission model will be retained with full disclosure which is supported by the SCA (NSW) board.

JL: Can you give us an explanation of how they work?

GH: The strata manager (some companies have an Insurance Department) obtain three (3) quotes if possible, depending on claims history and/or the state of the building. If required, the strata manager will get their nominated insurance broker to discuss the insurance requirements and covers for the scheme. This is normal practice for the larger schemes.

The industry deals with the strata specialist brokers and underwriters to make sure that the correct covers and types of insurance are in place. In the event of a claim the strata manager and/or company manages the claim process. The commission covers the cost of delivering the above services.

Without this service the owners corporation/executive committee would need to do this themselves and/or get a broker who would charge the full commission and probably charge a fee to handle any insurance claims.

JL: How do these commissions deliver value for companies?

GH: The insurance commission covers the costs that the company incurs throughout the insurance process. They also underpin the true profitability of the strata industry in its current form. It makes sure that the schemes have the insurance values that they need to reflect strata living.

JL: Commission based incentives often have negative connotations to the public, how do you educate them about the benefits?

GH: The education needs to be about full disclosure as the negativity is about secret commissions and in the case of insurance commissions, they are disclosed in the management agreements.

Importantly, the clients need to better understand that the insurance commission has always subsidised lower management fees and that the strata manager (as an authorised representative of the broker/underwriter) is well placed to make sure that the insurance needs of their clients are met.

Without this financial model the overall costs would increase for the client as they would be paying higher fees to brokers and strata management companies would need to increase the existing management fees to replace the loss of commission revenue. In addition, they would need to charge additional fees for lodging insurance claims. In effect, the current arrangement is cost efficient for the client.

JL: How are commissions structured in the industry?

GH: Basically, depending how the insurance is placed, especially the larger schemes, then it could be a fee-for-service. For the majority of schemes it will be a commission which can have a range of 15% to 20% and in some cases lower, due to the covers. These are disclosed in the standard SCA (NSW) endorsed management agreements.

JL: What are some of the problems you frequently have to address?

MT: There are a number, but I’ll discuss new building waterproofing, modern building quality, old building maintenance, and fire standards.

New Building Waterproofing
The two major difficulties we experience when faced with waterproofing issues in a new building is convincing our clients to engage a professional consultant to assess and provide an expert opinion on the cause and solution to rectifying the issues. Often, they believe it is as simple as initiating a defects claim. It’s necessary to clearly specify the issues and provide the necessary solutions before doing so.

The other major difficulty is that the individual owners that are affected want the repairs completed now, whereby the owners corporation wants to undertake the repairs as part of the defects claim through Home Warranty Insurance that often means lengthy and expensive court proceedings.

Modern Building Quality

Whilst issues with waterproofing are an obvious concern we often find that extremely poor paint finishes and cheap fittings and fixtures are a regular concern. The building may get certification from a private certifier however, poor quality finishes and inexpensive fittings and fixtures mean that it is not fit for the purpose of communal residential living. Owners Corporations generally have to allocate expenditure to upgrade to a suitable quality sooner rather than later.

We are continually considering ways to do things better to improve client experiences with our business
“We are continually considering ways to do things better to improve client experiences with our business.”

Old Building Maintenance

The problem with older buildings is complacency amongst owners and a reactionary approach to repairs. These are buildings that – despite the requirements now in place for sinking fund reporting – often do not have adequate funds set aside since the building was originally registered. They are hamstrung by a legacy of a minimalistic approach to raising regular sinking fund levies and therefore, works may be deferred for many years.

In addition, the legislation only requires that a sinking fund report is compiled, there is no requirement to adhere to the recommendations or plan.

To remedy the lack of sinking funds, special levies may have to be raised that may create financial hardships and unfairly burden new owners who often have large mortgages and therefore, limited cash flow.

Fire Standards

The great frustration to ourselves and our clients remains the inconsistency between fire maintenance companies in their assessment and consideration of fire standards. Fire doors and other fire systems that pass inspection one year – and then the following year are reported to fail standards. Another area of frustration is large fire defect reports that must be resolved within very short time frames to ensure compliance with the Annual Fire Safety Statement (AFSS). However, the recent decision to categorise repairs to fire systems into levels of priorities will help to address this frustration to some degree.

JL: There is often a debate about the value for money that a strata agent offers. What do you think are the key areas of importance for strata?

MT: I’ll break this answer up into four areas – (i) self-managed schemes or owners corporations, (ii) legislative compliance, (iii) time requirements, and (iv) experience.

i). Self-managed Schemes (owners corporation)

A strata manager offers an owners corporation expertise in so many areas including building science, financial management, contract management, project management, dispute resolution, asset management and contractor compliance. The time and energy that owners must apply to these areas in a self-managed scheme is extensive. Therefore, more often than not, the necessary care and attention is not applied and this can put an Owners Corporation at risk in meeting their legislative obligations.

Having a strata manager can be particularly beneficial in ensuring community harmony within the Owners Corporation. For example, when a breach of by-law takes place, the strata manager is the person to intervene on behalf of the Owners Corporation to make residents aware of their obligations. Likewise, the strata manager is the person to follow-up with owners the late payment of levies. In a self-managed scheme, it can be a difficult line to walk when you are the person responsible for ensuring your neighbour – that you may have to see on a daily basis – ‘follows the rules’.

ii). Legislative Compliance

Strata managers provide safe passage in an ever-increasing and complex minefield of legislation. Furthermore, with the possibility of new legislation, it is the strata manager’s role to ensure they are adequately educated in the area of legislative compliance. It is not just the Strata Schemes Management Act and its Regulations that apply to compliance for a strata scheme. For example, the owners corporation of a self-managed strata scheme needs to ensure the compliance of all tradespeople they engage to perform work at the building, that appropriate accounting standards are applied and satisfactory insurances are obtained. Having a strata manager can eliminate most of the legal risk that would be otherwise held by the owners corporation or its office bearers.

iii). Time Requirements

Depending on the size and complexity of a strata scheme, the time applied to self-management can be onerous and extensive. Furthermore, there may come times in the life of the scheme that may be more demanding than normal. For example, managing major buildings works, emergency repairs and owner disputes. Then there are regular responsibilities like making someone available to provide access to tradespersons, providing access to owners or prospective purchasers to the books and records of the strata scheme, personal time preparing correspondence, issuing levies, investing funds, and managing meetings of the owners corporation or the executive committee.

iv). Experience (understanding building issues)

A strata manager builds experience and knowledge through not only continual professional development but mass management. A strata manager will be exposed to varying issues on a regular basis through the management of a portfolio of buildings. Owners corporations can draw on that experience quickly as opposed to self-managed schemes that will need to investigate, research and interview for guidance and assistance.

A strata management company also provides access to an established network of tradespersons, consultants and suppliers. Often these business relationships extend many years and can ensure quality in delivery and service for the owners corporation.

Even should a member, or members of an owners corporation, feel they may have the time and energy to self-manage the scheme, a lack of experience, despite their good intentions, could put the owners corporation at serious legal or financial risk.

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GK Strata Management

This GK Strata Management business profile has been made possible by the generous support of:

BPS Strata Maintenance
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Howard Plumbing
AGC Roof Maintenance

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Stephen Raff is the CEO and founder of Ace Body Corporate Management, an international body corporate management company based in Melbourne. Ace manages over 45,000 units Australia-wide and is responsible for managing property and assets worth over $14 billion. Stephen now supports over 75 franchise areas under the Ace name around Australia and Singapore.

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Ace Body Corporate Management

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