One of the most pressing issues in the Management and Letting Rights industry concerns the fees caretaking service providers should charge.
The subject of fees and charges in strata is controversial at the moment as one of Australia’s most high-profile strata management firms has been accused of overcharging and taking kickbacks from contractors and suppliers.
Australian Resident Accomodation Managers Association (ARAMA) members, however, operate under a contractor service agreement and code of conduct that includes full disclosure of fees and charges agreed to by the unit owner in advance.
There is full transparency, and those managers must demonstrate good value for money.
ARAMA fully supports strata managers who like us, deliver service which is in the best interests of the community title scheme.
Strata and body corporate management companies play an important part in the “triangle of strata management”, where the resident manager, strata manager and committee work collaboratively in the best interests of the scheme.
However, it is clear that unit owners are not receiving value for money by some within the strata management field.
It’s a different story for our members who are resident managers and also unit owners and therefore have a vested interest in ensuring schemes are managed efficiently.
Many resident managers are sometimes uncertain, though, about what is a fair payment for work not covered by their agreements.
ARAMA fields many enquiries on the subject, and we provide some answers with our very comprehensive bi-annual costs and charges survey which is freely available to members on the ARAMA website. It’s one of a range of tools ARAMA provides to answer the questions and problems resident managers face on a regular basis.
The costs and charges survey provides valuable comparative data for resident managers and other ARAMA members, and covers the major costs and charges that generate business profitability. There is an accompanying webinar on our website with the same name and it goes into the specifics of these charges as well. If members need additional help beyond this then ARAMA can recommend a specialist accounting firm to assist.
The C&C survey is a really good resource that explains what Resident Managers in the role of an on-site letting agent should charge and what is an acceptable hourly rate for various work not covered in the Management and Letting Rights agreement.
The survey is updated every two years and published in all the even years. Another update is due in the second half of 2024.
A Caretaking Service Providers payment is provided by the Body Corporate in accordance with their caretaking service agreement. Generally speaking, there will be a pre-negotiated annual remuneration amount paid in monthly instalments with reference to a pre-negotiated hourly rate for work performed that Is not covered by the annual remuneration.
When it comes to fees and charges resident managers are transparent and clean; what they are charging is what is included in the contract that both the manger and the body corporate agree to in advance.
Because of the nature of our business – the rule for fees and charges is that we should only charge what has been agreed to in advance and in the absence of an agreed rate we should obtain approval preferably in writing before commencing the additional work.
The Caretaking Service Agreement should allow for an annual remuneration amount plus an hourly rate for work performed outside of the agreement.
In relation to the work performed as an onsite letting agent the schedule of fees and charges should be based on the ARAMA Costs and Charges survey and be transparent and specific. A bundled option is gaining traction with industry and while bundling is a good idea to avoid the individual “shopping docket” result with monthly expenses it does need to itemise the inclusions and the exclusions.
As a Caretaking Services Contractor, when outside work is done, by specialist trades for instance, the original invoices will need to be authorised and forwarded for payments by the body corporate. Unless your Caretaking Agreement says otherwise you should not charge an additional service fee for arranging the work unless you receive prior authorisation preferably in writing.
As an on-site Letting Agent, when outside work is done, by specialist trades for instance, the schedule of fees and charges may stipulate either a fixed fee or a percentage as a service fee which can be applied to the original invoice. That original invoice is usually paid by the onsite letting agent directly who then on charges the original invoice amount plus the pre-approved service fee to the unit owner at the end of each month usually by deduction from the gross letting Income.
A common practice within our industry is that for any work that an onsite letting agent organises with an outside trade on behalf of a lot owner, a 10 per cent fee is charged for service and administrative duties on top of what the tradesman charges.
This is not work for the body corporate because that is covered by the caretaking salary – but separate work for a lot owner, who may not live nearby and needs the resident manager to do work on his or her behalf.
For instance, a resident manager might have to organise a plumber inside a unit and that manager then has to meet the plumber, make sure that the unit is vacant, deal with the guest or tenant who might have been there, do all that paperwork, receive the invoice, and pay the invoice.
There has to be some compensation for that extra work.
As long as the resident manager discloses that fee and as long as they can produce the original invoice if an owner wants to see it, then that’s quite fair and appropriate. There can often be a lot of work involved in organising and paying tradies and it saves an owner having to travel from wherever – maybe interstate or even overseas – to arrange it themselves. It’s usually a very small fee compared with the costs an owner would incur for having to arrange it themselves.
There is a heap of work that resident managers do for no fee, even though they may be entitled to charge. Often a percentage charge which might equate to a $10 or $20 fee for organising, meeting, supervising and paying trades doesn’t go close to covering the amount of time managers spend if they were charging an hourly rate for that service beyond the agreed duties.
The manger will generally say “well, if you want me to organise the work it’s the cost plus 10 per cent for my time. But if you, as the owner, want to organise it then that’s your right and go right ahead. You can come over and talk to the tenant or guest, let the tradesman in, stay there while they do the work, and then organise payment. We can do it, but it’s not part of our duties. It can be if we strike an agreed payment rate in advance”
Generally speaking, it is wrong however for a resident manager to charge a body corporate 10 per cent for arranging work on behalf of the body corporate because that is a duty which is generally covered in the caretaking agreement. In this example the caretaking service provider is already paid by the body corporate to arrange that work.
What we might charge the body corporate for, if it’s on our schedule of fees and charges, is things such petrol or a travelling allowance if we must go to Bunnings or somewhere else to get tools or materials on behalf of the body corporate
There may also be things which are extraneous and not included in the agreement and that is usually charged as an hourly rate – often it’s $45 per hour or more however these benchmark rates can be found in the C&C Survey.
We advise members to get approval in writing first – by email for instance – before they ask for a fee for extra work so that there can be no arguments and no one can claim amnesia.
When I was a resident manager I had a unit owner ring me from Miami in the USA, and he wanted me to have a look around for new curtains and a new loungeroom and dining room suite for his apartment.
I told him I could go down to a store where they had deals on sofas, and that I could maybe find a dining table and I could get a guy in to do new curtains.
I said I’d organise all that for him and that it would cost him the invoice cost plus my service fee of 10 per cent. He thought this sounded like a fantastic deal.
So, I went to A-Mart. I negotiated a discount for the furniture. I paid it direct. I had it delivered. I took out the old stuff and took it to the tip. I received the new furniture and had it put into the apartment. I organised the guy to do the measure and quote for the curtains and then I added my service fee to the original invoices and deducted in from the rent the invoice for the 10 per cent.
On a $3000 job I made $300.
When the owner started to complain about my service fee, he quickly agreed that it represented great value when he understood that it took me about 1/2 a day running around to save him time and money and it had worked out a lot cheaper than if he’d flown home from Miami to do it himself.
Resident managers do well when they foster great relationships with their committees, owners and residents and act in their best interests.
It should work both ways.
Resident Managers deserve to be compensated for their time and effort, doing things not covered in their agreements and should be charging extra for providing these extra services.
Managers do a lot of running around but should not be taken for a ride.
As long as the fees and charges are transparent and communicated clearly and agreed to in advance no one should be taken for a ride.
