Some insights of the strata banking game: Whose bank account is it?
Look Up Strata
16 August 2016
This article about body corporate banking has been supplied by Wayne
Stevens President of the Unit Owners Association of Queensland (UOAQ).
Many owners may not be aware that their funds are sitting in someone
else’s bank account.
Many owners pay their levies electronically via an on-line facility
into a transaction account operated by their Body Corporate Manager
(BCM) under the name of the Body Corporate. This transaction account is
then used by the BCM to pay the bills on behalf of the owners. It is a
very common ‘strata industry practice’.
There are at least two major risks with these transaction accounts.
Risk 1: Poor
Transaction accounts are often no more than electronic versions of what
used to be called ‘cheque accounts’, earning virtually no interest. We
already have alerted owners that it is common practice for many BCMs to
park large sums of owners’ funds for extended periods in these
transaction accounts. This practice can cost owners many thousands of
$$$s in foregone interest each year – discussed in a previous article:
WHO KNEW? Some Tricks Of The Strata Banking Game.
Risk 2: Lack of
Some owners may be aware of recent media coverage about a former BCM
charged with an alleged fraud of $750,000. We cannot, and do not, make
any comment or inference either directly or indirectly about that
However, now is an opportune time to alert all owners to another
‘strata industry practice’, one which exposes their funds in the
transaction accounts to an unnecessary risk of catastrophic loss.
Specifically, this risk concerns the absence of control, by the owners,
of the transaction account.
If you are not a signatory, you do not legally control the account.
It is true that the account must have the name of the Body Corporate on
it. But what really matters is the name of the signatory.
Being the signatory to any bank account means having access and control
of the account and the money in it. Conversely, ‘not a signatory’ means
no access, no control… and if any owner has any doubts about this, try
asking the bank for access to your transaction account.
In Queensland, it is a common ‘strata industry practice’ that none of
the owners are signatories to the transaction account, not even the
Chairman, the Treasurer or other committee members. The Body Corporate
Manager (BCM) is usually the sole signatory.
Q: What happens if the BCM misappropriates the money?
A: You could lose the lot!
You may be able to recover your losses from either your own insurer or
the BCM’s insurer…but it is difficult imagining the bank offering to
make good on the losses.
Rather Than Cure
Most Bodies Corporate inherit this type of transaction account from the
original developer. Then the practice just develops a life of its own,
rolling on from one year to the next.
It should be remembered that this ‘strata industry practice’ is just
that, a practice…it is not a legal requirement. There is no statutory
impediment to owners taking back control and ownership of their own
money. If the owners wish to do so, they can.
This doesn’t mean that the BCM has to stop operating the transaction
account on behalf of the owners, using it to collect the incoming
levies and pay the bills. This is a service most owners, especially the
Committee members, would prefer to retain and pay for.
It is more a question of ensuring there is just enough money in that
transaction account to cover the bills when they fall due… but no more
Managing this balance can be quite easy and straightforward.
A Simple, Safe
One very common solution involves the Body Corporate establishing an
interest-bearing holding account in its own name. Then, the Body
Corporate directs the BCM that all receipts flowing into the BCM’s
transaction account must be electronically on-forwarded, without delay,
into the Body Corporate’s own account.
The signatories to the Body Corporate’s holding account are usually
Committee members eg the Treasurer, the Chairman. This provides the
owners, through their elected representatives, with access, control and
ownership of their money. The Body Corporate can then set its own rules
about how their Committee will deal with its money.
When funds are required by the BCM to pay the bills, an electronic
request is made by the BCM to the signatory of the Body Corporate’s
holding account. This request should detail how much is required, for
whom, and for what. If satisfied with this request, the Body
Corporate’s signatory then electronically transfers the money across to
the BCM’s transaction account.
To ensure there are no unfortunate delays in this request/transfer
process, many Bodies Corporate will allow their BCM to be one of the
signatories on their Body Corporate holding account. This may
compromise the integrity of the new process to some degree: however,
the Body Corporate’s designated signatory eg the Treasurer, always has
real-time access to the holding account.
Concerns are often raised about the amount of work that may be required
of the Body Corporate’s signatories. It is our experience that
reference to their Administration Account history will inform owners
that nearly all expenses, especially the large ones, are easily
budgeted for in terms of both timing and amount eg energy, pool
maintenance, lift maintenance, insurance, BCM’s fees, caretakers fees,
etc. Unexpected, one-off expenses are easily managed, as and when they
This budgeting process also allows the Committee to easily identify
amounts surplus to foreseeable requirements, which then can be
transferred in a timely manner from the Body Corporate’s holding
account across to the investment portfolio.
UOAQ Service and
Helping set up this type of banking arrangement is one of the many
services the UOAQ offers to its members, via an associated
money-management service run by our Treasurer, under ASIC licence.
There is no set-up fee, we cannot touch your money… we simply identify
the best deals available and help you with the paperwork.
Why control of
the bank account is important
It may be best to direct you to pages on this website that describe
what happened to condo corporations in North America where the property
management company had control of the condo's finances.
Reserve Fund Fraud—A case study
RPS Resource Property Services
Would the auditor hide information?
Kornerstone Community Management
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