Pleas for Top-Ups… One of the Many Lies in Stra-Ta-Land
We Cannot Sell – Unless You Grant Us a Top-Up
We have all heard the old jokes about the 3 greatest lies in the world and their many variations all tailored to suit the audience of the day.
In our Stra-Ta-Land, one of the most frequently heard ‘lies’ is the caretakers’ plaintive claim that
“We cannot sell our Caretaker’s Agreement …………… unless you grant us a top-up”.
In fairness, calling them ‘lies’ may be a bit harsh. “Shameless half-truths” is closer to the mark.
The first part of the caretakers’ claim is certainly true …………… as is the last part.
But, it really is the muted ‘Gorilla in the Middle’ which gives lie to the caretaker’s claim.
What the caretaker is really saying is this:
“I cannot sell my Caretaker’s Agreement for a lot more than it is currently worth unless you give me a 5-year top-up.”
“I will sell my Caretaker’s Agreement for a lot more than it is currently worth once you give me a 5-year top-up.”
And the operative word here is ’give’. The lot owners gift the top-up to the caretaker; then the caretaker sells the gift for a big bunch of $$$s and moves on.
The reality is the caretaker can always sell what is remaining of the original contract for what it is currently worth…this is what a free market is all about. It is just that the ‘remainder’ is normally worth less than the ‘original’, and caretakers do not want to accept this.
Depreciation Is a Cost, Not a Fountain of Eternal Youth
Most people understand the concept of ‘depreciation’: they understand it is a real cost, not just a nominal tax dodge.
Most people accept that when you buy an asset with a life expectancy of say, 25 years, its value is going to depreciate with the passage of time. And this applies just as much to contracts with a set term as it does to items of plant with an expected working life, e.g. a truck.
Strata caretakers do not live by these rules. Their reality requires regular, automatic refreshments of their long-term agreement back to its original term, at no cost to the caretaker.
Theirs is an artificial reality. Imagine buying a truck with a 25-year life expectancy, then going back to the dealer 5 years later and asking for a complete restoration of the truck back to its original condition, for free. This may seem bizarre to those uninitiated in the subtleties of Queensland’s strata practices, but this is what caretakers in Queensland have been getting away with for years… and up to recently, most bodies corporate obliged the caretakers and their premature top-up requests without care or question.
Not anymore. More and more owners are discovering that the only people who benefit from premature top-ups are the caretakers… not the owners. There is nothing surprising here; all gifts, by their very nature, flow in one direction. What is particularly irksome here is that the gift to the current caretaker by the current owners really impacts on the future owners, whoever they may be years down the track. The current caretaker takes the gift and moves on… the future owners pay.
The UOAQ has already helped many complexes along this journey. It can also help you.
More and more owners are discovering the substantial financial benefits available to their complex when they allow their caretaker’s agreement to run its course and expire.
Generally, these savings translate into reduced levies by at least $1,000+; i.e. per unit, every unit…per year, every year.
All you have to do is say ‘No Top-Ups’, and keep on saying it until you can eventually decide for yourselves what is best for your complex… and then the benefits will start flowing to you, the owners. Put simply, as an owner you are free to say ‘no’ after considering each request.
This is not a position taken against caretakers, as the UOAQ is often accused of. The well performing caretakers are a benefit to owners. This is a position taken against long term contracts and the consequences for owners, especially:
– ever-increasing costs (where a contract compounds by at least CPI every year);
– an inability to achieve updated terms for the current needs of the scheme (particularly where the terms were drafted 25+ years ago, sometimes even before the building was finished, mostly with non descriptive and vague duties which are a source of constant dispute between owners and caretakers).
The proposal to extend is generally accompanied by the statement that extending is the normal course of action. There is increasing experience of schemes rejecting extensions in order that they can proceed to self-management on expiry.
We are seeking schemes that have not granted extensions to advise us of this outcome. With the permission of the scheme, we can list these on our website to publicize this positive action for the benefit of owners which could favourably impact on the market value of lots in the scheme. Please contact us at email@example.com.
For a .pdf copy of this article to share with your owners click here.