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 Who Cares About Caretaking Valuations?

Most caretaker agreements contain a clause that provides for a review of the caretaker’s salary at set intervals. This means, of course, that if you manage a scheme with an onsite manager, you are likely to have to deal with the manager approaching the body corporate for an increase in salary.

The first time the body corporate becomes aware of this situation is often at a meeting when the manager presents atime and motion study. This is a quaint and not altogether accurate name for a valuation of the caretaker’s duties.

Frequently the response from the body corporate is alarm and total disbelief regarding the level of increase to which the author of the report believes the caretaker is entitled. Generally the body corporate responds by asking for an alternate valuation from another professional as a basis for negotiating a more reasonable adjustment.

Very quickly all parties care more than they had imagined they would about caretaking valuations.

It is not unusual to see substantial differences between these valuations and people often ask why this is so? It is quite simply the difference in opinion between the authors of the reports.

 So what is it that an unqualified person seeking the services of a provider of caretaking valuations should look for? One of the most important things is transparency. There should be a full and open disclosure of all results showing how they were calculated. It is not good enough, in my opinion, to utilise an hourly rate provided by a third party without disclosing the basis of the calculations – unless of course the hourly rate is taken from an official Government Award.

The valuation should reflect an independent opinion based on all facts available and not influenced by the party who happened to commission the report.

It should reflect a reasonable level of skills and proficiencies for a caretaker who is capable of managing his duties efficiently. It certainly should not allocate time allowances as though the caretaker has never carried out any of the duties before and has no idea how to coordinate duties located close by to obtain efficiencies in time. Remember that a caretaker performs the duties multiple times each year and it is reasonable to assume that he will become skilled and efficient at his job. The valuation should reflect this fact.

The person undertaking the valuation needs to have a thorough grounding in first principle estimating and needs at all times to be independent in their thinking.

The term time and motion study implies that a study was made of the times and motions of the person(s) undertaking the caretaking duties and that this data was used in the report. A major reason our company does not reference this term is that it is precisely what the report should not reflect.

Imagine if your caretaker was inefficient in most aspects of his job and he recorded his times, and then passed them on to the person preparing the valuation, who in turn relied on them to calculate the final amount. The report recommendation would likely be for a large increase in the contract amount, but could this be regarded as a fair and reasonable valuation? Of course it couldn’t. The report should reflect an independent assessment of the times taken to perform the duties if they are carried out by a reasonably skilled and efficient caretaker who has the interests of the body corporate in mind.

There are many skills required in the preparation of a caretaking valuation and having a thorough understanding of strata title documents, particularly where layered schemes are involved, is high amongst them. I have personally reviewed reports where the author has allocated duties to the wrong body corporate, resulting in the misapportionment of the value of the duties to a particular caretaker.

I have previously mentioned a need for first principle estimating skills. By this I mean the ability to independently assess the time it would take a reasonably efficient operative to carry out the duties, and the ability to assess other costs such as corporate expenses from first principles.

We are frequently asked why corporate expenses are included in the calculations. Shouldn’t the caretaker just supply his office and computer equipment as part of his job? On the surface this may seem reasonable, however, with a little reflection you can easily see the fallacy. If you employ a tree lopper he charges you a set amount, and as part of the deal you get the benefit of his operating a fully equipped office – all for a single cost. It is no different with the caretaker except that for the purpose of explaining how the costs were arrived at, the office expenses are shown separately.

Of course a significant part of the estimate of corporate expenses is determining who pays for what. The report writer has to be able to interpret the contract documents before they can accurately assign costs for items such as consumables (cleaning products, fertiliser etc.) and plant and equipment (lawn mowers, blowers etc.).

Finally, you need to be sure that your choice of professional adviser is in the right paddock to begin with. Because the terms valuation and valuer are often used to describe the process, it is not unreasonable that an untrained person would assume that a valuer will fit the bill. Well, he might do if he understands that he is required to assess the caretaker’s salary on the basis of it being a contract tender, rather than a valuation of an investment asset. Traditional valuers are not trained in first principle estimates involving man-hours. Their core skill is their ability to assess the likely value of an asset if put on the open market for sale. This is not what caretaker valuations are about.

In summary, your choice of person to prepare your caretaker’s duties valuation should be independent. He should be skilled in assessing the times taken to carry out the duties – using first principle estimating techniques. He should be honest and not influenced by the party commissioning the report and he should possess the skills required to interpret complex strata and contract documentation. In short, someone who cares about caretaking valuations and has the skills to prepare them without favour or bias.

Published in the SCA (QLD) E-News March 2015

By - Leary & Partners
 Created:
Modified: 13 Jan 2016

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