Building Manager Review Issue 4 2013

Issue 4 August 2013

Welcome to the August edition of the Building Manager’s Review. In this issue we deal with the real costs in running and maintaining a residential strata complex.

Too often I hear “my levies are too high”. Levies range depending on the building design, building size and amount of facilities in the building. Obviously, the more facilities in the complex the higher the running and maintenance costs.

Many buildings have full-time building managers, 24/7 concierge services, large gardens, heated pool, gym and saunas.

Some buildings are older than others, therefore, the older the building (and facilities) the more maintenance required.

I also see, far too often, many new developments being sold with very low levies. Strata agents are at the mercy of the developer when setting levies for new developments. The developer wants to make the sale of apartments more appealing by setting the levies artificially low.
Strata managers produce a budget for a new building then the developer may interfere by stating the fees need to be lower. Whilst low levies may seem appealing you may have a false economy in your strata plan. A recent article in Domain by Sue Williams “Misleading strata levies prompt calls to protect home buyers” 26 August 2013 writes about levies that are set too low.

The main areas of recurring substanial cost are:

  • building manager
  • concierge/security
  • cleaning
  • strata management
  • utilities – electricity, water, gas
  • fire services
  • gardens
Hopefully this Building Manager’s Review issue will help highlight the true costs of running a strata complex.

Building manager

What is the true cost of a building manager?

There is no legislation or certification body that regulates the building management industry, therefore, there is no award wage. The closest award is the hotel industry’s front line manager. Another rate comparison site, but not regulated, is Payscale, which generates salary reports.
Building managers are also referred to as caretakers or facilities managers. Qualifications to be a building manager are not necessary, but many of the major building management companies only employ people with building or trade qualifications (mainly electrical or mechanical), previous hotel or management experience, strata management qualifications or someone who has been in the industry for many years.
The below example of costs is based on a small building management company with low overheads, employees are trade qualified and work 40-hour weeks Monday to Friday.
– Payscale has the rate for a facilities manager at $69,000/yr
– Payscale has the rate for an electrician at $63,000/yr
– My Career has the rate for an electrcian at between $60,000 – $70,000/yr
– Live Salary has a medium rate for an electrician at $68,000
Lets say the building manager is paid $65,000 by the building management company. The following is the real cost of the building manager:
  • wages $65,000
  • annual leave (4 weeks) $5,000
  • sick leave $2,750
  • superannuation (9.25%) $6,012.50
  • long service leave $560
  • parental leave $1,250
  • personal/carers leave $1,000
  • bereavement leave $750
  • insurance $650
  • office & office admin $700
  • travel $500
  • uniform $500
  • advertising $200
  • phone $2,500
Building manager costs $85,622.50
If company profits are based on 20% per employee that adds another $17,124.50
Total true cost = $102,747.00 per annum

Concierge and Security

What is the true cost of a concierge?

The following price structure is based on having a concierge 5 days a week 7.00am to 4.00pm

The award rates for a concierge is:
– Fair Work has the minimum wage Monday to Friday at $37,674
– Payscale has the medium wage Monday to Friday at $40,000
Based on Fair Work’s minimum wage of $37,674 per annum the real cost to have a concierge is:
  • salary $37,674
  • annual leave (4 weeks) $2,898
  • sick leave $1,449
  • superannuation (9.25%) $3,484.85
  • long service leave $324
  • parental leave $724.50
  • personal/carers leave $579.60
  • bereavement leave $437.70
  • insurance $650
  • office & office admin $700
  • travel $100
  • uniform $1,200
  • advertising $200
  • phone $2,500
Concierge costs $52,921.65
If company profits are based on 20% per employee that adds another $10,584.33
Total true cost = $63,505.98

What is the true cost of an onsite security guard?

The following price structure is based on having an onsite grade 4 security guard 5 days a week 7.00am to 4.00pm

Due to the nature of the work grade 4 security is required.

The award rate for a security guard is:

– Fair Work has the minimum wage Monday to Friday at $38,667.20

– Payscale has the medium wage Monday to Friday at $40,000

Based on Fair Work’s minimum wage of $38,667.20 per annum the real cost to have an onsite security guard is:

  • salary $38,667.20
  • annual leave (4 weeks) $2,974.40
  • sick leave $1,487.20
  • superannuation (9.25%) $3,576.72
  • long service leave $333
  • parental leave $743.60
  • personal/carers leave $598.88
  • bereavement leave $446.16
  • insurance $650
  • office & office admin $700
  • travel $100
  • uniform $1,200
  • advertising $200

Security costs $51,677.16

If company profits are based on 20% per employee that adds another $10,335.43

Total true cost = $62,012.59

Cleaners

Cleaners are the unsung heroes in apartment buildings. Many people, including EC members, still think cleaners are on an hourly rate $12.
Cleaners are too often picked on and are burdened with duties that cannot be performed properly in the time allotted. Once engaged they are also asked to perform duties outside their original scope.

The following price structure is based on having a full-time level 1 cleaner (who does not change light globes) 5 days a week 7.00am to 4.00pm

The award rates for a cleaner is:

– Fair Work has the minimum wage Monday to Friday at $34,559.20

– Payscale has the medium wage Monday to Friday at $40,000

Based on Fair Work’s minimum wage of $34,559.20 per annum the real cost to have a cleaner is:

  • salary $34,559.20
  • annual leave (4 weeks) $2,658.40
  • sick leave $1,329.2
  • superannuation (9.25%) $3,196.73
  • long service leave $291.21
  • parental leave $664.60
  • personal/carers leave $531.68
  • bereavement leave $398.76
  • insurance $650
  • office & office admin $700
  • uniform $1,200
  • advertising $200
  • phone $2,500

Cleaner costs $48,879.78

If company profits are based on 20% per employee that adds another $9,775.96

Total true cost = $58,655.74 per annum

Strata Manager

Strata management standard fees are very low when you consider how much work is involved. Cost can vary dramatically depending on whether there is an on-site building manager, the scope of work, size of the complex and the amount of requests from the EC and other owners. Usually strata schemes are charged on a per lot per annum basis. Strata management costs can easily be consumed by a few difficult or demanding residents.

Additional fees (for additional services) such as disbursements (photocopying, faxes, postage, common seal, etc) Schedule B, telephone and meeting expenses need to be budgeted for.
A 130 lot complex, for example, may have standard fees of $21,450, but also have photocopying fees of $4,000 (depending of the amount of meetings and information required at each meeting), Schedule B fees (works outside agreed services) of $2,000 and telephone fees of $1,900.
True costs in a 130 lot complex – $25,000 – $30,000
Utilities

Electricity, gas and water, we need them, but they can cost a fortune!

Electricity is charged on the amount used and also costs associated with producing electricity, carbon costs and getting the electricity to the consumer (Network charges). Obviously the less you use the less you pay. The only thing that will not change is the Network charges, which is government regulated and controlled.
The best way to reduce consumption is to look at all the common property facilities and find out their power consumption e.g. lights may use 50% of total consumption, pool heating may use 18%, lifts 5%. car park fans 25%, etc. Once you understand where the consumption is you can plan to use your electricity more efficiently e.g. install LED lighting with inbuilt movement sensors, install VSD’s on all fan and pump motors, ensure lifts go into “sleep” mode when not in use, install more efficient pool heating such as heat pumps.
Common property gas is normally used to heat water, BBQ’s or pool heating. I am astonished that some strata schemes still use electricity to heat their water and pools. More efficient and effective methods such as heat pumps and hot water on demand heaters (gas) can help reduce the overall usage and costs. Gas costs are relatively small compared to electricity and water due to the fact that gas is cheaper and there may not be too many common property facilities that require heating.
The use of water is harder to control, but not impossible. Residents need to be constantly reminded that if they have leaking or running taps or shower heads they should replace the washers. The same applies for leaking toilets and if in doubt contact your strata manager, building manager or agent. Pools are another area where water can be conserved. Ensure there are no leaks in the pool, the pump/s and filtration system. Outdoor pools tend to lose a lot of water due to evaporation from heating, the sun and high winds. Whilst we cannot control the weather you can still install windbreaks, shade cloth and pool blankets.
A 91 lot scheme can have possible costs of electricity – $110,000 per annum, gas – $3,000 per annum and water – $35,000 per annum.

Fire Safety

Fire safety is without doubt one of the most important aspects of a building. It is also one of the most continuous and costly ongoing expenses.
The general ongoing service to your fire system is not overall expensive, it is the repairs and maintenance that becomes very costly.
I have seen in buildings, where cheap electric and diesel pumps were installed, the pumps only last 5 to 6 years, and with no original builder around or Home Owners Warranty insurance replacement becomes costly and time consuming. Depending on the size, pumps can cost anywhere from $5,000 to $20,000 to replace.
Fire dampers are another major facility and cost. Annually 20% of all fire dampers are to be inspected and tested (where appropriate) so that in 5 years time all the fire dampers in the complex have been inspected. Many buildings have never had their dampers inspected due to access. Often dampers are not installed where they are stated on the building plans and if they are there is no access panel to inspect them. If inspection panels need to be installed and the dampers are not compliant the costs start to escalate.
To supply and install an appropriate access panel (not a cheap and nasty type) can range from $150 to $500. Divided over 100 apartments and that is $15,000 to $50,000. This cost does not include any repairs to the damper or painting of the ceiling or access panel if required.
To replace faulty dampers can cost between $450 to $650 depending on what damper is installed and what you replace it with.
Faulty installation of dampers can also be an issue. Dampers may have gaps around them to allow fire or smoke to pass through, therefore rendering the damper non-compliant. This gap must be filled with a special fire rated material. Assuming easy access the cost to fire rate a one 20cm section is approximately $180 to $240 including materials. If a building has 200 dampers and half have gaps around them the costs you can expect the costs to be about $4,000 (the more you do the less the costs per damper).
Richard Raine, from AFT Fire Protection in Botany, touched on another item. He stated many executive committee members, building managers and strata managers do not understand the importance or know about the annual flow test. This test ensures the water flow and pressure to the buildings fire system is appropriate. It also indicates flow problems with non-return or check-valves. This test is essential and adds to the annual costs of fire maintenance services.
Another big annual cost is exit and emergency lighting. All buildings should budget for approximately 9-17% of emergency and exiting lighting to be replaced annually. Fire companies charge between $85 – $125 per hour for electrical maintenance whereby you can engage an electrician for between $60-$70 per hour to do the same job. You will also find the electrician will get a 10-20% better price on all lighting. This means in a complex that has 300 emergency and exit lights the savings by using an electrician are fantastic.
True cost for a 130 lot complex = $30,000 per annum

Gardens

There are many great benefits of having a well maintained garden such as:

  • gardens are relaxing
  • they add value to your asset (if they are well maintained)
  • are a great place to relax
  • look and smell nice
  • can cool the complex in summer

Gardens can also be very expensive to maintain and if you do not have the right flora, fauna, grass, irrigation, mulch, feed and maintenance structure in place the whole complex may suffer.

Gardeners charge anywhere from $50-$75 per hour. Larger complexes may have 2 gardeners 2 times per week. Plant replacement, irrigation lines, timer and pumps, annual mulching, seasonal feeding, mowing and feeding of lawns and trimming or cutting back of plants takes time and money.

True cost for a larger complex = $14,000 – $30,000 per annum
Have a question you’d like answered or feedback?Just get in touch – info@k-sbms.com.au

K&S BMS has been working in the strata sector for almost 30 years. Our services are designed to assist owners corporations with the smooth running of their buildings. Duties we undertake include: by-law enforcement, coordinating repairs and maintenance, assisting with building defects issues and claims, coordinating fire and essential service compliance, managing various maintenance contracts, liaising with owners and tenants in the day-to-day operation of their building, and waste management.
Jamie Killorn – Director
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