NSW: Is a contract valid if it’s signed by someone who is not on the committee?

Question: Although not on the committee, the builder signed a three year contract when he was unfinancial. Is the contract valid?

Our builder owns a few lots in the building but is not on the committee. Our strata manager sent our committee a contract. The committee found the builder had signed the three year contract. Further investigation indicates the builder was unfinancial when he signed the contract.

Should the contract be signed by at least two committee members? Is the contract valid?

Answer: We would need to analyse some key elements, such as the capacity in which the builder/owner signed the agreement.

Strata schemes enter into agreements by affixing their “common seal” to it. Then, persons will “attest to” the common seal being affixed by writing their signatures next to it.

There are different ways to attest to the affixing of a common seal. Section 273 of the Strata Schemes Management Act 2015 (NSW) specifically outlines the way to affix the common seal to an agreement:

1. The seal of an owners corporation that has only one owner or 2 owners must not be affixed to any instrument or document except in the presence of the owner or owners or the strata managing agent of the owners corporation.
2. The seal of an owners corporation that has more than 2 owners must not be affixed to any instrument or document except in the presence of —
   1. 2 persons, being owners of lots or members of the strata committee, that the owners corporation determines for the purpose or, in the absence of a determination, the secretary of the owners corporation and any other member of the strata committee, or
   2. the strata managing agent of the owners corporation.
3. The strata managing agent must attest the fact and date of the affixing of the seal —
   1. by his or her signature, or
   2. if the strata managing agent is a corporation, by the signature of the president, chairperson or other principal officer of the corporation or by any member of staff of the corporation authorised to do so by the president, chairperson or other principal officer.

In the example given, we would need to analyse some key elements, such as the capacity in which the builder/owner signed the agreement.

For example, whether:

• the owners corporation is the named party to the contract (or whether it was the builder);
• the common seal was affixed; or
• two persons attested to the common seal being affixed.

If not, the agreement may not have been entered into properly.

Tim Sara
Sara Strata
E: tim@sarastrata.com.au
P: 04 8500 7960