This question came in from a NSW Lot Owner asking about using proxies for monetary gain. Leanne Habib, Premium Strata provides the following response.
Question: Our Building Managers are using their proxies to vote on the negotiation of their agreements. Is this allowed?
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Our strata complex had a EOM last week. Our on site Caretaker / Building Managers wanted their Management agreement returned to 10 years instead of the 7 years left on original agreement.
They also wanted their remuneration doubled for both of their Agreements along with back pay.
They own a unit in the complex as well as the unit attached to the office being a total of 2 units. There are 41 units in our complex.
Proxies NSW Strata
They came to the meeting armed with 4 proxies and wanted to use them along with their 2 votes, being owners of 2 units.
I mentioned to the Strata Manager conducting the meeting that they couldn’t use the proxy votes for monetary gain. He said it was allowed. Is this correct?
Also, can they use their 2 votes being unit owners for monetary gain?
The 2 motions were withdrawn waiting for a time and motion study to be conducted.
Answer: The proxies cannot be used because the building manager is seeking both an extension of term and an increase in remuneration.
This scenario is legally flawed:
Firstly, the term is in breach of Section 68 Strata Schemes Management Act 2015 as reproduced below:
68 Term of appointment of building managers
(1) A building manager agreement (including any additional term under any option to renew it) expires (if the term of the appointment does not end earlier or is not ended earlier for any other reason):
(a) at the conclusion of the first annual general meeting of the owners corporation, if the agreement was executed before the meeting, or
(b) when 10 years have expired after it commenced to authorise the building manager to act under it, in any other case.
(2) A person may be reappointed as building manager for a strata scheme at the end of the person’s building manager agreement.
(3) The appointment of a building manager may be terminated in accordance with the building manager agreement, if authorised by a resolution at a general meeting of the owners corporation.
Further, as you correctly suggest, the building manager cannot use any proxies for his re-appointment:
Schedule 1: 25 Rights of proxies and limits on votes by proxies
(1) Proxy may demand poll A duly appointed proxy may vote on a show of hands or demand a poll.
(2) Powers of proxies A person duly appointed as a proxy:
(a) if entitled to vote otherwise than as a proxy–may also vote in the person’s own right, and
(b) if appointed as proxy for more than one person–may vote separately as a proxy in each case.
(3) Proxy cannot vote if person appointing proxy votes A proxy cannot exercise a vote in relation to a matter if the person who appointed the proxy is exercising personally a power to vote on that matter.
(4) Proxy limited by instrument of appointment If the instrument appointing a proxy limits the manner in which the proxy may vote at a meeting, a vote by the proxy that does not observe the limitation is invalid.
(5) No proxy vote pursuant to contract for sale by original owner An original owner or a person connected with the original owner cannot cast a vote by means of a proxy or power of attorney given by another owner of a lot in the strata scheme if the proxy or power of attorney was given pursuant to a term of the sale contract for the lot or pursuant to another contract or arrangement that is ancillary or related to the sale contract.
(6) Subclause (5) does not apply to a proxy or power of attorney given by a person to another person connected with him or her.
(7) Limits on exercise of proxy by building manager, on-site residential property manager or strata managing agent A vote by a proxy who is a building manager, an on-site residential property manager or a strata managing agent is invalid if it would obtain or assist in obtaining a pecuniary interest for, or confer or assist in conferring any other material benefit on, the proxy.
(8) For the purposes of subclause (7), “material benefit” includes, but is not limited to, the following:
(a) an extension of the term or an additional term of appointment of the proxy as building manager, on-site residential property manager or strata managing agent,
(b) an increase in the remuneration of the proxy,
(c) a decision of the owners corporation not to proceed with, to withdraw, to delay, to compromise or to settle litigation or other legal proceedings relating to the proxy,
(d) any other decision of the owners corporation that affects litigation or other legal proceedings relating to the proxy.
As for the number of proxies, as you have 41 lots in the scheme, the provisions of Sch 1 Cl 26(b) apply ie
(7) Limit on number of proxies that may be held 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:
(a) if the strata scheme has 20 lots or less, one,
(b) 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.
Therefore, in respect of your scheme, a person may not hold more than 2 proxies (though we do not have enough information on the exact ownership of the 2 lots in question eg one person related to the building manager may own 1 x lot and a completely separate person may own the office).
In any event, as you have accurately asserted, the proxies cannot be used because the building manager is seeking both an extension of term and an increase in remuneration.
This post appears in Strata News #143.
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.