NSW: How the 5 percent proxy rule works in NSW strata

Question: In our 95 lot building, two companies hold proxies or positions on the committees. What can we do?

I live in a building with 95 apartments. A specialist disability accommodation company holds 12 apartments, with two on the executive committee, and another owner with close ties to the developers holds six or seven proxies. Under the new rules, are companies reduced to five per cent and rounded down? Do both companies hold five per cent? Can two people from one company be on the executive committee?

Answer: Company nominees and proxies are two different means of voting and two different types of limitations.

It sounds like you have two different individual owners appointing different individuals as either a company nominee or a proxy. Company nominees and proxies are two different means of voting and two different types of limitations.

A quick recap on proxy limitations in NSW.

• There are limitations on who can hold a proxy, which are:
  
  • building managers, on-site residential property managers and strata managers who hold a proxy cannot use it to vote on a matter if it means they would obtain (or if it would assist them obtain) a material benefit or a pecuniary interest; and
  • an original owner may not use a proxy (or a power of attorney) under the contract for sale of a lot or a contract that is ancillary to the contract for sale.
• There are limitations on the number of proxies a person may hold at a general meeting, which are:
  
  • Schedule 1, Clause 25 “(7) …The total number of proxies that may be held by a person (other than proxies held by the person as the co-owner of a lot) voting on a resolution are as follows:
  1. if the strata scheme has 20 lots or less, one,
  2. if the strata scheme has more than 20 lots, a number that is equal to not more than 5% of the total number of lots.”

From your comment, I expect that the other entity who holds 6 or 7 proxies meets all the above criteria.

Company nominees also have limits, which are set out below:

• Schedule 1 Clause 25A “(2)  A company nominee, or a person acting under a power of attorney, may exercise voting rights on behalf of not more than—
  
  1. if the strata scheme has not more than 20 lots—1 owner, or
  2. if the strata scheme has more than 20 lots—5% of the total number of lot owners.”

Noting that a power of attorney who is a family member must not be taken into account in this limitation.

In your situation, the specialist disability accommodation company (being one owner) can appoint one person to be the company nominee for all its lots. If the scheme has more than 20 lots, a person could be the company nominee of more than one company lot owner, provided they are the company nominee only for 5% of the number of lot owners for the scheme.

Breaking it down, if the scheme has ten lots and lots 1 and 2 are owned by ABC Pty Ltd and lots 3 and 4 are owned by XYZ Pty Ltd, the company proxy or power of attorney for ABC Pty Ltd could only exercise voting rights for lots 1 and 2. The same person could not also be appointed as the company nominee for XYX Pty Ld.

If the scheme has 21 lots and the remaining 17 lots are owned by different individuals, the same company nominee or power of attorney still could not be appointed for ABC Pty Ltd and XYZ Pty Ltd to exercise voting rights for lots 1, 2, 3 and 4 as together, the two lot owners are more than 5% of the total number of lot owners. Why? There are 19 total lot owners. The calculations are: 2 lot owners / 19 total lot owners X 100% – 10.5%.

If the scheme has 50 lots and ABC Pty Ltd owns lots 1 and 2, XYZ Pty Ltd owns lots 3 and 4, with all remaining 46 lots owned by different people, one person could be appointed by the company nominee for all lots 1, 2, 3 and 4, as together the two lot owners (ABC Pty Ltd and XYZ Pty Ltd) are less than 5% of the total number of lot owners. Why? There are 48 total lot owners. The calculations are two lot owners / 48 total lot owners x 100% = 4.16%.

This post appears in the August 2024 edition of The NSW Strata Magazine.

Allison Benson
Kerin Benson Lawyers
E: allison@kerinbensonlawyers.com.au
P: 02 4032 7990