Everyone likes a good deal and most of us will seek opportunities to save money where we can. But there are some things that are worth the investment and owners corporation (OC) management fees are definitely one of them.
When it comes to OC management, it pays to check the small print (literally in most cases!). You may think you’re getting a great deal with cheap fees but the reality is you could end up paying a lot more than you intended over time in more ways than one.
Below we unpack the four biggest costs of cheap OC management.
What do OC management fees cover?
OC management fees are typically collected annually and go towards repairs and maintenance of common property areas including:
- Shared stairwells and hallways, gardens, roads, driveways and footpaths, property boundary fences and railings or walls, entry gates and intercom utilities, as well as additional amenities such as shared pools, gyms, or BBQ areas. It also covers fire systems and extinguishers.
- Structural repairs such as roofing, external walls, property foundations, balcony balustrades, railings, and waterproofing, and external painting for the building. It also includes windows for common/external areas and shared doors or entryways.
The fees also go towards things such as building insurance and day-to-day administrative costs relating to things like building compliance.
4 costs of cheap owners corporation management
Understanding what OC management fees cover gives you some idea of why low fees could be a red flag.
Low or cheap fees can lead to:
1. Improper or inadequate insurance cover.
Cheap fees may be the result of improper, inadequate or out-of-date insurance cover. It’s easy to see why this can be a costly mistake. It only takes one large-scale repair or event, such as a roof replacement, that insurance won’t cover to lead to a significant cost back to lot owners.
2. Ongoing, unattended repair and maintenance issues.
Cheap fees often means that some repairs or maintenance issues aren’t addressed in a timely manner. This could be anything from cracked windows to leaky pipes, broken fences to peeling paint.
Small repairs and maintenance issues can become bigger problems if left over time, leading to more costs to lot owners to repair damage that’s been left unaddressed.
3. Unprofessional OC administrative management.
One of the biggest potential costs of cheap OC fees is the lack of due diligence and professional administration of things like building insurance, compliance and other day-to-day management.
This could be a result of ‘self-managed’ OCs, where lot owners have tried to keep fees low by managing things themselves, only to have a lack of ownership over who does what – especially if people move on or don’t have the time to look after day-to-day admin. This can lead to insurances lapsing or not being kept up-to-date with property needs, or a loss of compliance documentation that costs money to resolve down the track.
4. Maintenance deficits
A maintenance deficit occurs when maintenance on a building has now led to secondary and tertiary issues, which when fixed, still leave the underlying cause untreated. When this occurs, fees normally increase by a factor of two or three just to keep the building at the current run down standard. This will almost inevitably lead to owners paying more.
What to do if OC management fees are low
If you’re looking to purchase a property and the OC fees seem low, it’s worth asking some questions. Taking the above into account, you can speak to the OC management committee and do some research to understand the financial health of the building before you purchase.
If you’re based in Victoria and unsure or need guidance, AboveOCM can help. If you’re looking to find a new OC management group or have questions about what next steps could look like for your property, our expert team is on hand to offer support and information.
Reach out to us today to find out more.
