NSW: Q&A Owners Corporation’s Payments to Lot Owners or Committee Members

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These questions are from NSW Lot Owners about owners corporation’s pay themselves, lot owners or committee members.

Table of Contents:

• QUESTION: Can an owner who lives in the building and has no qualifications as a Building Manager and who isn’t registered as one, be hired as a Building Manager and be paid for their duties?
• QUESTION: Can our Strata Committee pay themselves an undisclosed amount by ignoring Section 46 of the Act and overriding the committee?

Question: Can an owner who lives in the building and has no qualifications as a Building Manager and who isn’t registered as one, be hired as a Building Manager and be paid for their duties?

Can an owner, who lives in the building and has no qualifications as a Building Manager and who isn’t registered as one, be hired as a Building Manager and be paid for their duties?

Can the Building manager receive an annual Honorarium instead of a salary?

If not, then can the person do the job, without remuneration?

Can the Building Manager be on the Body Corp committee or is that considered to be a conflict of interest?

Answer: A building manager may be appointed only via ordinary resolution at a general meeting of the owners corporation.

In NSW, the Strata Schemes Management Act 2015 (‘Act’) includes provisions governing the engagement of building managers (or facilities managers, caretakers, or any other similar title carrying out the functions of a building manager) for strata schemes.

There is no specific statutory framework that regulates building managers (unlike strata managers who have licensing requirements). However, building managers have traditionally been practitioners who have sufficient knowledge and experience in facilities management and/or building trades, as they are primarily engaged to assist the owners corporation in management, control, maintenance, and repair of common property. The Facility Management Association of Australia is the peak industry body for building and facilities managers, raising the profile for their industry and supporting their members by promoting high standards of practice.

A building manager may be appointed only via ordinary resolution at a general meeting of the owners corporation. The ‘building manager agreement’ (or contract) would outline what functions of the owners corporation are delegated to the building manager (but this does not prevent the owners corporation from continuing to exercise those functions). The ‘building manager agreement’ should also stipulate the remuneration or contract price to be paid to the building manager.

Section 66(4) of the Act states that a building manager may be a resident or occupier in the strata scheme, however, it should be noted that section 66(2) states that if a person is carrying out the role of a building manager on a voluntary or casual basis, or is a member of the strata committee, then he/she is not considered a building manager for the purposes of the Act.

In the case of an owner, a strata committee member, or a resident/occupier performing the duties of a building manager, if they enter into a ‘building manager agreement’ with the owners corporation then they may receive remuneration as part of the terms of that agreement. The building manager would then be considered a contractor of / supplier to the owners corporation.

Alternatively, section 46 of the Act states that the owners corporation may resolve at an annual general meeting to pay an honorarium to a strata committee member for services carried out for the owners corporation since the last annual general meeting, usually for the last 12 months of services already performed. Strata committee members cannot be paid in advance each month like a normal contractor would be.

In some instances, owners corporations are able to directly employ someone as a building manager, however we would generally caution against doing this as this comes with a number of statutory requirements on the part of the owners corporation as an employer such as paying superannuation and providing leave provisions, and in our experience direct employment of building managers by an owners corporation has created a number of legal issues for strata schemes in the past when things do not work out well, e.g. termination of employment procedures and long service leave issues.

So essentially, it may be possible to engage someone who lives in the building as a building manager, and payments to be made to that person/s will depend on the agreement with or resolutions made by the owners corporation. We, however, do not think this would be wise for strata schemes to do so.

Finally, section 32(1)(a) of the Act states that a building manager may not be appointed to the strata committee.

Rod Smith
The Strata Collective
E: [email protected]
P: 02 9879 3547

This post appears in Strata News #461.

Question: Can our Strata Committee pay themselves an undisclosed amount by ignoring Section 46 of the Act and overriding the committee?

Our building is a reasonably well run medium-sized block of NSW units; however, the strata committee pays themselves an undisclosed amount which is never itemised in the financial statements but apparently allocated to whatever job they have spent time on, and the amount they are paid is kept secret.

I wrote before the last AGM praising the Committee’s hard work on our behalf, but also pointing out Section 46 in the Strata Law which states that any payment to the Strata Committee has to be presented at an AGM and approved by the Owners Corp. This started a very unpleasant exchange!

The longstanding Chairman/ Treasurer was outraged at being questioned, and he claims that as a motion is requested to be passed at each AGM that states: “RESTRICTED MATTERS RESOLVED that the Owners Corporation does not limit the decision making powers of its Executive Committee”. This allows them to approve payments to themselves without informing the Owner’s Corporation at an AGM. I always assumed this was just for building works.

I am unwilling to start a war over this and cause further unpleasantness, but the lack of transparency seems very unprofessional even if not against the law. No one in the block, or apparently on the Committee, is willing to go against the Chairman, who does work hard and has ruled the block as Chairman and Treasurer for at least 15 years, possibly longer.

Can you help clarify the correct process for payments to the Strata Committee please and if the motion at the AGM allows the Committee to ignore Section 46 of the Strata Act and override the committee decision making process?

Answer: The Strata Committee cannot override the decision making process reserved for the Owners Corporation under Section 46 of the Act.

In short, you are correct. The Strata Committee cannot override the decision making process reserved for the Owners Corporation under Section 46 of the Act. Honorariums, as you state, are paid in arrears at an annual general meeting of the Owners Corporation.

See also Section 36 (3) (a) of the Act set out below: A strata committee cannot make a decision required to be made by the Owners Corporation in general meeting.

36 Functions of strata committee

1. A strata committee has the functions conferred on it by or under this or any other Act.
2. A decision of a strata committee is taken to be the decision of the owners corporation. However, in the event of a disagreement between the owners corporation and the strata committee, the decision of the owners corporation prevails.
3. The following decisions cannot be made by the strata committee:
   
   1. a decision that is required by or under any Act to be made by the owners corporation by unanimous resolution or special resolution or in general meeting,
   2. a decision on any matter or type of matter that the owners corporation has determined in general meeting is to be decided only by the owners corporation in general meeting.

Leanne Habib
Premium Strata
E: [email protected]
P: 02 9281 6440

This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.

This post appears in Strata News #149.

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Read next:

• NSW: Q&A Can Owners Corporation committee decisions be reconsidered?
• NSW: Q&A Strata Manager Complaints and Unprofessional Advice

Are you interested in more about the committee decision making process or other information particular to NSW legislation? Visit Strata Committee Concerns OR NSW Strata Legislation.

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