Many contractors have carried out works for strata schemes or owners corporations, and not been paid.

The interesting thing about this kind of work is the risk. The risk here is not that the scheme does not have the money to pay. They almost always do. The risk lies in the chain of command required to approve the payment. When it comes time to pay one person in that chain argues against payment, and that’s where things come unstuck.

Most contractors start work on a Purchase Order issued by the managing agent. This document does not provide any assurance that the same agent can approve payment. He or she cannot.

This is how moneys for works are provided by a strata scheme. The scheme is required to have a sinking fund for works and maintenance. If the works are large, then a strata meeting is required to pass a motion to raise a special levy that requires all owners to pay their part. Once this levy is raised, the work can be paid for.

At this point let’s look at the characters in this situation:

The managing agent: They will issue orders for works or invite quotes. They will do this on the direction of the chairperson or secretary of the strata.

Chairperson: This is the strata schemes elected top dog. This person is the contact point for the strata scheme and runs the meetings of the executive committee.

Executive Committee: This is an elected group of representatives of the strata scheme.

Mr Jones in Unit 12A: Every scheme has one of these. This is the loud mothed resident who has nothing much to do [usually retired] and so dedicated their life to complaining a bout the works and ensuring that no payment is made. Often this person is the Chairperson. I once had a retired nurse who prepared a defect report on the installed fire curtains to prevent payment! Apparently, a nursing degree also includes fire services expertise!

Now anyone of these characters can stop payment! Often the agent agrees you should be paid, and chairperson agrees, but the resident does not and threatens to go to the NCAT tribunal. Or the chairperson disappears and the agent cannot get hold of them to approve the payment.  The most common situation is where the agent agrees you should be paid but the chairperson decides the work is defective and refuses payment.

We see this all the time.

The way forward is for contractors to be asking some hard question upfront and mitigate risks. Here are some things you can try.

1. Ask the agent if there is enough money in the sinking fund to pay for your quoted amount.
2. Ask if a special levy had to be raised for the work.
3. If a levy was raised, ask if all the owners have paid the levy.
4. Ask to see the current balance of the sinking fund to ensure there is enough in there.
5. Ask who will approve the completed works before you are paid. If it is the chairperson, then suggest you will have your own expert inspect the work and supply that inspection to the strata.
6. Tell the agent that you will not supply and certificates until you are paid in full.

Don’t be shy about asking this stuff. It’s your money they will be stealing!

Strata almost always pay after a Security of Payment decision. This is because they find it hard to argue with. Many times strata schemes cannot even explain why they are not paying for works. This suggests that there is no reason, and it usually comes down to a Mr Jones in Unit 12A who is arguing about payment but for no good reason; just a power trip.

So for strata works I suggest budgeting money to have your own expert inspect the works on completion. It’s not much to pay to have excellent backup if anyone complains about the work at the end. If you run through the series of question outlined above, the agent will see that you mean business and will tend to try to cut off argument at the schemes’ end early. That is, talk them into paying you and not picking a fight.

Also remember that strata work tends to be urgent. This means that they need you more than you need them. So use that to get payment issues straightened out before any work is done. I suggest insisting that you deal only with the agent and that you insist the agent demonstrate that they are authorised to arrange payment for the works.

If you complete and supply an inspection report and certificates, there is no reason the agent can withhold payment.

Remember, it is the chain of characters involved in strata schemes that represents the risk. The agent is only the last person in that chain. So take control early.

By Anthony Igra, Founder and Director of Contractors Debt Recovery

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