The performance of the strata committees is regularly questioned and challenged with little regard to the fact these committees are volunteers.
While this has been the same for 50 years apartment developments & realestate values have grown dramatically. Strata committees are regularly now in control of assets with rebuild costs more that $100million and sale values of much higher.
If you think of your apartment block as a business worth $100million, and share holders to report too. Would you expect the decision makers to be paid and given a clear mandate for the building?
I recommend that every owners corporation should consider the value of their executive committee.
If you place zero value on them, do something about it and attend the AGM vote them off and step up, or have compulsory appointment order and pay an administrator to do everything and charge you.
If you do place a value on your committee pay them. But before you give out free money you need to define the expectations and job requirements with a performance criteria.
You should also be assessing the people you add to the committee, you should be looking for people with knowledge and expertise, and consider who you pay and don’t pay.
There are countless studies that verify the quality and performance of paid workers is much higher than volunteers.
But how much do you pay the committee?
This is completely different for each Building so here are some things to consider. Below is an example of what a building could do compared against some ASX listed companies.
Company | Sample Building | Baby Bunting Group Limited (ASX:BBN) | Retail Food Group (ASX:RFG) | Sundance Energy Australia Limited (SEA) |
---|---|---|---|---|
Market Capitalization | $80,000,000 | $207,000,000 | $891,000,000 | $80,210,000 |
Revenue | $3,120,000 | $278,000,000 | $349,300,000 | $87,127,534 |
Profit before tax | $2,720,000 | $17,700,000 | $75,700,000 | -$59,769,784 |
Board Payment | $10,000 | $407,000 | $923,343 | $273,708 |
% Board payment of profit | 0.35% | 2.3% | 1.2% | -0.46 |
Avg Per Member | $2,000 | $81,400 | $153,891 | $136,854 |
% of Profit, per member | 0.07% | 0.46% | 0.20% | -0.23% |
source | simulation | 2017 annual report | 2017 reports | 2016 reports |
Sample Building Assumptions: 100 apartments at an average value of $800,000. Average weekly rent $600 per week (used for revenue), Levy budget $400,000.
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How do you measure performance?
I suggest the tracking of performance against market rates such as weekly rents and market value. Although these should be considered against market trends.
You can always add additional performance indicators but I recommend the above two should be included.
Strata Committee scope of works/mandate
Below are the opening suggestions when creating the scope of works for your paid committee members.
- Optimise building insurance and integration with landlord and lot owner insurance
- Review routine maintenance
- Approve invoices
- Quarterly reports to All Owners
- 5 year strategy for development
- Contain running costs
- Generate income streams
You should also consider our 7 things that every strata committee must do in 2018.