One of the most contentious issues in the body corporate industry is the resident manager’s remuneration. For many, many years we had heard a fee per unit per year bandied around as the benchmark for remuneration. Where that methodology originated or how that fee was calculated seems to be a mystery to everyone. To me this was a lazy way of determining the remuneration and for many years a fee of $1,000 per unit per year was the benchmark. It was not until a landmark decision was handed down by a specialist adjudicator appointed by the Office of the Commissioner for Body Corporate and Community Management in 2006 that a time and motion study became accepted as the appropriate method. So, how should a resident manager’s remuneration be determined?
No two buildings/complexes are the same and there are no two management agreements the same. That is why no two remunerations should be the same even though the complexes may contain a similar number of units. The work content in a high-rise building is entirely different to the work content at a townhouse/villa complex and different again to a walk-up complex, a commercial complex and so on.
A townhouse/villa complex usually has large gardens and grounds to maintain which form the major part of the duties as far as time is concerned, whereas a high rise complex has basement car parking, rubbish disposal facilities, large areas of common property for cleaning (including reception areas, floor level foyers, etc.) and an infrastructure of lifts, pumps, water tanks, fire alarms and equipment, resulting in quite different management requirements.
When comparing remuneration being paid at different buildings/complexes, the comparison should at least be apples with apples. If a comparison is to be made, it should be with remuneration for other complexes within the same category, e.g. high-rise with high-rise, townhouse with townhouse, etc.
Methods of Determining a Remuneration
For many years, the most commonly accepted way of determining a manager’s remuneration has been the direct comparison method. This is where the average fee per unit per year being paid at other complexes is compared to the average fee per unit per year being paid at the complex in question. From that information, an assessment has usually been made as to what might be a fair and reasonable remuneration.
The danger in assessing a remuneration by this method is that there is no way of knowing if the amounts being paid at the other complexes are correct in the first place.
If the remuneration being paid at other complexes are too high then the recommended remuneration for the complex in question may be too high. Likewise if the remuneration at the other complexes are too low, then the opposite may be true.
A resident manager is a service contractor. A management agreement is a contract, whereby the manager performs specific duties and in return the body corporate pays an agreed remuneration for those duties. To assess the value of the remuneration, it is necessary to assess the individual duties prescribed in that contract in relation to the complex at which those duties are to be performed.
The fee is not some average of the fees being paid to a manager/caretaker down the road or around the corner in another complex, it is specific to the needs of that particular complex, which will most certainly vary from those other complexes.
In a decision handed down by a specialist adjudicator appointed by the Office of the Commissioner for Body Corporate and Community Management, in a case involving a dispute between a body corporate and a resident manager over the level of remuneration being paid, the specialist adjudicator stated in his decision and order: – “In my opinion the appropriate method to adopt here is to identify the obligation in the Caretaking Agreement and assign a time to complete the task and apply an appropriate remuneration for that task, but then have regard the fact that the agreement covers the doing of all identified tasks as a single job lot rather than many separate job lots. That is, the assessment is not to be done as if each task was carried out in isolation”.
The decision handed down by the specialist adjudicator was not based on an average fee per unit per year. The decision was based on the number of hours per week required to perform the duties as prescribed in the caretaking agreement.
Many management/caretaking agreements are “generic” and are not always specific to the individual requirements of the building/complex.
Before determining a manager’s remuneration, it is vital to establish a specific schedule of duties that are required to be performed at a particular building/complex, and the frequency with which those duties are to be performed (daily, weekly, monthly, etc.) to maintain the complex to the standard expected by the owners.
It is extremely important that a schedule of duties that is specific to the requirements of the particular building/complex be determined and agreed upon before reviewing the remuneration. Otherwise, it is not possible to arrive at a manager’s remuneration that is “just and equitable”.
A resident manager’s remuneration is not a statutory fee ($1.000.00/unit/year). The remuneration is based on the services required by the caretaking agreement. This is the methodology that, in the opinion of the specialist adjudicator, is the “appropriate method” and this is exactly the type of methodology devised and used by BMCS.