Adelaide strata customers paying thousands to companies who did ‘nothing’

Major reform is needed to South Australia’s strata regulations to stop customers being ripped off with exorbitant fees for services that aren’t being delivered and provide better avenues for complaints.

Lawyers are calling on the state government to introduce a draft bill improving strata management in SA as more apartment owners seek legal support.

Some of the issues raised include accreditation pathways for strata managers and maintenance plans for buildings not being mandated.

Laws about declaring conflicts of interests between strata companies and contracts, as well as record keeping of decisions also need to be strengthened, lawyers say.

While a draft bill was released in 2023 with suggested improvements, the SA government said it was still working on a final version to introduce to parliament.

Payment but no service

Thomas* changed strata management companies for his Mawson Lakes apartment building because of what he called “mismanagement”.

The building’s homeowners need to raise more than $170,000 to pay bills because their former strata company allegedly wasn’t effectively managing their finances and building.

The company missed an annual general meeting in 2023 because of being short-staffed, putting the owners behind on paying levees for their upcoming bills, Thomas said.

When the owners recently changed companies, they found out they also had almost $8000 in outstanding invoices for smoke alarm call-outs they were not advised about.

They also incurred an $86,000 bill because of various fire safety defects — such as evacuation lights needing replacing — that were not rectified and the costs accumulated over years.

Then they were told the building’s insurance would cost almost $90,000 this year, which they needed to pay through a special levee because the committee did not have the funds to pay the invoice.

Meanwhile, owners were paying $7800 annually to the strata company with the expectation its expertise in building maintenance would make their lives easier.

“There was no one overseeing the whole picture … to me that’s the role of the strata company,” Thomas said.

“The most frustrating part was the time I had to invest in managing (our building) when we pay a manager to do that for us.”

7NEWS.com.au has chosen not to name the company for legal reasons.

Another owner raised concerns owners were being overcharged for maintenance jobs that were always done through the same company.

She was quoted $1000 to paint the exterior of a 4 sq m storage area and $2000 to patch up a small section of their ceiling that cost her less than $100 to fix.

“When we bought the apartment we didn’t know much about it, we wouldn’t have bought it in hindsight,” she said.

The company said it did not receive any kickbacks or commissions from the maintenance company.

It said it acts professionally and in the best interest of customers.

Over in St Clair, owner Rhett Fraser, was paying almost $8000 annually for his building to be managed.

During that time, Fraser said the company did “little to nothing” about maintenance issues raised, such as a fire door needing replacing, a faulty intercom and rubbish piled up.

Multiple emails to have work completed took weeks for a response, and some were not resolved at all.

The company also forgot to collect levies from the homeowners for three months, so the building’s account was short of money required for bills the following year.

“They made all these promises about all phone calls and email being returned within 24 hours,” Fraser said.

“They didn’t do anything really … the work they did do, they did it wrong … it was the worst customer service I’ve had.”

When the owners complained to the company, they were given a new building manager but also told some issues were the fault of a second strata company managing businesses in their building.

System overhaul require

As part of the state government’s solution to the housing crisis and plans to expand Adelaide, more apartment buildings are expected to be constructed across the city.

But those currently dealing with headaches related to strata said the laws need to be urgently reformed to avoid thousands more people experiencing costly issues.

An apartment owner in Adelaide’s west previously told 7NEWS.com.au his building was having to pay $750,000 to fix waterproofing issues that could have been avoided if maintenance plans for buildings were compulsory.

“There needs to be an overhaul of the current situation based on my experience,” Thomas said.

A lack of avenues to resolve strata disputes is one of the issues the SA government is being called on to resolve.

Lawyers say a specialist tribunal should be established, so strata disputes don’t clog up the magistrates court.

Others suggest there be a mandatory mediation process to resolve conflicts without the expense and delay of going to court.

In South Australia, strata managers do not require a license or accreditation to practice.

Law firm Piper Alderman’s head of property Adam Rinaldi said given the trust put into managers to manage expensive assets and large sums of money, licensing should be mandatory.

“They hold a position of fiduciaries under the act and general law,” he said.

“There really needs to be a baseline set of qualifications and a code of conduct that is mandated for compliance, no different to other professions like lawyers … a breach of the code of conduct results in a breach of statutory duties.”

A recent ABC investigation found some strata companies were rorting customers by using associated companies for insurance or maintenance that would charge high fees.

A 2018 parliamentary inquiry into SA strata industry also found management companies were recommending their own firms for insurance and maintenance to customers so they could retain control of the revenues.

While state law requires managers to declare conflicts of interest, Rinaldi said the act should clearly identify commissions and kickbacks should be declared.

“We’ve seen strata managers have close relationships with developers, and in some instances we’ve seen the strata manager try to entrench themselves by requiring the developer to include bylaws that make specific mention of their engagement.

“One of the issues is entrenched relations with the strata manager (for example) putting in place contracts with service providers that are on favourable terms to either the strata manager, developer or service provider

“The owners associated with the strata scheme wouldn’t have the knowledge and industry know-how to determine whether the transaction is competitive with an industry standard” he said.

Since July 2024, the Strata Community Association set out new guidelines requiring its members to disclose insurance practices to customers, including brokerage fees and commissions received.

It said all complaints to the association were investigated by an independent chair.

Many of the findings of the 2018 inquiry were accepted by the former Liberal government, but the current labour government has yet to introduce a bill, made public in 2023, to parliament.

Minister for Consumer and Business Affairs Andrea Michael said: “These are complex areas for reform and the government is currently considering feedback”.

“The draft bill was written by the previous government and when we came to office, we wanted to undertake our own stakeholder and community consultation on it and potentially amend it.”

*Full name withheld for privacy.