NSW Strata Managers need More Supervisio

or, what should your strata manager be doing & are they …

A Quick Take

It seems that NSW Fair Trading thinks that strata management businesses in that state need more supervision, so they’re updating [and upgrading] their Supervision Guidelines next month. And those new guidelines include some surprisingly detailed, extensive and strict requirements for the owners and licensees in charge. So, here’s an overview and some of the more interesting requirements that all strata citizens should now about.

[a 5:00 minute read with 993 words]

The Full Article

INTRODUCTION

In NSW strata management businesses must be licensed. 

But since they’re typically incorporeal entities [not people] and because they employ class 1 and 2 licensees, trainees, and administrative staff those businesses must be supervised by Class 1 personal licensees.

It makes sense, because like any business trying to provide quality products or services, new people working in strata usually don’t understand the niceties, rules and complexities that exist in running strata buildings and the multitude of laws and other controls that apply. 

So, NSW Fair Trading publishes supervision guidelines about how strata management businesses should be supervised [and run] and those guidelines are changing on 1 July 2024.

STRATA MANAGEMENT GUIDELINES OVERVIEWED

Section 32 of the Property & Stock Agents Act 2002 requires all NSW real estate licensees [including strata managers] to properly supervise their businesses.

And section 32(4) allows NSW Fair Trading to issue guidelines about what is proper supervision and makes a failure to comply with the guidelines a failure to supervise under the section.

NSW Fair Trading says that its supervision guidelines are designed and intended to empower strata management businesses, ensure they are accountable, and help them to become trusted through robust leadership.

They also say business supervision and the guidelines are important because strata management businesses deal with valuable assets of strata owners that are also often homes for them and others.

The NSW Fair Trading guidelines are separated into 3 categories.

1.  People leadership guidelines issued under section 32(3)(b).

2.  Compliance procedure guidelines issued under section 32(3)(b).

3.  Conduct monitoring guidelines issued under section 32(3)(c).

Plus, the guidelines require that reasonable steps must be taken and adequate systems must be in place to comply which means that:

• there are clear lines of accountability enabling effective compliance monitoring of the operational procedures by everyone in the business,

• work is distributed in the business in ways that doesn’t jeopardise compliance or supervision such as due to volume or complexity of the work,

• records of transactions, communications, advertisements, contracts, agreements and other types of business information are kept in ways enabling access and

  review by licensees in charge, and

• staff performance and conduct reviews are regularly undertaken to effectively monitor compliance and take corrective action.

So, obviously if you’re a strata manager or run a strata management business you should read, understand, and comply with all the guidelines.

But, if you’re a strata stakeholder it might also be worth reading them too, so you know what strata managers should be doing.

You can find and read the new 2024 NSW Fair Trading Supervision Guidelines here.

SOME OF THE STRATA MANAGEMENT SUPERVISION HIGHLIGHTS

I’ve read the new guidelines and they make interesting reading.

So here are a few of the guidelines I noticed that surprised me, and, what I think they mean to strata management businesses and their customer strata buildings, committees, and owners.

• Every part of a strata management business must be supervised; so, that means everything in the business from the trust accounts to the photocopiers.

• Strata management businesses must prepare and maintain operation procedures covering financial operations, licensing compliance, qualifications, education & training. and professional conduct and not doing so is an offence: so, that means there must be a thorough business operations manual.

• Operations procedures must be reviewed at least every 12 months:  so, that means annual updating of the business operations manual.

• Separate supervision procedures must be prepared and maintained that identify who’s responsible for supervision, who’s being supervised, and which of the listed 22 property related laws they cover [they’re on pages 14 and 15]; so, there must be a separate supervision policy specifically referring to property law compliance.

• Strata management businesses must follow the 14 detailed trust account operational requirements from NSW Fair Trading [they’re on pages 15 and 16]; so, tight procedures apply to handling, recording and managing strata building money.

• Strata management businesses must have annual training plans for staff with ongoing monitoring, recording and verification systems; so, businesses need to make sure staff are CPD compliant on an ongoing and routine basis.

• Strata management businesses must have formal complaint handling procedures hat include a register of complaints, structured complainant rights notifications, complaint procedures notifications, details of all compliant outcomes, and mechanisms to ensure financial misconduct complaints are reported to the licensee in charge; so, there needs to be a detailed system for handling customer complaints and letting customers now how complaints are handled.

• Strata management businesses must have internal guidelines for staff about the circumstances when and/or examples of situations which could reasonably be considered to give rise to conflicts of interest; so, businesses need to think about and identify potentials for such conflicts and communicate those things to staff.

• Strata management businesses must keep a register of gifts or benefits that are offered, refused and/or received to them and their staff, including their nature, value, who offered them and to whom they were offered; so, business must track third party benefits [even if they’re refused].

• Strata management businesses must have procedures for managing the information they receive [especially personal information] and how they deal with the Privacy Act 1998 provisions; so, confidentiality issues need to be considered and properly handled and information consistently managed.

• Strata management businesses must ensure that third party platforms they use do not contravene the Property & Stock Agents Act 2002; so, software and other systems used by strata management businesses need to be vetted for compliance.

• Strata management businesses must provide their staff with ways to report operational misconduct: so, that means there can be internal whistle blowers in strata management businesses.

CONCULSIONS

That’s a lot of compliance requirements for NSW strata management businesses, licensees in charge, and strata managers.

It makes me wonder how compliant many strata management businesses actually are [or will be] with these guidelines and what audit processes exist inside strata management businesses and by NSW Fair Trading.

Plus, there seems to be no reason why a strata management business customer [that would be a strata buildings, committees and owners] can’t ask to see some of their strata manager’s operational, procedural and practice guidelines or registers under these guidelines and [even] use them to help decide between prospective strata managers.

June 05, 2024

Francesco ...