There is one event each year when every lot owner is asked to spend a little time thinking about how their building is run: the Annual General Meeting, or AGM. These days it is usually held online.
A thick PDF attachment arrives in your email inbox. It looks complete, professional, carefully prepared. If you are a long-standing lot owner for the building, it may also look very familiar. Most of the pages in the lengthy AGM notice are likely to be part of a standard template that rarely changes over the years.
Two reports, one from the chairperson of the committee and one from the strata manager, are new and should be read. The latter in particular may contain vital information.
Other important new pages, however, are those devoted to financial statements, including past and estimated annual budgets.
By the time the new budget estimates for the current financial year reach the committee and lot owners for a tick of approval in its ballot box, their contents have already been shaped, checked and printed.
Budget estimates are usually built on previous years’ spending, adjusted for inflation, updated for new contracts such as insurance, and amended to include forthcoming maintenance work. Other items, however, can look remarkably similar from one year to the next. Categories such as General Maintenance often appear to have been rolled over with only minor adjustments. That does not necessarily mean they are wrong, but it does raise a useful question: were the figures worked out again from scratch this year, or simply carried forward from the previous year with small adjustments?
Here’s how that matters in practice.
When you look at a budget item such as General Maintenance, it’s easy to treat it as a fixed expense. But what does it actually consist of and why does the committee have no knowledge of any “general” maintenance carried out? One likely answer is that many strata management contracts include provisions allowing the manager to hire a technician or tradesman without first seeking three quotations each time because of the small cost involved. At other times the issue, such as a blocked pipe, might have required immediate attention.
Alternatively, you may get an item called General Plumbing Maintenance or General Electrical Maintenance in the budgets with no other explanation.
This avoids delays that can end up being more costly than the original expense, which is fine. But it also means that it can sometimes leave owners feeling uninformed about spending decisions.
This is where committee members play a role. It is not to query the budget line by line. But it is okay to expect that a paper trail for those smaller expenses does exist, perhaps in the form of an email to the committee with a photo, while invoices can be posted to the committee’s portal if they have one.
And then there’s the approval process. By the time a budget is presented in a Notice of AGM, it has usually passed through multiple layers: manager preparation, software input, auditing and printing. So, what you are seeing is not the raw financial data of the building. It is the version of it prepared, checked and presented by the managers and their administrative systems before owners ever see them. It can and does happen many times that the strata committee also gets to see the past expenditure and proposed budget for the first time when the printed agenda arrives.
This may create the assumption among owners that there is no point in attending the AGM each year because everything has already been decided. All too often, by the time the lot owners who do attend work through a long list of ballot boxes that have to be verbally voted on or with a show of hands, there is not enough time left in their Zoom or Teams meeting to allow for broad discussion.
As many of you would know, the first 45 minutes of an online meeting is free. After that with Zoom, if you want longer meetings you have to upgrade to Zoom Pro, which is currently Aus$19.90 per month, $118.80 pa. This subscription is typically shared among the manager’s clientele of numerous strata buildings so there should be only a small additional charge.
With Teams it’s different. If you have a Microsoft 365 subscription (and most companies do) there is no further charge for a longer meeting.
But this is the point where you have to look at your Strata Manager’s contract. In some contracts the strata manager’s time for chairing a meeting is typically free for the first 45 minutes or one hour, depending on the contract, then typically $240-$280 per hour after that. If, however, the meeting is held after 5.00 pm working hours, the manager’s fee per hour may be doubled.
For many strata managers, the latter is their “get out of jail card” and they may look a bit relieved when they can declare after 45 minutes that time is up and the meeting is about to close. The reason they give is that it is necessary in order to save the owners corporation money. They are the good guys.
However.
For the lot owners who have tuned in, the real meeting was about to move on to the general discussions. After all, it is usually only at the one general meeting every year that they have the opportunity to speak face-to-face (sort of) with their manager and the members of the committee, or to share their views with other lot owners. Suddenly the meeting is closed, and that is that for another year.
In addition, the meetings are often held during Australian working hours to avoid charging double for the manager’s time as chairperson of the meeting. For a lot of owners, that timeslot is simply not practical. Then of course there are the interstate and overseas lot owners, whose clock is completely different and those lot owners who are shy about speaking if they are not confident of their English.
When you take all of that into consideration, is it really a surprise if you log in to you AGM and find that you are the building’s only lot owner who has?
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This blog is fully independent and self-funded. It doesn’t offer legal or financial advice. When such advice is needed, always consult a professional in those disciplines. Use the links provided here as a starting point. The author resided in Victoria and is most familiar with Victoria’s strata legislation. Always check and use the current legislation governing your own state. State legislations vary and are state-specific. Links to each state’s own strata-title Act are provided on the “Introduction” page.